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FSRA Launches Regulatory Technology ’RegTech’ Initiatives











The Financial Services Regulatory Authority, FSRA, of Abu Dhabi Global Market, ADGM, has launched three regulatory technology, RegTech, pilot initiatives, with the objective of helping its regulated financial services firms achieve better compliance and risk management outcomes, while reducing regulatory costs and burden.

To provide business efficiency to stakeholders operating in ADGM, the FSRA is automating its licence application process, enabled by artificial intelligence, for Venture Capital, VC, fund managers. Potential applicants will be able to interact with a "RegBot", which utilises natural language processing, NLP, and machine learning to identify information and risk gaps in the application and ask clarifying questions.

RegBot will enhance the applicant’s understanding of and compliance with the FSRA’s rules and regulations. It will classify the applicant’s readiness, and complete a draft application form for the applicant as well as a draft assessment report for the FSRA’s review. In this way, the RegBot is expected to increase business efficiency and reduce overall turnaround time for the application process.

The FSRA selected the VC fund management community for the pilot in light of the increasing pipeline of licence applications from VC managers. In the last year, the FSRA approved nine VC fund managers to conduct regulated activities in ADGM. Notably, funding and incentive schemes were launched in 2019 within ADGM to support start-ups and scale-ups at different stages of funding cycle. These include the Ghadan Ventures Fund, Mubadala MENA Tech Fund, ADGM Catalyst Fund, and Hub71 incentive programme.

To reduce the regulatory reporting burden on non-bank licenced firms (e.g. asset managers and broker dealers) while enhancing their risk management capabilities, the FSRA says it is utilising Application Programme Interfaces, APIs, to monitor client money held by such licenced firms with custodian banks, on a real time basis. "The RegTech solution enables the reconciliation of an FSRA licenced firm’s client money balances held at the custodian bank against the licenced firm’s internal client money records in compliance with the FSRA’s regulatory requirements at all times," the regulatory authority said, adding that any discrepancies with regard to the licenced firm’s reconciliation of client money balances will be immediately alerted to the firm and to the FSRA for prompt remedial actions.

To ensure that FinTech solutions, such as the two initiatives mentioned above, are fit for purpose in the event of any underlying changes in regulations, the FSRA has embarked on a pilot project to digitise its regulations, leveraging semantics and NLP. In a digital state, the FSRA’s regulations can be expressed as a set of APIs and regulatory taxonomy for firms and FinTechs to interact with dynamically. This pilot is a first step towards achieving the FSRA’s concept of creating "Regulations in a Box", where firms can use the FSRA’s digital regulations to test and deploy innovations that are compliant by design. The FSRA in turn, would be in a position to ensure that its Regulations can be updated efficiently and effectively to support technological advances.

"As part of our ongoing efforts to build a best in class ecosystem of digital financial and business services, the Financial Services Regulatory Authority continues to commit significant resources to promoting business efficiency and innovation in a safe and well-regulated environment. These RegTech initiatives are prime examples of our model of close collaboration with the industry to develop practical solutions for industry participants to enhance regulatory compliance and instil the right compliance culture within their organisations," said Richard Teng, Chief Executive Officer of the Financial Services Regulatory Authority of ADGM.

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