Canada: U.S. Government Accountability Office Publishes Report On Fintech Regulation

In March 2018, the United States Government Accountability Office (GAO) published a report on Fintech regulation (the "GAO Report"). The GAO Report assesses how various American regulators can protect consumers of Fintech products and promote regulatory harmonization and innovation.


One of the major challenges in the United States, like Canada, is that there are many different regulators with responsibilities related to Fintech. The GAO Report identifies ten different federal regulators, many of whom have overlapping objectives, in addition to a number of state regulators and self-regulating industry organizations. Fintech firms consulted for the GAO Report identified the number of different regulators as a source of difficulty in identifying and complying with the various regulations applicable to their business. Numerous regulators were found to make it difficult to predict what approach would be taken by various regulators with differing objectives, capabilities and enforcement powers.

The GAO Report found that Fintech promises significant potential benefits to consumers. Mobile device payments offer greater convenience to customers who are able to access their finances anytime and anywhere. Distributed ledger technology has the potential to lower costs and improve security for payments and asset management. Automation of loan approval and investment advice can reduce transaction time. The better use of data from these transactions can also lead to increased financial inclusion, particularly for disadvantaged communities.

The GAO Report also identified potential risks to consumers. One such example is the risk of unauthorized transactions taking place following aggregation of a customer's accounts by a Fintech firm. A consolidated picture of who should bear the cost of compensating customers has not yet emerged; should responsibility lie with the Fintech aggregator or the bank or credit union behind the underlying account? These questions highlight the importance of a coherent regulatory approach between agencies.

Regulatory Coordination

The central theme of the GAO Report is that government agencies need to do more to coordinate with each other to encourage Fintech innovation. For example, the report suggests that the Federal Reserve should consider including the Federal Communications Commission (FCC) at meetings of the Federal Reserve's Mobile Payments Industry Working Group because of the FCC's expertise in mobile device regulation.

Other agencies are also encouraged to take a cooperative approach to Fintech regulation by including other agencies in their meetings and by sharing knowledge across platforms. Regular touchpoints between regulators are useful as they help to clearly define each regulator's roles and responsibilities. This reduces confusion for Fintech entities and allows regulators to better protect consumers.

Cooperation can also take place between regulators in different countries. The GAO Report notes that international Fintech cooperation agreements or "Fintech treaties" are a growing trend. Cooperation agreements are intended to help regulators share information and facilitate referrals for Fintechs which are interested in new jurisdictions. For example, Canada has concluded Fintech cooperation agreements with regulators in France, Australia, Abu Dhabi and the United Kingdom. The Canadian Competition Bureau also recommended increased coordination and harmonization between international regulators in its report on technology-led innovation in the Canadian financial services sector ( see our blog post on the Competition Bureau Fintech Report here).

American regulators have also joined the trend of international Fintech treaties. The recent agreement between the UK Financial Conduct Authority (UK FCA) and the U.S. Commodity Futures Trading Commission (CFTC) is the first example of a cooperation agreement involving an American regulator. The UK FCA and CFTC agreed to collaborate on their LabCFTC and FCA Innovate initiatives to support the growth of Fintech firms.

Innovation Offices

One of the regulatory tools the GAO Report examines is the development of Innovation Offices within agencies. Having dedicated staff who are knowledgeable about questions frequently posed by Fintech startups facilitates issue resolution and regulatory oversight. Innovation Offices are also well-positioned to hold Fintech-related events which bring industry experts together with regulators to encourage cooperation.

While some Federal agencies, such as the Office of the Comptroller of the Currency (OCC), have developed Innovation Offices, the GAO Report notes that others, such as the Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) have not. At a minimum, the GAO Report recommends agencies consider a dedicated webpage and contact email address in order to allow Fintechs with issues a method to get in touch.

Canadian jurisdictions are also looking at the concept of Innovation Offices. For example, the Government of Ontario recently announced plans for a Fintech Accelerator Office (FAO). The FAO's objective when it launches in November 2018 will be to help Fintech startups connect with regulators, global financial institutions, and other Fintechs. ( see our blog post on the FAO here)

Regulatory Sandboxes

The GAO Report also suggests American regulators consider establishing regulatory sandboxes. Regulatory sandboxes allow firms to test their ideas on a limited basis in a supervised environment where the enforcement of traditionally applicable regulation is modified. Sandboxes are helpful to regulators because they assist policymakers in determining appropriate regulatory approaches while also limiting the systemic consequences from the risk of a proof of concept failing. Sandboxes also are helpful for Fintechs who can use their experience interfacing with regulators in the sandbox to bring products to market-ready compliance more quickly.

Fintech regulatory sandboxes have been created in several jurisdictions around the world. Canada, Australia, Singapore, Switzerland, the United Kingdom and others have each developed their own regulatory sandboxes. The Canadian regulatory sandbox is administered by the Canadian Securities Administrators and aims to offer qualifying businesses a more tailored approach to regulation on a case by case basis. The CSA sandbox allows innovative businesses such as online financial portals, cryptocurrency-based ventures, and artificial intelligence trading platforms the opportunity for relief from certain regulatory requirements to permit them to test their products throughout the Canadian market. (see our blog post on the CSA Regulatory Sandbox)

The UK FCA has even published a proposal for a global sandbox (see our blog post on the idea). In the United States, Arizona recently became the first state to create a regulatory sandbox program, but federal regulators have not yet followed suit. The GAO Report suggests studying the idea in greater depth to see if such a concept would work federally. No action letters, trial disclosure waivers, innovation awards, industry advisory councils and Fintech accelerators in which regulators provide access to funding are also other tools open to American regulators.


Developing a regulatory system which is flexible and can adapt to new innovation is not easy. The GAO Report identifies several areas where Fintech regulation can be improved in the United States, including interagency cooperation, innovation offices and regulatory sandboxes. These lessons can also be applicable to other jurisdictions, such as Canada, which face similar challenges from a patchwork of Fintech regulation.

To view the original article 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
Related Topics
Related Articles
Related Video
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions