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The financial services industry in Asia Pacific continues along a journey of transformation driven by rapid technological innovations. Developments in AI, big data analytics, and the increasing institutional acceptance of cloud data storage have thrown challenges up for regulators, who already struggle to harmonize rules across an economically and diverse region.
What new challenges are each of these new technologies bringing to regulators?
In January 2018 the Financial Stability Board valued the world’s crypto-assets at $830 billion. Although volatile, the sector has shown explosive growth that surpassed expectations.
However, with an estimated $2.5 billion worth of cryptocurrency being laundered through top exchanges annually, on top of the cryptocurrency that is stolen by hackers, these assets present a new anti-money laundering challenge to regulators. The challenge is made harder due to the anonymous nature of the transactions, the fact that they are hidden from authorities, and can freely move across borders.
Blockchain technology is proving to have many applications within the financial industry as well as governments. Of interest in South East Asia is the capacity to drive financial inclusion by enabling migrants to send back remittances to the developing world and eliminate fraud and corruption. Within the financial services world, distributed ledger and Digital ID is enabling Open banking, making it easier for customers to compare products and move their account data from one firm to another.
However, while regulations are not clear, compatible and consistent across borders, some banks are choosing to de-risk, refusing to open accounts for certain types of people under these circumstances in order to avoid the AML threat entirely.
Artificial intelligence is also making waves for regulators. When combined with algorithms, artificial intelligence and big data can be used to drive robo-advice and automated investment decisions.
Regulators need to drive accountability frameworks to ensure the personal responsibility of the people that create the AI engine and to identify any potential risk that may arise. Firms will need to define the objects of the AI governance framework, select organizational governance measures, consider the consumer relationship with management and build decision-making and risk assessments.
To read more about the challenges that these new technologies are bringing to the market, and how the regulators are addressing these threats, download the full report.
Regulatory regimes in Asia Pacific are being challenged by the need to adapt to rapid technological innovations and an erosion of trust in a sector tainted by high-profile cases of financial crime enforcement. Learn how these challenges are being addressed.
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