The Regulatory Technology Handbook
The transformational potential of RegTech has been confirmed in recent years with US$1.2 billion invested in start-ups (2017) and an expected additional spending of US$100 billion by 2020. Regulatory technology will not only provide efficiency gains for compliance and reporting functions, it will radically change market structure and supervision. This book, the first of its kind, is providing a comprehensive and invaluable source of information aimed at corporates, regulators, compliance professionals, start-ups and policy makers.
The REGTECH Book brings into a single volume the curated industry expertise delivered by subject matter experts. It serves as a single reference point to understand the RegTech eco-system and its impact on the industry. Readers will learn foundational notions such as:
• The economic impact of digitization and datafication of regulation
• How new technologies (Artificial Intelligence, Blockchain) are applied to compliance
• Business use cases of RegTech for cost-reduction and new product origination
• The future regulatory landscape affecting financial institutions, technology companies and other industries
Edited by world-class academics and written by compliance professionals, regulators, entrepreneurs and business leaders, the RegTech Book represents an invaluable resource that paves the way for 21st century regulatory innovation.
Table of Contents
A FinTech and RegTech Overview: Where We Have Come From and Where We Are Going vi
About the Editors xii
Acknowledgements xiv
1. Introduction
What a RegTech Compliance Killer System Will Look Like 6
Technology-Enabled Collaborative Compliance 10
The Age of RegTech Disruption to the Status Quo Is Here 16
RegTech and Financial Crime Prevention 20
RegTech: Tackling Regulation with Innovation 26
Identities, the RegTech Holy Grail 30
2. The RegTech Landscape
Islamic RegTech 38
How RegTech Could Help Determine the Future of Financial Services 44
Introducing the RegTech Quality Compass: The Five Factors of RegTech Quality 50
How Banks Are Managing Their Risk Through Technology and Market Infrastructure 55
RegTech and the Science of Regulation 58
GDPR and PSD2: Self-Sovereign Identity, Privacy, and Innovation 62
Rise of RegTech in the German Market 66
The Power of RegTech to Drive Cultural Change and Enhance Conduct Risk Management Across Banking 70
3. Regulatory Innovation and Sandboxes
Discover the Innovative Technology Behind RegTech Leaders 80
Enabling RegTech Up Front: Unambiguous Machine-readable Regulation 85
Align Open Banking and Future-Proof RegTech for Regulators and Third-Party Providers to Deliver the Optimal Consumer Convenience and Protection 89
A Seat at the Table - Bringing the Voice of FinTech to the US Regulatory Process 93
Sandbox Games for RegTech 99
Legal Guidance for Entering the Sandbox and Taking Advantage of Cross-Border Cooperation Agreements 102
RegTech and the Sandbox − Play, Innovate, and Protect! 106
4. A Call for Innovation or Disruption?
Governance, Risk, and Compliance: Complex or Complicated? 118
Innovation or Disruption: Not Always Black and White 122
How to Use Digital Marketing Data in Regulated Industries 126
Invention Versus Reinvention 130
Making Regulation Machine Readable 134
Can We Digitize Know Your Client? 138
5. RegTech Investment and Compliance Spending
Why a Substantial Investment in Financial Services RegTech Now Will Strategically Reduce Your Future Regulatory Compliance Costs 146
Old Tech + New Tech = RegTech: Excel Spreadsheets and End User Computing in a Regulated World 150
Will Financial Institutions Ever Achieve a 100% Compliance with Anti-Money Laundering and Combating the Financing of Terrorism Rules? 154
Merits and Demerits of a Shared Risk Engine 158
Spend on Compliance: A Necessary Evil orBusiness Enabler? 163
6. RegTech for Authorized Institutions
RegTech Opportunities in a Post-4MLD/5MLD World 172
Passporting in the EU - Is an Opportunity Also a Problem? 177
What Do PSD2 and Similar Activities Mean for Banks and FinTech Start-ups? 181
7. RegTech from a Regulatory Perspective
The Role of Anti-Money Laundering Law and Compliance in FinTech 190
Banking Supervision at a Crossroads - RegTech as the Regulators’ Toolbox 195
FinReg, FinTech, and RegTech - Quo Vadis, EU? 199
The RegTech Landscape from a Regulator’s Perspective 205
RegTech is for Regulators Too, and its Future is in
Emerging Markets 210
8. Blockchain and AI in RegTech
The ROI of RegTech 218
The Augmented Compliance Office 221
Dissolving Barriers: A Global Digital Trust Protocol 226
Can AI Really Disrupt Monitoring for Suspicious Activity? 231
Forging a Responsibility and Liability Framework in the AI Era for RegTech 235
Compliance with Data Protection Regulations by Applying the Blockchain Technology 246
Blockchains Are Diamonds’ Best Friend: The Case for Supply Chain Transparency 250
9. RegTech Applicability Outside the Financial Services Industry
Protecting Consumers and Enabling Innovation 260
RegTech Impact on the Private Security Industry 263
ArtTech: How Blockchain Can Improve Provenance 266
The Potential of RegTech in Improving the Effectiveness of Environmental Regulation 270
RegTech Applicability Outside the Financial Services Industry 274
Using RegTech as a Cross-Industry Digitization Tool 278
RegTech Unleashed: Discovering the Pathways Beyond Finance 282
RegTech Outside Finance: Four Options, One Clear Choice 287
RegTech: A Safe Bet for Tackling AML and Fraud in the Gambling Sector 292
10. Social Impact and Regulation
The FinTech Ecosystem Between Legal Compliance and Social Dimension 300
The End Justifies the Means: Putting Social Purpose Back at the Heart of Banking and Financial Regulation 305
RegTech’s Impact on Trust and Identity 310
How Technology Is Driving Financial Inclusion 314
Banking the Unbanked and Underbanked: RegTech as an Enabler for Financial Inclusion 318
Superhero Way: Enhancing Regulatory Supervision with Superpowers 323
11. The Future of RegTech
Market Surveillance 2020 330
I Regulate, Therefore I Am? Regulating Humans’ and Machines’ Conduct and Culture 335
The Future of RegTech 340
From RegTech to TechReg - Regulation in a Decentralized World 344
Emerging Innovations in RegTech 348
List of Contributors 351
Index 358
