Data and tech platforms helping finance regulator spot problems earlier

The Financial Conduct Authority (FCA) is using technology investments to proactively identify and act upon potential risks to financial services customers.

Rather than react to problems after consumers have been affected, technology is improving the regulator’s use of analytics to gain insights and prevent future problems.

In a speech at the Peterson Institute of International Economics, FCA CEO Nikhil Rath said: “This is helping us to take a more proactive stance and, crucially, spot harm and intervene more quickly and more broadly.”

For example, the FCA has moved systems to the cloud as part of a project to put 50,000 finance firms and thousands of users onto a new regulatory data platform.

“Using our data lake, we aim to more swiftly identify, connect and react to firm and market issues,” said Rath. “Our analytics tools are speeding up case management and providing improved visibility of risk in each firm.”

He said the FCA is currently rolling out analytics screening tools to check that finance forms are complying with sanctions on Russia. This includes an automated tool to test firms’ ability to identify sanctioned firms. 

The FCA now scans 100,000 websites every day and removes hundreds of fraudulent or scam-related websites targeting UK consumers every year. “There is and must remain a laser focus on the quality of data coming in in the first place,” said Rath. “This is an area where we are holding firms increasingly to account.”

He said the FCA is keeping an eye on the potential systemic risks caused to the finance sector as a result of its resilience of services provided by a small number of critical third parties, including cloud providers.

The FCA is changing its approach to digital regulation in the UK through its Digital Regulators Cooperation Forum, which creates collaboration with communications, privacy and competition regulators.  

Rath said the FCA will influence tech companies to make changes on its behalf where it can. “We are testing our powers to the limit, and where we lack them, using our influence and other means to affect change,” he said, citing a success story where Google agreed to stop non-FCA verified firms from advertising financial products on its platform. 

Last month, the FCA announced it is looking for a “significant number” of tech experts as it invests in the use of data to prevent online fraud.

It wants to hire people with expertise in artificial intelligence, analytics and data science, as well as cloud engineering and digital technology.

The new recruits come on top of the100 people hired since 2020 as part of the FCA’s data strategy.