The ASIC Podcast

Episode 20 transcript

March 14, 2017

ASIC podcast – Episode 20 transcript

Host: Hello and welcome to the official podcast of the Australian Securities and Investments Commission. On today's episode we'll be discussing ASIC's recent RegTech Roundtable, held on the 8th of February, and the themes and priorities that came out of the event. My name is Andrew Williams and joining me this time around is Mark Adams, Senior Executive Leader, Strategic Intelligence and the coordinator of the ASIC Innovation Hub at ASIC.  Mark, thanks very much for your time on the podcast.

Mark Adams: Thanks Andrew, pleasure to be here.

Host: Before we talk about the roundtable itself, explain to us – what is RegTech? What does RegTech mean?

Mark Adams: Technology's always been a part of risk and compliance frameworks for a financial system, however RegTech refers to the use of new technologies in solutions to address regulatory risk and compliance requirements in a way that's more efficient and more effective. Now let me illustrate that if I can – just think of computing power is now so much stronger than it was before, we've now got applications of big data, machine learning and artificial intelligence which I think brings the RegTech environment into a different world today. Now the kind of things it can be used for is near term, or near time, or predictive identification of potential misconduct or concerning behaviours, so that could track transactions, that could monitor service provisions, even the culture within a firm. Another area where it could perhaps be very useful is supporting the provision of information, including regulatory requirements, to regulators such as ASIC.

Host: Right, so it's a big area – it's a big, wide-ranging area, then.

Mark Adams: It is a significant development, I think, a step above the use of previous technologies with great potential.

Host: So I guess that leads into my next question, which is why did ASIC hold this RegTech roundtable event?

Mark Adams: So as I say, I think ASIC thinks the RegTech sector has enormous potential to help financial firms build a culture of compliance and identify learning opportunities and save time and money relating to regulatory matters. But ASIC also thinks it has potential to complement the work that we do in many ways. So it's against that backdrop – we've got a focus on RegTech – and this roundtable was really an opportunity to bring together a whole range of stakeholders and give them an opportunity to talk about where things might go and what might be the issues or barriers to the implementation of RegTech.

Host: And it was a big event – it wasn't just eight people around a desk, this was a significant undertaking – can you tell us how it worked?

Mark Adams: It was a huge event. We had to turn people away. In fact we had probably over about 120 people attend, the majority of those were in Sydney. We held a VC conference between the two venues, and we split the event into two sessions. One session was about what the opportunities might be and the drivers towards those, and the second session was around what might be the issues or barriers towards its implementation. In those two sessions we had a couple of industry people present – warm up the audience – before we then had facilitated discussion for around an hour in each case on those topics.

Host: And what were some of the topics that came out of that discussion – some of the issues and priorities that were brought up again and again?

Mark Adams: Well, there were a lot – so let me just mention a few. At the foundational level I think a number of them raised issues around digital identity and data. So on the digital identity, a number of the people in the audience said that Australia has a long way to go to the environment we have that supports effective and efficient identification and verification of individuals. Then there was data, which was also seen as foundational – that again, the work that Australia needs to proceed quickly on is what is the framework around access to data, consumer data, regulatory data – how might it be used; the standards around that data, the protections around that data – that's an exercise, amongst other things, the Productivity Commission is looking at at the moment, which a report due in March. Then a lot of people talked about the opportunities of RegTech, in particular in the financial services sector. And I think it was really interested what a few people said: really wanted to move away from a rear-view mirror approach to something more about learning and predictive. And a person in the financial advice sector really made an interesting comment: he thinks RegTech is a really good opportunity to change from being policeman to being coach. So I thought that was a really interesting comment. So it was clear amongst the audience that many people really saw RegTech as having a great opportunity to assist the supervision, monitoring and the improvement of culture within firms.

And I think the last area I'll probably talk about is that clearly people said 'Hey, this has to be something important for regulators' – we need to keep an open mind and reap the benefits of RegTech. Now that can be done a number of ways, in the way we approach regulation, can we be as technologically neutral as possible? We need to be proactive in the way we think about the uses of RegTech, including through the use of trials. And the last bit, I think, is how best to promote, inform and support collaboration with industry to nudge the use of RegTech in current risk management and compliance implementation. So, you know, that was just some of the issues.

Host: There are a lot of opportunities with RegTech, as you've mentioned over the course of the podcast, but where there's opportunities, there's always going to be an element of risk. Were there any sort of risks associated with RegTech that arose as part of this discussion?

Mark Adams: Well, again, I think risks are pertinent to any form of compliance management processes, and I think people did identify some that were certainly pertinent to RegTech. And it's probably no surprise, information and cyber security were mentioned as paramount – people need to have confidence in the holding of data and its use. Then, clearly another point was that there should not be reliance on RegTech as simply a 'tick and flick' process – that it was really important that entities identify where human judgement is still needed to play a role in making use of RegTech – i.e. RegTech needs to be seen as an enabler rather than the complete solution. And then a little bit like outsourcing and operational risk, people suggested that people need to check the technologies are actually fit for the purpose. You don't want to deploy an algorithm around RegTech which is flawed and can give rise to problems. So they were just a range of some of the things that people mentioned.

Host: Apart from the roundtable, what else is ASIC doing in the RegTech area at the moment?

Mark Adams: Well before I go on about what the next steps might be and so on, I probably just want to touch on what we're doing now. Under the Innovation Hub that ASIC administers, we have been pretty clear towards the latter part of last year that we wish to engage with the community. So since then we've had over 35 meetings with RegTech providers. We have also indicated that we are prepared to provide informal assistance to RegTech providers, and they only need to contact us via the Innovation Hub.

Going forward, I think this roundtable was a seminal event in informing us about our future approach. So, we intend to reflect on that, I think we intend to issue a report with a summary of the content of the roundtable as well as to outline what might be some options for the future approach of ASIC. And I think we want to hear from people about what they think could be the preferred way to go forward for ASIC. So quite a lot ahead.

Host: If people didn't attend the event, and do want to get in touch with ASIC about RegTech, about innovation, where should they go?

Mark Adams: The Innovation Hub has a dedicated e-mail address – that's the best place to go. Go to our website, look up Innovation Hub, go to that e-mail address and send in information about yourself and why you would like to talk with us. That's probably the simplest.

Host: Fantastic. Mark, thank you very much for your time.

Mark Adams: My pleasure.

Host: We'll be back with another ASIC podcast very shortly, thank you very much for listening.

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