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PETER OAKES
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    Peter Oakes is an experienced anti-financial crime, fintech and board director professional.

    He has served in senior roles at central banks (Ireland & Saudi Arabia) and financial regulators (UK and Australia).

    Peter is an experienced board director of regulated finserv & fintech firms and advisor to regtech firms.

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Use of Supervisory and Regulatory Technology by Authorities and Regulated Institutions

10/10/2020

 
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Download Report - The Use of Supervisory and Regulatory Technology by Authorities and Regulated Institutions Market developments and financial stability implications 

One for all the #regtech and #suptech ambassadors / champions in the network (and you may have spotted it) - Use of Supervisory and Regulatory Technology by Authorities and Regulated Institutions covering:
  • Drivers of SupTech and RegTech developments
  • Benefits, challenges and risks for authorities and regulated entities
  • SupTech and RegTech strategies, market interaction and monitoring developments
  • SupTech resource considerations
  • Applications of new technologies by regulated institutions & authorities
  • Future technology use by the regulator
  • Ethics of using AI models for supervision
  • Case studies and examples

As you will see in the images below and in the report, less than 50% of supervisory authorities responding to the FSB survey had a Chief Data Officer or equivalent.  Areas where new RegTech tools and uses for data have been developed post 2016 are:

  • Risk reporting
  • Stress testing
  • Microprudential reporting
  • Other Macroprudential reporting
​
Whereas pre-2016, the supervisory authorities were focused on:
  • Fraud Detection
  • AML/CFT
  • KYC & Identity and Verification
  • Risk assessment
  • Risk management

Future technology use by the regulator 
I thought the section 9.2 Future technology use by the was regulator interesting. The FSB reports that rapid changes to the financial landscape and evolving market structure could be accompanied by changes in supervisory surveillance techniques. [Oakes - Ok so that is relatively obvious]

85% + of survey respondents expect that the continued evolution of available technologies will result in changes to supervisory processes, with 68% expecting this to be a considerable change. However, authorities expressed concern that undue reliance on SupTech tools could lead to misplaced focus on areas where risks can be easily measured. [Oakes - so just because you can do something doesn't mean you should do it]. This may deflect attention from areas of concern that are not as easily given to quantifiable measurement [Oakes - so true].

Retaining a forward-looking human based supervisory process
Thus while authorities may recognise the importance of integrating technology into their supervisory approaches, they could also acknowledge the importance of retaining a forward-looking human based supervisory process. The modern supervisory philosophy in most jurisdictions surveyed is based on predictive and human judgement-based oversight of regulated institutions. Technology offers the opportunity to automate routine tasks, develop new analytical techniques and provide better information. Using tools such as AI and ML to analyse increasing volumes of regulatory data provides opportunities for authorities to shift their focus to those aspects where humans excel over machines, e.g. judgement-based decision making. [Oakes- couldn't add anything further to that].

Cases Studies
I also recommend a read of Annex 1 where the Case studies and examples are contained.  There are case studies from 26 supervisory authorities:
  1. De Nederlandsche Bank - Becoming a smart supervisor
  2. European Central Bank - Supervisory Technology Hub
  3. European Central Bank - ECB’s Virtual lab
  4. Bank of England - Unstructured data extraction and analysis using ML
  5. People’s Bank of China - Off-site Payment Transactions Supervision Based on API and AI
  6. Bank of England, Financial Conduct Authority - Digital Regulatory Reporting (DRR)
  7. European Securities and Markets Authority - Web scraping, NLP and analysis of Key Information Documents
  8. European Central Bank - Machine-reading of Fit and Proper Questionnaire
  9. China Banking and Insurance Regulation Commission - Multi-party secure computing (credit field)
  10. Banco de España - Use of NLP in relation to ESG disclosures in Spain
  11. Banco de España - Tools for detection of mis-selling in Spain
  12. Monetary Authority of Singapore - Network Analysis for STRs
  13. Banca d’Italia - Anomaly measurement in transactions using Big Data
  14. Commissione Nazionale per le Società e la Borsa (CONSOB) - Market Surveillance
  15. European Central Bank - Early Warning System for Less Significant Institutions
  16. European Central Bank SREP – Truffle Search Analytics for structured text documents
  17. Monetary Authority of Singapore - Predictive modelling to identify representatives at higher risk of misconduct
  18. Monetary Authority of Singapore - Text analysis of audited financial statements
  19. Monetary Authority of Singapore - Data analytics for inspections
  20. European Central Bank - Sentiment analysis 
  21. European Central Bank - Network Analytics
  22. Banque de France/ACPR - Augmented supervisor
  23. Banque de France/ACPR - Advanced network analysis for banking supervision purposes
  24. Federal Reserve Board of Governors - NLP for continuous monitoring, web searches and COVID-19 monitoring
  25. Bank for International Settlements - BIS Bulletins
  26. Bank of England - Policy Response Tracker
  27. De Nederlandsche Bank - COVID-19 SAS-VA Dashboard
  28. Monetary Authority of Singapore - Monitoring and enforcement of safe distancing measures 

Source:
https://www.fsb.org/2020/10/the-use-of-supervisory-and-regulatory-technology-by-authorities-and-regulated-institutions-market-developments-and-financial-stability-implications/

​https://www.fsb.org/2020/10/the-use-of-supervisory-and-regulatory-technology-by-authorities-and-regulated-institutions-market-developments-and-financial-stability-implications/


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Spain - Collapse of half a billion euro money laundering and seizure case

10/10/2020

 
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Here's one for the #moneylaundering typology case studies for #MLROs as part of regulatory training requirements!
 
Relates to the collapse of major investigation into the Kinahan cartel and more than half a billion euros- particularly €500,000,000 stash of cars, properties & cash handed back to the accused by a Spanish judge after collapse of money laundering case.

Continue reading at CompliReg by clicking here.


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Do boards of central banks understand monetary policy?

4/10/2020

 
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"Decision makers seem hostile to a consideration of evidence or research".

This post relates to the Reserve Bank of Australia board, which has been lashed by a former researcher for failing to understand monetary policy in an email made public. 

Many of the points raised could be levied at other central banks too. As central banks continue to claim immunity from scrutiny under a misguided cloak of a widely misunderstood principle of 'central bank independence', which applies to some but not each and every aspect of a central bank's remit, we should expect to see more criticism of them particularly:

  • their ability to read the economic data to formulate effective policy in the current #covid pandemic climate;
  • their ability to navigate a wider policy debate over decentralised #digitalcurrencies;
  • where a central bank has both a central bank and financial regulation mandate,
  • mistakenly read tenets of independence of central banking to that of financial
  • regulation; and
  • failure to issue clear, simple and concise information. (see link below to a post by a former central bank deputy governor on his 'lonesome battle against the incantations')

On the 2nd last point, it is welcome reading that in the case of the Australian central bank the damning email was released by the bank following a freedom of information request. This is not something one could expect from many European central banks.

The email also criticised the central bank for:

  • its reluctance to be open and honest, 
  • making claims contradicted by evidence including about the effectiveness of policy, likelihood of dropping interest rates to zero and the effect of #negativeinterestrates, 
  • a Board that does not understand monetary policy or statistical research,
  • opposing views are not taken into account, 
  • decision makers seem hostile to a consideration of evidence or research, and
  • an environment makes the organisation dysfunctional. 

Here's a link to the Australia article on Reserve Bank  

Here's the link to Stefan Gerlach's (former Central Bank of Ireland deputy governor) post on his 'lonesome battle against the incantations' 

Both are worth a read.  And when you do, think about any relevance to your central bank and although there is always two sides to every story, in the absence of comment by the Australian central bank, the reports of Dr Peter Tulip's comments make for compelling reading and thinking. 

​This article is reference in my post on Linkedin.

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