On Wednesday, I participated in the FCA’s follow-up to its successful TechSprint in May (see link), both hosted by EY. The aim was to bring together a diverse group of people from the industry and beyond, many of whom had been involved in the original, to feed into the FCA’s formulation of its FinCrime priorities.
It was a terrific day, creative and progressive in equal measure, such that I suspect the FCA could have run multiple follow-up events of extremely high quality. There is a genuine momentum here, but still a major challenge to harness it.
This isn’t the place to go into detail, but I did sense the emergence of a new set of promising approaches to the peculiar set of problems financial crime – in all its destructive forms – poses for regulation.
The plural here is important. I’ve posted several blogs in this territory before, all arguing the need to create a different mindset, one that recognises more explicitly that FinCrime involves conscious opponents of regulation. Technology promises to enable us to chunk these problems up in different ways, that have the potential to make it much more tractable.
Combatting these criminals successfully, and for the duration, will almost certainly require putting several complementary initiatives in the fire at the same time, accepting some of them will work faster than others. The aim would be to box the criminals in, making it much more expensive and higher risk for them to use the financial system.
From my experience of the day, here are six possible challenges the FCA and industry (in its broadest sense, including vendors, academics etc.) might take on collectively:
1. Share data on suspicious transactions, while respecting legal protections of privacy
2. Create a better alignment between regulators and firms, with more explicit collaboration.
3. Do the same between regulators and law enforcement, sharing more information and analysis
4. Leverage the technology that already exists, and incentivize firms to continue innovating
5. To accelerate this, devise “better carrots and sticks” for firms to invest, possibly using capital adjustments
6. Create, via a willing industry, a well-funded unit to think ahead and anticipate what might come next
Of these, 1 is a prerequisite, 2–5 are incremental to varying degrees, and 6 is a matter of will. None of them are easy, and they would all benefit from greater international collaboration, but no-one saw these as excuses for inertia.
There are probably also initiatives and lessons that regulators might adapt from other industries (e.g. Mandatory Observation Reporting in aviation, which builds up patterns of “near misses” to inform future regulation), and doubtless there are other important challenges not covered above.
But the two main thoughts I took away were: first, that much of this is do-able if the will exists; and secondly, that FinCrime no longer seems like a Gordian knot type of problem, where the only way to unravel it is to cut through it in a single stroke.
In May we held a three-day International Anti-Money Laundering and Financial Crime TechSprint. Our fifth and largest TechSprint, the event focused on how new technology can be used to more effectively combat money laundering and financial crime.