RegTech in public and private sectors: the nexus between data, technology and regulation

Abstract

Higher regulatory compliance requirements, fast and continuous changes in regulations and high digital dynamics in the financial markets are powering RegTech (regulatory technology), defined as technology‐enabled innovation applied to the world of regulation, compliance, risk management, reporting and supervision. This work builds on a systematic literature review and a bibliometric analysis of the literature on RegTech, its influential papers and authors, its main areas of research, its past and its future. The resulting multi-dimensional framework bridges across four main dimensions, starting with regulation and technology, where one or more regulations, not necessarily financial ones, are addressed with the support of technologies (e.g. artificial intelligence, DLT, blockchain, smart contracts, API). Data play a central role, as sharing them enables data ecosystems, where additional value can be attained by each market participant, while data automation and machine-readable regulations empower regulators to pull data directly from the banks’ systems and combine these data with data obtained directly from customers or other external sources. Several applications emerge, both for regulated entities, covering matters of compliance, monitoring, risk management, reporting and operations, as well as for authorities, which can leverage on RegTech (SupTech) solutions to make policies, to undertake their authorising, supervising and enforcement operations, for monitoring and controlling purposes, and even to issue fines automatically. As a consequence, stakeholders can reap a series of benefits, such as higher efficiency and effectiveness, accuracy, transparency and lower compliance costs but also risks, such as cyber risk, algorithmic biases, and dehumanization.

How effective are the enforcement activities of derivatives exchanges in the digital age? A survey of enforcement notices through the lens of humans

“…Classed as a subset of RegTech (Barrière, 2021), SupTech refers to technologies which equip regulators to "conduct supervisory work and oversight more effectively and efficiently" (The Basel Committee on Banking Supervision in Magalhães Batista and Ringe (2020)). Thus far, analyses in the burgeoning literature have largely focused on the potential of SupTech to transform public or national competent authority level supervisory and enforcement operations (Grassi and Lanfranchi, 2022). However, as "private" regulators, exchanges could take a lead role in encouraging their (at JFRC 32,3 times) tech shy public counterparts (Anagnostopoulos, 2018) to switch from analogue to more digital approaches to enforcement.…”

“…This is because these tools might be able to translate the original notices into the technical language of the target “tongue”, for example, Chinese. This way, an enforcer might be able to meet the twin goals of precision and ensuring a notice’s messages are understood by the broadest possible audience; SupTech could help make enforcement processes more manageable through the auto calculation and dissemination of penalties, particularly for minor technical infractions (Grassi and Lanfranchi, 2022). This facilitates a more proportionate, risk based approach (Arner et al , 2017) which could free up tight supervisory and enforcement resources for allocation to more complex cases.…”

Navigating the nexus of security and privacy in modern financial technologies

“…This helps in preventing financial fraud and protecting both institutions and customers. In addition, with ever-evolving regulatory landscapes, technologies such as RegTech assist financial institutions in automating compliance processes, reducing the risk of non-compliance and associated penalties [61], [62].…”

The Evaluation of the Indonesian Fintech Law From the Perspective of Regulatory Technology Paradigms to Mitigate Illegal Fintech

“…The concept of RegTech has broader coverage in terms of the development of digital financial industries, including fintech. 42 To date, there has not been any formal model delineating the legal construction to avoid illegal fintech practices through a RegTech approach. 43 Some references on the enhancement of RegTech components in the legal structure of fintech were garnered to resolve illegal fintech issues.…”