The FCA: becoming a data-driven regulator
The FCA published its second data strategy in 2020 (the first being published in 2013) and since then it has been full steam ahead.
The FCA set out that it wanted to be smarter in the way it uses its data and advanced analytics to transform the way it regulates and reduce the burden on firms.
This focus on data and innovation is a fey feature of its Business Plan 2022/23, accompanied by its Three-year Strategy 2022 to 2025 and an Outcome and Metrics document published in April 2022. Some of the FCA’s key intentions in relation to data include:
- using data more systematically to ask the firms it supervises more rigorous questions and using its enforcement and intervention powers more actively, pushing the boundaries where it needs;
- reducing and preventing serious harm by harnessing data to assess problems more quickly and so act sooner, aiming to prevent harm from happening in the first place;
- improving its reporting requirements, for example, through automated data collection;
- improving its ability to detect market abuse, through a significant upgrade in its market surveillance systems;
- supporting integrity in the environmental, social and governance (ESG) ecosystem, by encouraging improvements in ESG data, ratings, assurance and verification services;
- examining the role of artificial intelligence in financial services, working closely with the Digital Regulation Cooperation Forum and Bank of England, in particular in relation to unlocking the benefits of competition;
- continuing to invest in technology, including developing a Digital Unified Intelligence Environment to connect the vast array of data and intelligence it holds across its systems.
The FCA further stressed its focus on their data driven future in a speech delivered by Chief Executive, Nikhil Rathi, where he noted that ‘as the complexity and breadth of data broadens, so too will our remit’. He commented on the progress made by the FCA to date including reaching an agreement with Google in the UK that it would ban ads for financial products that have not been approved by an authorised person. TikTok and Microsoft have also implemented similar policies.
The FCA has now published its data strategy update 2022, which further detailed the progress made in relation to the 2020 data strategy including:
- collecting more liquidity data meaning the FCA can monitor the risk of firm failure and act early to improve consumer protection;
- analytics have developed and implemented sanctions screening tools to support the monitoring of the effectiveness of a firm’s controls in identifying organisations or individuals that have been sanctioned;
- using web scraping to identify potential scams. The FCA is scanning an average of 100,000 websites created every day to identify newly registered domains that show the characteristics that could be used for scams or fraud;
- building a range of innovative programmes, including;
- the Regulatory Sandbox which allows businesses to test innovative propositions in the live market with real consumers, alongside regulatory oversight;
- Innovation Pathways the new, unified firm service that provides tailored regulatory guidance to innovative businesses, including established firms, start-ups and tech firms.
Going forward, this is a space to watch as the FCA has stated that it will publish further updates to explain its progress and how the outcomes it delivers continue to support the transformation vision set out in 2021, and the priorities set out in its Business Plan 2022/23.