Journal article

The role of RegTech in augmenting regulatory compliance: regulating technology, accountability and liability

Algorithmic regulation Business regulation Financial system regulation Financial services industry Regulator strategy Regulatory instruments Australia

The financial services industry in the years following the global financial crisis has been faced with rapid regulatory change partly in response to findings of corporate misconduct and non-compliance. Compliance challenges have since become more complex and businesses struggle to meet their many local and extra-territorial regulatory obligations. Following in the steps of the financial and legal technology sectors, regulators are turning to technology as a solution to improve efficiency, reduce the risk of human errors and improve compliance standards overall. Regulation technology or ‘RegTech’ refers to this new category of technologies used to address regulatory requirements across various industries.

While RegTech in its many forms, from expert rule-based systems for compliance automation to artificial intelligence for reporting and compliance analysis, has the potential to revolutionise a regulator’s job, it comes with its own set of legal challenges. A growing reliance on technological solutions for compliance management requires new responses externally and internally within a business or institution to manage the liability risks of systematic errors and ensure the accountability of decision-making. This paper explores regulatory and corporate governance frameworks to address these challenges of adopting RegTech solutions and encourage best practices for regulators to augment regulatory processes. This will be discussed in light of the growing demand for RegTech solutions against the backdrop of financial regulatory change and uncertainty in the UK and in response to findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Australia.

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