Canada: Regtech Stepping Forward: UK Financial Services Regulator Publishes Results On RegTech Consultation

What is RegTech?

The UK's financial prudential regulator, the Financial Conduct Authority (the "FCA"), has recently published its Feedback Statement on Call for Input: Supporting the development and adopters of RegTech, where it outlined the result of its earlier Call for Input on how to support the development of "RegTech".

"RegTech" is defined by the FCA as the application of "new technologies to facilitate the delivery of regulatory requirements".

In short, RegTech promises to make sense of cluttered and intertwined sets of data, rapidly configure and generate reports using this data, and intelligently mine the data to realize its value (i.e. use the same data for multiple purposes). Some examples of applications of this approach are big data reporting tools that could increase regulators' use of big data, to real-time system-embedded compliance evaluation tools that could improve operational efficiency in monitoring transactions, anti-money laundering and fraud risk. RegTech could potentially assist financial services providers comply with regulation in a more cost-effective and easier way, while also potentially allowing regulators to have access to, analyse and process an increasing amount of data.

Context of the Call for Input

The FCA recognized that in the aftermath of the financial crisis, the financial services sector has had to deal with more onerous reporting requirements and comply with stricter regulatory standards. Regulators are also facing new challenges in monitoring compliance, as they have to supervise the application of more regulation while having to review more data to measure risk. The FCA seeks to improve effective compliance and reduce the cost of regulation for both firms and the regulator, and it sees the development and adoption of RegTech as a way to help achieve this aim. The Call for Input was issued as part of the FCA's Project Innovate, which was launched in October 2014.

In its Call for Input, the FCA sought views on the following issues: (1) what type of RegTech would make it easier for firms to interact with regulators, at a lower cost and lower administrative burden; (2) what role should the FCA play in order to foster development and adoption of RegTech in financial services; (3) specific regulatory rules or policies posing barriers to innovation of RegTech; (4) regulatory rules or policies that should be introduced; and (5) existing regulatory compliance or regulatory reporting requirements that would most benefit from RegTech.

Types of RegTech

The FCA categorized the types of RegTech that could benefit the financial services industry as the following, based on feedback received:

  1. Technology that allows more efficient methods of sharing information.

These include alternative reporting methods, shared utilities, cloud computing, and online platforms.

  • At a base level, cloud computing, and open online platforms could be leveraged as universally accessible tools that would better enable firms to interact with regulators, promote improved collaboration and engagement amongst the various industry players in the financial regulatory ecosystem, and help provide accessibility to regulatory changes.
  • Cloud computing and open online platforms would also be critical in enabling types of RegTech described in item #3 below – technology that simplifies data, allows better decisions and the creation of adaptive automation, such as big data analytics, risk and compliance monitoring, modelling/ visualization technology and machine learning and cognitive technology (artificial intelligence).
  • A move to cloud computing and open online platforms could also enable financial institutions to de-shackle themselves from closed, archaic legacy systems and make a strategic leap to best-in-class systems (in terms of performance, security, and open standards) at a low cost, given that the cloud computing and open online platform applications and infrastructure could be accessed on a relatively low subscription basis with little to no long term capital outlays.
  • Shared utilities, in which financial institution participants would collectively take part in contracting for and accessing 3rd party services, could substantially lower the administrative burdens and costs of such financial institution's compliance. For example, a service could collect end-client information in a shared portal (e.g., information required by know-your-client rules) for the immediate use of all financial institution participants.
  • Alternative reporting methods, which permit financial institutions to provide regulatory data in various formats would also be enabled by online platforms that permit for the development of application programming interfaces (APIs) (as described in item#2 below).
  1. Technology that drives efficiencies by closing gaps between intention and interpretation.

This is technology that makes the compliance process more efficient by closing the gap between the intention of the regulatory requirements and the subsequent interpretation and implementation within the regulated entity. Some examples of this type of technology are:

  • semantic technology and data points models: semantic technologies encode meaning into content and data to enable a computer system to possess human-like understanding and reasoning. In one example of this technology (called linked data), links are created between data points within documents and other forms of data containers, rather than the documents themselves. In this way, regulatory text is translated into code.
  • shared data ontology: an ontology represents knowledge as a hierarchy of concepts within a domain, using a shared vocabulary to denote the types, properties and interrelationships of those concepts. Ontology does to applications what Google does to the Web – instead of having to go to each web page and search for a piece of information, an ontology allows a user to search a schematic model of all data within the applications. This allows the user to extract relevant data from a source application, such as a CRM system, big data applications, files, warranty documents etc. From a compliance perspective, shared ontology allows the creation of a compliance management solution based on a shared conceptualization of the compliance management domain.
  • application programming interfaces (APIs): this is technology which allows the integration and interoperability between systems (chiefly over the internet) and can reduce costs, increase efficiency and provide platforms for innovation.
  • robo-handbooks and other robo-advice tools: these are computerized tools that are intended to deliver advice and guidance, and could allow firms to interact with regulation in order to understand the impact on their systems and processes.
  1. Technology that simplifies data, allows better decisions and the creation of adaptive automation.

Put simply, this is technology that simplifies and assists firms in managing and exploiting their existing data, supports better decision-making and makes ferreting out those who are not playing by the rules easier. Financial institutions are often challenged by the complexities of growing amounts of data stored in various locations in different formats and legacy compliance processes and systems struggle to keep up. What is needed are smarter, more efficient solutions – hence, RegTech. Examples of these types of technology include big data analytics, risk and compliance monitoring, modelling/ visualization technology and machine learning and cognitive technology (artificial intelligence).

  1. Technology that allows regulation and compliance to be looked at differently.

These include blockchain/ distributed ledgers, inbuilt compliance, biometrics and system monitoring and visualization.

Encouraging Adoption of Regtech

The FCA identified that, based on the feedback received, it can play a role in the development of RegTech by driving industry standards, encouraging improved collaboration and engagement and, possibly, FCA certification of RegTech.

In terms of why RegTech has not yet been widely adopted, respondents pointed to uncertainty over regulations, the stance of regulators and the credibility of unproven technologies. In addition, privacy legislation, the lack of standards in reporting, lack of accessibility to regulatory changes, as well as general infancy of the sector also proved a challenge.

Feedback suggested that the following would assist encourage the adoption of RegTech:

  1. Defining new regulations in a machine readable format. Similarly, the recent U.S. Department of the Treasury's white paper on marketplace lending "Opportunities and Challenges in Online Marketplace Lending" also recommended, more generally, the release of government data in formats that can be easily processed by third party software (so called "smart disclosure") as described in further detail in our recent post;
  2. Greater consistency and compatibility of regulations internationally; and
  3. Establishing a common global regulatory taxonomy.

The FCA report also outlined specific examples of RegTech that could assist with meeting regulatory requirements. These included global requirements such as Basel III, and more generally capital requirements and stress testing, as well as requirements under Dodd-Frank in the U.S.

RegTech in Canada

The Canadian financial services industry, like that in the UK, is subject to numerous regulatory requirements, particularly following the financial crisis. Many of these requirements are very similar, and Canadian firms, and regulators, would likewise benefit from additional technology tools facilitating compliance and reporting, where appropriate.

However, in seeking such benefits, attention must be paid to existing regulations that affect the adoption of RegTech in Canada. By way of example, the requirements set out in Guideline B-10, Outsourcing of Business Activities, Functions and Processes ("Guideline B-10") issued by the Office of the Superintendent of Financial Institutions ("OSFI") apply in the event that an entity that is deemed a "federally regulated entity" ("FRE") under Guideline B-10 outsources one or more of its business activities to a service provider. In the financial services industry context, FRE's include federally regulated banks, and Guideline B-10 could materially impact how the FRE's must contract for, among other things, cloud computing solutions and online platforms.

to view original article, please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.