On 2nd November 2021, Jessica Rusu, the Chief Data, Information and Intelligence Officer at the Financial Conduct Authority (FCA) spoke at the Chief Data Officer Exchange for Financial Services forum.

She spoke about the FCA’s approach to addressing new data and technology driven threats to consumers; how the FCA was developing its own data and technology strategies to regulate firms more effectively; and the FCA’s commitment to fostering innovation in financial services. The speech provided a useful round-up of the FCA’s focus on data across its operations and activities.

Key takeaways

Ms Rusu’s speech focused on the following points:

  • Data-led regulation: Ms Rusu’s role is to build the digital regulatory future of the FCA. She stated that the FCA’s priority is to become a data-led regulator – appropriate to regulating the data-led financial services industry. This means using data more effectively and using the same techniques that are used in the financial services industry to prevent harm, address poor practice and to foster innovation.
  • A more assertive and adaptive regulator: Interestingly, Ms Rusu also stressed the FCA’s determination to ‘become a more assertive regulator… a more adaptive regulator… and a more accountable regulator‘. The willingness to test the limits of its enforcement powers in future and to be more interventionist reflects similar sentiments expressed by the FCA CEO Nikhil Rathi. (See our earlier post here.)
  • Shifting threat landscape: Ms Rusu described how the FCA has seen the threat landscape develop recently due to fraudsters and scammers using new technological methods to target consumers. The key example mentioned was cryptocurrencies – where many consumers are drawn to invest in unfamiliar and unregulated products, encouraged by social media hype.
  • FCA response to the shifting threat landscape for consumers: Ms Rusu identified three ways that the FCA has responded:
    1. using traditional strategies to warn consumers (e.g., its list of unregistered businesses) and has developed campaigns (Scam Smart and InvestSmart) to educate consumers about investment risks;
    2. engaging with social media platforms to ensure compliance with the UK’s existing laws on scam advertising and advocating for the proposed Online Safety Bill to combat scam digital adverts and websites; and
    3. using ‘digital listening tools’. For example, the FCA used these tools to monitor consumers’ difficulties in the insurance markets during the pandemic. This intelligence prompted the FCA to take legal action against insurers which ultimately resulted in helping consumers and businesses being able to successfully claim on their insurance policies (e.g., business interruption policies).
  • ‘Regulatory Big Data’:
    • The FCA regulates over 51 thousand firms and as a result has access to a vast database of regulatory data. The FCA has used this data to consider what action to take. For example, the FCA has modelled the impacts of different interventions in the home and car insurance markets. The FCA has also used order book data to detect manipulative behaviour. The FCA continues to connect different data sets to form new intelligence, for example, it is currently using data to identify which financial advisors are most likely to give poor advice.
    • Ms Rusu emphasised that the FCA will continue to develop its data strategy to identify ‘paths to harm’, i.e., the behaviours and events that are likely to result in consumer harm or market failure. Clients may be interested in monitoring any future comments that the FCA makes on the ‘paths to harm’ that it identifies.
  • AI and machine learning: Ms Rusu noted the continuing advancement of machine learning and AI technologies and the associated potential harms and concerns. Ms Rusu briefly mentioned that the FCA is considering how it will use these technologies and will develop its data governance approach in line with industry standards.
  • What the FCA is doing to enable and support innovation: Ms Rusu also stressed the FCA’s interest in fostering and supporting innovation. The FCA wishes to be a progressive and forward-thinking regulator to support fintechs and financial services business. For example, through its Innovate services and the FCA Sandbox. The FCA Sandbox has moved to be ‘always on’ from its original cohort model; it has been seen internationally as a ‘gold standard’, now being adopted by regulators around the world.
  • Transforming the FCA data culture and capabilities: Ms Rusu concluded by stressing the FCA’s commitment to investing in its data strategy and capacities (how it collects and analyses data) and its commitment to being an innovative regulatory leader.