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Algorithmic Regulation: Automating Financial Compliance Monitoring and Regulation Using AI and Blockchain

Author

Listed:
  • Treleaven, Philip

    (University College London)

  • Batrinca, Bogdan

    (University College London)

Abstract

Efficient financial regulation is crucial to the future success of the financial services industry and especially the rapidly evolving new financial technology (FinTech) area. The concept of “algorithmic regulation,” modelled on “algorithmic trading systems” [Treleaven et al. (2013)], is to stream compliance, social networks data, and other kinds of information from different sources to a platform where compliance reports are encoded using distributed ledger technology and regulations are “codifiable” and “executable” as computer programs, using the same technology being developed for blockchain smart contracts. In this paper, five areas are discussed: a) an “intelligent regulatory advisor” as a front-end to the regulatory handbook; b) “automated monitoring” of online and social media to detect consumer and market abuse; c) “automated reporting” using online compliance communication and big data analytics; d) “regulatory policy modeling” using smart contract technology to codify regulations and assess impact before deployment; and e) “automated regulation” employing blockchain technology to automate monitoring and compliance. We refer to algorithmic regulation for systems that facilitate compliance and regulation decision-making in financial services using advanced mathematical tools and blockchain technology.

Suggested Citation

  • Treleaven, Philip & Batrinca, Bogdan, 2017. "Algorithmic Regulation: Automating Financial Compliance Monitoring and Regulation Using AI and Blockchain," Journal of Financial Transformation, Capco Institute, vol. 45, pages 14-21.
    • Handle: RePEc:ris:jofitr:1586
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    Citations

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    Cited by:

    1. Teichmann, Fabian & Boticiu, Sonia & Sergi, Bruno S., 2023. "RegTech – Potential benefits and challenges for businesses," Technology in Society, Elsevier, vol. 72(C).
    2. Anil Savio Kavuri & Alistair Milne, 2019. "FinTech and the future of financial services: What are the research gaps?," CAMA Working Papers 2019-18, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    3. Michael Becker & Kevin Merz & Rüdiger Buchkremer, 2020. "RegTech—the application of modern information technology in regulatory affairs: areas of interest in research and practice," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 161-167, October.

    More about this item

    Keywords

    Algorithms; Automation; Finance; RegTech; Blockchain;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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