Christopher Woolard, Executive Director of Strategy and Competition at the Financial Conduct Authority (FCA), delivered a speech today on the hot topic of cybersecurity, crime and financial services. Delivered at a “TechSprint” in London, Woolard said it was time to bring regulators and tech specialists together to tackle the issue.
It is estimated that UK banks spend about £5 billion annually to deter and combat financial crime. The FCA’s own data indicates that over 920,000 suspicious activity reports were filed regarding anti money laundering.
“Our challenge, and the reason we’re here today, is to monitor entry, devise controls and erect barriers powerful enough to stop criminals in their tracks,” said Woolard.
Woolard said that usage of cryptocurrencies or “virtual currencies” by criminals is an example as to how new tech has given the bad guys new tools to fleece the unsuspecting. But while the “task is daunting,” Woolard believes this new tech can be used to counter the crooks.
“… But these same technologies, when used for good, could also be game changers in the fight against financial crime. Machine learning to improve the detection of suspicious activity, AI-driven anti-impersonation checks and distributed ledger technology [Blockchain] to improve the traceability of transactions are just some of the real, practicable solutions technology has gifted us.”
Woolard touted the FCA’s global Sandbox project as one way regulators and Fintech entrepreneurs can collaborate on a cross jurisdictional basis to focus on a problem that is clearly global and borderless.
“And the global sandbox is proof that the FCA isn’t afraid to facilitate global solutions to global problems. Financial crime, the perpetrators behind it and the victims of it can be found all around the world,” said Woolard. “Which is why it will take a network to defeat this network. In the fight against financial crime, fragmentation is our greatest enemy.”
As David Carlisle, a former US Department of Treasury advisor and currently with Rusi states;
“Governments must avoid the temptation to over-react and mis-regulate. They should not rely on an outdated set of anti-money laundering/counter-terrorist finance (AML/CTF) approaches. Rather, governments should study VCs to understand how to combat future financial crimes, while also allowing the technology room to evolve so that its potential benefits may be explored fully.
Global view: Because cryptocurrencies and related technology.”
This is a good theme to pursue as too frequently policymakers make a knee jerk decision based on a superficial appraisal of the problem that misses the mark while harming innovation. Hopefully, regulators from around the world will pursue a similar mission as Woolard and Carlisle advocate.