ECC0039
Written evidence submitted by Jane Jee (CEO at Kompli-Global Limited)
I see that you are chairing a new inquiry to review what progress has been made in combatting economic crime.
I understand that the inquiry has two strands:
I am writing in my personal capacity. I have an interest in the subject by virtue of my role as the CEO of a RegTech company called Kompli-Global Limited see https://www.kompli-global.com/ and as the Chair of Project Financial Crime at the Emerging Payments Association – see https://www.emergingpayments.org/portfolio/project-financial-crime/
My purpose is to urge you, as part of your inquiry, to examine why new technologies (such as those mentioned in the letter dated 9th October to you from Nikhil Rathi - the newly appointed Chief Executive at the FCA) have not been more widely deployed to prevent economic crime and to determine what you and government can do to remove the barriers which exist. In that letter Nikhil Rati says
" Emerging technologies such as artificial intelligence and machine learning have the potential to help firms monitor and identify suspicious transactions more effectively and efficiently." Such technologies can save a great deal of time and effort currently expended by both AML regulated entities and the public sector as accounts, grants and loans would not be awarded to those who are claiming in breach of the rules and/or fraudulently.
Firms offering these new types of technologies are known as RegTechs. RegTechs use artificial intelligence including machine learning and big data analytics to, for example, uncover adverse information and links to bad actors and prevent fraud and financial crime. Many offer software-as-a-service and provide real-time responses and up to date information as opposed to only interrogating static databases and watchlists.
RegTechs cover several sectors and they broadly fall into the following categories although many overlap; Risk and Compliance Management, Identity Management, Regulatory Reporting, Anti-money laundering (AML) and Fraud Management and Regulatory Intelligence. RegTech companies cannot by their nature be regulated under AML legislation and should be distinguished from Fintechs which are normally capable of being regulated and offer some form of financial service.
To give just one specific example of where a RegTech can make a difference - these new technologies can be used to analyse Companies House data and highlight potentially bad actors before they are granted an account. Although reform of Companies House has been announced, there is no set timetable for this and AML regulated entities, not just in the UK, but from around the world, rely on Companies House data although they are not currently checked or verified. Several companies including Kompli-Global where I am CEO have taken in Companies house data and are able to undertake the analysis which is required to prevent economic crime.
This article details a proposed reform of Companies House which cannot come too soon
Although the FCA has paid lip service to promoting use of these new technologies, it has failed to enable them to be widely deployed as it is afraid of skewing the market from a competition perspective. Many financial institutions are concerned that they will be sanctioned by their regulator if they experiment. Regulators in other countries are less inhibited and want to promote homegrown technology companies - see for example MAS in Singapore. I am not suggesting these technologies are a panacea for financial crime, or a silver bullet, but, by deploying them, more financial crime can be uncovered and prevented and potentially, assets recovered.
A BBC journalist recently asked my help in understanding why a man previously convicted of tax fraud would become a director of 1193 active companies? There are many examples of such suspicious activity within Companies House data. We at Kompli-Global are able to highlight this type of scenario due to the unique technology we have developed which makes use of human expertise in identifying suspicious factors.
Those entities regulated under AML legislation need positive encouragement to deploy such technologies. These technologies stand a much better chance of defeating such crime than some more conventional data providers who have a strong grip on the market. The FCA can ask what new technologies have been tried by a bank and offer some positive incentives to use real-time data to search for relevant information rather than only using static databases.
One of the biggest barriers to the adoption of technology to defeat financial crime is the obvious lack of joined-up thinking across government - where Treasury, FCA, BoE, Cabinet Office and BEIS have a part to play as well as the Information Commissioner. Data Protection is often incorrectly cited as a barrier to sharing data and investigating a person's background.
Both the National data strategy https://www.gov.uk/guidance/national-data-strategy
and the national digital identity strategy are relevant to this topic https://www.gov.uk/government/news/next-steps-outlined-for-uks-use-of-digital-identity and form important aspects of where progress can be made. We are leaving criminals to outwit our systems because they are not constrained in their use and exploitation of both available technology and gaps in our defences.
I also trust you will liaise the team at Ron Kalifa’s Strategic review of Fintech in the UK - https://www.gov.uk/government/news/review-launched-to-boost-uk-fintech-sector as Fintechs and RegTechs are a vital area for success in our future economy.
Please let me know if I can provide further information to help your inquiry.