Regulator, We Need To Talk!

Gary Bailey, Co-Founder FinTech Advisory at Imperium Compliance Limited

26.11.2019 12:45 pm

financial regulatory

The problem
The cost of the current financial regulatory landscape is estimated at over 5% of the total revenue of the industry. This number is expected to double over the next 5 to 10 years. With over 50,000 regulatory rules and guidance being issued since the 2009 Crisis, the regtech council have penned the term law’s law in deference to Moore’s law view about technology, in that the number of regulations could be seen to have doubled every year since 2009 with no retreat in sight.

Regulation through the ages
- regulation 1.0 largely trust and competence based, light external governance.
- regulation 2.0 rules, guidance, penalties and increased external governance.
- regulation 3.0 detailed rules and culture based regulatory framework, heavy external governance with personal liability overlaid by a ‘do the right thing’ conduct ethos.

The law

The age of regulation 3.0 is upon us but we have not adapted our approach in the last or so 20 years. The mandated rules for any regulatory adherence scenario can involve; statute, guidance, case law, precedents, best practise, industry working group proposals and internal interpretations. Compliance is therefore analogous to law, but with a speed of change that would render most university law degrees out of date before completion.

facebook & the fca

One of Facebook’s biggest rivals in China, WeChat performs the role of Facebook, ApplePay, WhatsApp and more all rolled into one service. Over a billion monthly users service most of their daily needs through the conversational user interface or CUI. With app in app functionality, service providers allow WeChat users to seamlessly interact with banks, cinemas, retail shops, e-commerce and even some local governmental amenities. This is done using mobile first CUI technology.

Post Libra foray, most would conclude that Facebook would aspire to the same ubiquitous usefulness or shall we call it dominance. But what has this got to do with the FCA?

Native interaction

Compliance practitioners believe the current regulatory adherence method is not viable in the long term, either from a cost or completeness perspective, therefore the time has come for a more native interaction with the rules. Graham Odds, an innovator with ScottLogic, evangelises about the use of Conversational UI to provide more natural user interaction with their landscape. Having moved from the MS-DOS style text prompts to users driving activity via mouse, the general user interface GUI...revolutionised the way we operate. The conversational user interface, CUI is the new paradigm and could be adopted by financial services to solve regulatory adherence.

Conversational user interface - cui

Conversational interfaces (CUI) are platforms that mimic a conversation with a real human. CUI’s provide opportunity for the user to communicate with the computer in their natural language rather than in a syntax specific commands.

Conversational interfaces use Natural Language Processing (NLP) to allow computers to understand, analyze and create meaning from human language. Unlike word processors, NLP considers the structure to human language i.e. Words make a phrase, phrases make sentences which convey the idea or intent the user is trying to invoke.

Conversational interfaces have evolved as a tool for businesses to efficiently provide consumers with relevant information, in a cost effective manner. CUI provide ease of access to relevant, contextual information to the end user without the complexities and learning curve typically associated with technology. There are a variety of interface brands, including; voice assistants, chatbots and instant messaging apps.

The rise of regbots

RegBot, is a company pioneering similar technologies, enabling financial entities to be compliant with applicable regulation in real time, with no interpretative uncertainties or analysis bottlenecks. Like a virtual compliance expert sitting next to traders and compliance officers, RegBot ensures that regulatory obligations are fully monitored and met at all times, eliminating the need for unnecessarily conservative business policies that restrict business opportunities. The stated aim is to build a lawyer in a box: a sort of virtual regulatory co-pilot, that takes care of meeting your regulatory requirements automatically or near-automatically, providing the answers in all cases, communicating next steps, reasoned determinations and relevant information to all involved stakeholders, and logging it all in a fully auditable, time-stamped, 100% searchable format.

fca 3.0

Let us re-imagine the regulatory role with FCA 3.0 using the why, how and what framework;

Why - we believe that compliance adherence will help maintain the integrity of the financial services industry

How - we have developed conversational interface applications that contain all the current rules, guidance and interpretations and case studies

What - we have an interactive Wikipedia style assistance, training and information exchange platform manned by our automated technical specialists who are available to help you find the relevant rules

Conclusion

The need for compliance regulation to move beyond the static law library approach to interactive conversational models is clear. The problem is known. Technology tested and live. Mountains can be moved, all that is required is a conversation!