FSRA launches Regulatory Technology (“RegTech”) initiativesADGM FSRA 21/04/2020
The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) is pleased to announce that it has launched three 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.
AI-enabled RegBot for Licence Application
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. For instance, if the applicant did not provide adequate information on its risk management systems and processes in relation to a regulatory requirement, the RegBot will prompt the relevant response from the applicant and in the process, enhance the applicant’s understanding of and compliance with the FSRA’s rules and regulations. From the information and data that it has extracted from documents uploaded by the applicant, the RegBot 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 would like to invite prospective VC fund managers exploring business opportunities in ADGM to try out the RegBot, and provide feedback and inputs on how to improve its user experience and functionality. Interested applicants may contact the FSRA at firstname.lastname@example.org for further information.
Fostering a Vibrant VC Ecosystem
The FSRA selected the VC fund management community for the pilot in light of the increasing pipeline of licence applications from VC managers. In May 2017, the FSRA introduced a first-in-the-region tailored regulatory framework for VC managers that simplifies the applicable regulatory requirements while maintaining the necessary safeguards to ensure that they operate in a safe and sound manner. Since then, the VC framework has gathered healthy traction among the VC community. In the last year, the FSRA has approved nine VC fund managers to conduct regulated activities in ADGM. This development is in concert with Abu Dhabi’s wider efforts in fostering a vibrant ecosystem for tech start-ups and small-and-medium enterprises. 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.
API-enabled Solution for Safe Handling of Client Money
To reduce the regulatory reporting burden on non-bank licensed firms (e.g. asset managers and broker dealers) while enhancing their risk management capabilities, the FSRA is utilising Application Programme Interfaces (APIs) to monitor client money held by such licensed firms with custodian banks, on a real time basis. The RegTech solution enables the reconciliation of an FSRA licensed firm’s client money balances held at the custodian bank against the licensed firm’s internal client money records in compliance with the FSRA’s regulatory requirements at all times. Any discrepancies with regard to the licensed firm’s reconciliation of client money balances will be immediately alerted to the firm and to the FSRA for prompt remedial actions.
Interested firms may contact the FSRA at email@example.com for further information.
Moving Towards Digital Regulations
In an increasing digital economy, where technology innovation is constantly transforming the financial services landscape, the ability to introduce or update our regulations to support that transformation is key. 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 Mr. Richard Teng, Chief Executive Officer of the Financial Services Regulatory Authority of ADGM.
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