The REGTECH Book

Book description

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

  1. Cover
  2. A FinTech and RegTech Overview: Where We Have Come From and Where We Are Going
  3. About the Editors
  4. Acknowledgements
  5. 1. Introduction
    1. What a RegTech Compliance Killer System Will Look Like
      1. Real-time Data Machine-readable Streams for Regulators
      2. Sharing the KYC Burden for Small Business Through Digital ID
    2. Technology-Enabled Collaborative Compliance
      1. Collaboration in Compliance Is Key
      2. Sharing Responsibility Within the Organization
      3. Collaborating Within the Industry
      4. Collaborating with the Regulators
      5. The Technology Boost to Enable Collaborative Compliance
      6. The Journey Has Just Begun
      7. Note
    3. The Age of RegTech Disruption to the Status Quo Is Here
      1. Regulatory Change Is No Longer a Project
      2. Step Forward RegTech
      3. Notes
    4. RegTech and Financial Crime Prevention
      1. Lack of ROI – Calling for a Framework Overhaul
      2. Where We Stand Today – Manual, Manual, Manual
      3. RegTech – A World of Opportunities?
      4. Outlook
      5. Notes
    5. RegTech: Tackling Regulation with Innovation
      1. Removing the Bottlenecks to Innovation
      2. Not Hibernating
      3. Financial Services = Financial Technology
      4. London and New York Dominate
      5. Bright Future
      6. Key RegTech Trends
      7. Other Developments
    6. Identities, the RegTech Holy Grail
      1. The Identity Problem
      2. Why Financial Services and RegTech?
      3. The Race Is On
      4. The Path Forward
      5. Notes
  6. 2. The RegTech Landscape
    1. Islamic RegTech
      1. The Industry
      2. The Opportunity
      3. The Challenges
      4. The Solution
      5. Conclusions
      6. Notes
    2. How RegTech Could Help Determine the Future of Financial Services
      1. Where It All Started
      2. Could It Have Been Different for Esther?
      3. Advent of RegTech and Innovation in Trust
      4. View from the Top – Feedback Received from Interviews of 120+ CEOs and Board Members
      5. Use Cases
    3. Introducing the RegTech Quality Compass: The Five Factors of RegTech Quality
      1. The SERVQUAL Dimensions in Brief
      2. Developing a Quality Framework for the Digital RegTech World
      3. The Directions of the RegTech Quality Compass
      4. Quality Drives Satisfaction Drives Profitability
      5. Benefits of Working with the RegTech Quality Compass Framework
      6. Notes
    4. How Banks Are Managing Their Risk Through Technology and Market Infrastructure
      1. The Markets Post Lehman Brothers
      2. Basel III
      3. Dodd-Frank, EMIR, and Liquidity
      4. BCBS 248
      5. EMIR, Dodd-Frank, and MiFID II – More Players, More Competition
      6. Role of Clearing-houses and Related Infrastructure
      7. Management of Collateral Requirements by CCPs
    5. RegTech and the Science of Regulation
      1. Science Fiction and Banking Reality
      2. Managing Risk – The Holy Grail of Banking
      3. RegTech and the Regulatory Framework
      4. RegTech and Modern Technology
      5. Human-Factors Impact of RegTech
      6. Preparing for RegTech – Technologists and Bankers
    6. GDPR and PSD2: Self-Sovereign Identity, Privacy, and Innovation
      1. A Market in Data-led Services
      2. The Need for a More Nuanced and Better Understood Working Definition of Privacy
      3. Privacy Is Not Just About Withholding Information from Others; It Is About the Individual Having Control Over Who Has Access to It
      4. How Can Technology Help Implement These Principles and the Intention of GDPR?
      5. The Future: Privacy and Innovative Markets Both Better Served by Self-Sovereign Identity
    7. Rise of RegTech in the German Market
      1. Overview of RegTech Business Models in Germany
      2. Use Case: SolarisBank
      3. How RegTech Will Evolve
    8. The Power of RegTech to Drive Cultural Change and Enhance Conduct Risk Management Across Banking
      1. Culture Determines What You Do When No-one Is Looking
      2. Governance Framework: Three Lines of Defence Powered by RegTech
      3. Data and New Skills as Strategic Assets
      4. Technology to the Rescue
      5. Compliance Spending
      6. FinTech and RegTech Solutions
      7. Notes
  7. 3. Regulatory Innovation and Sandboxes
    1. Discover the Innovative Technology Behind RegTech Leaders
      1. The Regulatory Quest
      2. Big Data
      3. Conclusion
    2. Enabling RegTech Up Front: Unambiguous Machine-readable Regulation
      1. Publishing Machine-readable Regulation on the Web
      2. Notes
    3. Align Open Banking and Future-Proof RegTech for Regulators and Third-Party Providers to Deliver the Optimal Consumer Convenience and Protection
      1. Transaction Model (for a Picture-perfect Open Banking Scenario)
      2. Notes
    4. A Seat at the Table – Bringing the Voice of FinTech to the US Regulatory Process
      1. The Case for Financial Services Innovation in SME Lending
      2. US Financial Regulation – Outdated, Complex
      3. The US Financial Regulatory System Is Silent on Innovation in General and FinTech in Particular
      4. Who’s Speaking Up for the FinTech Sector?
      5. Looking Forward
      6. Notes
    5. Sandbox Games for RegTech
      1. Regulatory Sandbox in the Stricter Sense
      2. Conclusion
    6. Legal Guidance for Entering the Sandbox and Taking Advantage of Cross-Border Cooperation Agreements
      1. Background: The Genesis of the Sandbox
      2. Why Enter the Sandbox?
      3. Note
    7. RegTech and the Sandbox − Play, Innovate, and Protect!
      1. The Rise of RegTech
      2. Regulatory Sandboxes for More Innovation
      3. Notes
  8. 4. A Call for Innovation or Disruption?
    1. Governance, Risk, and Compliance: Complex or Complicated?
      1. Asset Management: A Case Study
      2. Complex: ‘Involving Many Different and Connected Parts’ Parts’
      3. Complicated: ‘Involving Many Different and Confusing Parts’ Parts’
      4. From Complicated to Complex
      5. Technology
      6. Note
    2. Innovation or Disruption: Not Always Black and White
      1. Disruption or Innovation: A Tale of Two Cultures
      2. Keys to Success for FinTech Partnerships
      3. Notes
    3. How to Use Digital Marketing Data in Regulated Industries
      1. Conclusion
    4. Invention Versus Reinvention
      1. What Is Open Banking?
      2. Building a Bank Through Partnerships
      3. Platform Banking Is How It Starts
      4. Marketplace Banking Is How It Develops
      5. Co-ownership of Products and Customers
      6. The Execution Model Is Fundamental to Succeed
      7. API Monetization and Getting the Business Model Right
      8. Conclusion
      9. Note
    5. Making Regulation Machine Readable
      1. Invest in Industry Standards, Instead of Individual Approaches
      2. Shift Lawyers’ Mindsets Towards Digital
      3. Managing Regulations Digitally, Instead of by Hand
      4. How to Digitize Regulations?
      5. But How Can RegTech Platforms Digitize Regulation?
      6. Notes
    6. Can We Digitize Know Your Client?
      1. How Are We Doing Today?
      2. Cognitive Computing
      3. Conclusion
      4. Notes
  9. 5. RegTech Investment and Compliance Spending
    1. Why a Substantial Investment in Financial Services RegTech Now Will Strategically Reduce Your Future Regulatory Compliance Costs
      1. Notes
    2. Old Tech + New Tech = RegTech: Excel Spreadsheets and End User Computing in a Regulated World
      1. Which Regulations Apply to EUC Solutions in Financial Organizations?
      2. Conclusions
      3. Notes
    3. Will Financial Institutions Ever Achieve a 100% Compliance with Anti–Money Laundering and Combating the Financing of Terrorism Rules?
      1. Innovation and Disruption – The Magic Words for Investors?
      2. Standardization, Digitization, and Automatic Validation
      3. Customer Identification and Verification
      4. Repository, Data Ownership, and Self-Assessment
      5. Conclusion
    4. Merits and Demerits of a Shared Risk Engine
      1. Cloud Infrastructure for Storage
      2. Data Handler
      3. Model Silos
      4. Stress Testing and Scenario Analysis
      5. Integrated Risk Reporting
      6. Architecture Details
      7. Rapid Scaling
      8. Reduced Cost
      9. Improved Data Quality
      10. Faster and Modular Modelling
      11. Improved Supervisory Comparability
      12. Data Privacy
      13. Standardization of Internal Models
      14. Systemic Model Risk
      15. Conclusions
    5. Spend on Compliance: A Necessary Evil or Business Enabler?
      1. Compliance as a Cost Centre
      2. Why Is Compliance Not Addressing the Blind Spot?
      3. RegTech: A New Wave of Opportunity
      4. Examples
      5. How to Get Started
      6. Notes
  10. 6. RegTech for Authorized Institutions
    1. RegTech Opportunities in a Post-4MLD/5MLD World
      1. A GLOBAL ISSUE
      2. The Risk Based Approach (RBA)
      3. The Union of RegTech and Increased Regulation
      4. Beyond Regulatory Compliance
      5. Beyond the Regulatory Need for RegTech
      6. An Enhanced Approach
    2. Passporting in the EU – Is an Opportunity Also a Problem?
      1. What Constitutes ‘to Provide Any or All of the Investment Services’
      2. The Actual Application Form Process That an Investment Firm Is Required to Complete When Seeking an EU Passport
      3. Conclusion
    3. What Do PSD2 and Similar Activities Mean for Banks and FinTech Start-ups?
      1. PSD2 Introduces Two Types of Entities to the Financial Industry: PISP and AISP
      2. Access to Accounts (XS2A)
      3. Customer Authentication and Security
      4. Notes
  11. 7. RegTech from a Regulatory Perspective
    1. The Role of Anti–Money Laundering Law and Compliance in FinTech
      1. Anti–Money Laundering Law
      2. Counterterrorist Financing Law
      3. Sanctions Law
      4. AML Compliance 101
    2. Banking Supervision at a Crossroads – RegTech as the Regulators’ Toolbox
      1. Technology and Regulation
      2. Compliance and Reporting
      3. Risk Mitigation
      4. Conclusion
      5. Notes
    3. FinReg, FinTech, and RegTech – Quo Vadis, EU?
      1. Financial Market Regulations as a Game Changer
      2. RegTech – The Helping Hand for Financial Institutions and Regulators
      3. EU’s Watchful Approach on FinTech and RegTech
      4. Outlook: Call for Regulatory Interoperability
      5. Notes
    4. The RegTech Landscape from a Regulator’s Perspective
      1. The Emergence of a New Breed of Technology-Driven Financial Institutions
      2. The Need for Traditional Financial Institutions to Redesign Their Processes
      3. The Positioning of Regulators in the Midst of This Evolution
      4. Notes
    5. RegTech is for Regulators Too, and its Future is in Emerging Markets
      1. Regulators Are Starting to Innovate as Well
      2. For Emerging Market Regulators, the Risk of Inaction Is Too High
      3. Glimpses of a RegTech Approach to Regulation are Emerging
      4. In Emerging Economies, We Are at the Beginning of a Wave of Regulatory Experimentation with RegTech
      5. Where RegTech for Regulators Is Headed
  12. 8. Blockchain and AI in RegTech
    1. The ROI of RegTech
      1. So what does this mean in practice?
    2. The Augmented Compliance Office
      1. Know Your Customer
      2. Enterprise Risk Management
      3. Predictive Regulatory Monitoring
      4. In Conclusion
    3. Dissolving Barriers: A Global Digital Trust Protocol
      1. Attempts at Unified Global Identity
      2. Getting to Know More About This Identity (Due Diligence)
      3. Beyond One-time KYC: Keeping Records
      4. Underlying Core Global Regulatory Principles
      5. Core Function of Compliance Can Be Replaced by an AI Platform
      6. The Power of a Common Global KYC Platform
      7. Keeping Records Beyond KYC
      8. Conclusion
    4. Can AI Really Disrupt Monitoring for Suspicious Activity?
      1. Grinding to a Halt
      2. A Definition
      3. Linking with the Facts
      4. The Next Generation of Suspicious Activity Monitoring in Practice
      5. The Challenge with the Next-Generation Approach
      6. Conclusion
    5. Forging a Responsibility and Liability Framework in the AI Era for RegTech
      1. Applying Current Legal Frameworks in the AI Era
      2. Key Issues for Forging a Responsibility and Liability Framework in the AI Era
      3. The Road Ahead: Addressing Opacity and Complexity for AI Responsibility
      4. Notes
    6. Compliance with Data Protection Regulations by Applying the Blockchain Technology
      1. Distributed and Transparent Source of Truth
      2. Immutable and Tamper-proof Ledger
      3. Secure Space to Process Transactions
      4. Notes
    7. Blockchains Are Diamonds’ Best Friend: The Case for Supply Chain Transparency
      1. What Is Provenance?
      2. What Technology Solutions Are Available?
      3. Knowing Your Object (KYO)
      4. Blockchain’s Potential
      5. Future Challenges
  13. 9. RegTech Applicability Outside the Financial Services Industry
    1. Protecting Consumers and Enabling Innovation
      1. What Is RegTech?
      2. Data Revolution
      3. Enter Data Protection Regulation
      4. Consumer Empowerment
      5. The RegTech Solution
    2. RegTech Impact on the Private Security Industry
    3. ArtTech: How Blockchain Can Improve Provenance
      1. Introduction
      2. Provenance and Blockchain Background
      3. Conclusion
      4. Notes
    4. The Potential of RegTech in Improving the Effectiveness of Environmental Regulation
      1. The Clean Energy Revolution
      2. Regulatory Uncertainty in Monitoring Environmental Data
      3. The Use of Technology in Achieving More Effective Environmental Regulation
      4. Conclusion
      5. Notes
    5. RegTech Applicability Outside the Financial Services Industry
      1. Non-financial Compliance
      2. Tone from the Top/Ethics
      3. Due Diligence/Enhanced Due Diligence
      4. Anti-bribery and Corruption
      5. Trust and Safety
      6. Communications Archival/Monitoring
      7. Insider Trading
      8. Conclusion
    6. Using RegTech as a Cross-Industry Digitization Tool
      1. Lessons Learned in the Financial Services Industry
      2. Data Protection Is a Now a Cross-industry Problem
      3. Consequences of Not Protecting Data (and the Benefits of Doing So)
      4. Issues Related to Industries Outside of the Financial Services Sector
      5. How RegTech Can Be Applied to Industries Outside of the Financial Services Sector
      6. Conclusion
      7. Note
    7. RegTech Unleashed: Discovering the Pathways Beyond Finance
      1. More than FinTech and Finance
      2. Regulatory Costs Driving Cross-sector Demand
      3. Big Data Also Drives Demand in Business
      4. Co-opting Public Sector for Vibrant Ecosystem
      5. RegTech: The Next Generation
      6. Conclusion
      7. Notes
    8. RegTech Outside Finance: Four Options, One Clear Choice
      1. FATF Recommendations
      2. Four Available Options
      3. The Option to Fight
      4. There Are So Many Solutions Out There
      5. Conclusion
      6. Notes
    9. RegTech: A Safe Bet for Tackling AML and Fraud in the Gambling Sector
      1. The RegTech Technology Toolbox
      2. RegTech in a Gambling Context
      3. Supervised Learning Techniques
      4. Unsupervised Learning Techniques
      5. 360° View of Bettors
      6. Improving Efficiency by Centralizing Data for Compliance Teams
      7. Assembling Everything in a Real-time Architecture
      8. Machine Learning’s Black Box Problem
      9. The Positive RegTech Externality
  14. 10. Social Impact and Regulation
    1. The FinTech Ecosystem Between Legal Compliance and Social Dimension
      1. Notes
    2. The End Justifies the Means: Putting Social Purpose Back at the Heart of Banking and Financial Regulation
      1. Lessons Learned or Business as Usual?
      2. The Collapse of Trust and the Spread of Inequality
      3. The Role of RegTech as an Instrument of Change
      4. Purpose-driven Regulation
      5. Better Collaboration for Better Outcomes
      6. Notes
    3. RegTech’s Impact on Trust and Identity
      1. Tools for Restoring Trust
      2. Identity Vulnerability Is Globally Pervasive
      3. How the Futurist Sees Trust and Identity: Social Due Diligence
      4. Notes
    4. How Technology Is Driving Financial Inclusion
      1. The Role of Government
      2. The Role of Technology
      3. The Emergence of the Regulatory Sandbox
      4. Technological Inclusion Means Financial Inclusion
      5. Where Next?
      6. Notes
    5. Banking the Unbanked and Underbanked: RegTech as an Enabler for Financial Inclusion
      1. Why Is That?
      2. RegTech as a Solution to Financial Exclusion
      3. India as a Case Study
      4. Africa as a Case Study
      5. MENA Region as a Case Study
      6. Refugees as a Case Study
      7. Conclusion
    6. Superhero Way: Enhancing Regulatory Supervision with Superpowers
      1. The Flavour of Prevention
      2. The Prey
      3. At Eye Level
      4. Robocop Way?
  15. 11. The Future of RegTech
    1. Market Surveillance 2020
      1. Fifty Billion Events
      2. Capital Markets Policing Challenges
      3. Call for Action – Regulations in Europe
      4. Key Business and Technology Requirements for Market Analysis Platform (MAP)
    2. I Regulate, Therefore I Am? Regulating Humans’ and Machines’ Conduct and Culture
      1. A Brave New World of Regulated Activity
      2. RegTech and the Future of Digital Conduct Risk
      3. Whom Do You Trust? Empowerment Through Blockchain and Identity Management
      4. Conclusion
      5. Notes
    3. The Future of RegTech
      1. A Big Opportunity
      2. Compliance Culture
      3. New Technologies
      4. Roles of RegTech Companies
    4. From RegTech to TechReg – Regulation in a Decentralized World
      1. Existing Regulatory Framework
      2. Decentralization
      3. Regulation in a Decentralized Market
      4. A Broader Case for Regulating Technology Providers
      5. TechReg Market Opportunities
      6. Note
    5. Emerging Innovations in RegTech
  16. List of Contributors
  17. Index
  18. End User License Agreement

Product information

  • Title: The REGTECH Book
  • Author(s): Janos Barberis, Douglas W. Arner, Ross P. Buckley
  • Release date: August 2019
  • Publisher(s): Wiley
  • ISBN: 9781119362142