FinTech Global Regulatory Round-up – w/e 15 January 2021

HM Treasury (HMT) has extended by one week the deadline for responses to its consultation on insolvency changes for payment institutions (PIs) and electronic money institutions (EMIs), including a proposed Special Administration Regime.

Feedback is now requested by 21 January 2021. [14 Jan 2021]

#Insolvency

#PIs

#EMIs

The Reserve Bank of India (RBI) has announced the establishment of a Working Group to study digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place.

The Working Group will consist of internal RBI members and external industry representatives. The Terms of Reference are as follows:

• Evaluate digital lending activities and assess the penetration and standards of outsourced digital lending activities in RBI regulated entities;
• Identify risks posed by unregulated digital lending to financial stability, regulated entities and consumers;
• Suggest regulatory changes, if any, to promote orderly growth of digital lending;
• Recommend measures, if any, for expansion of specific regulatory or statutory perimeter and suggest the role of various regulatory and government agencies;
• Recommend a robust Fair Practices Code for digital lending players, insourced or outsourced;
• Suggest measures for enhanced Consumer Protection; and
• Recommend measures for robust data governance, data privacy and data security standards for deployment of digital lending services.

The Working Group is expected to submit its report within three months. [13 Jan 2021]

The Fed has published a speech delivered by Governor Brainard entitled ‘Supporting Responsible Use of AI and Equitable Outcomes in Financial Services’. In her speech, Ms Brainard emphasised that the Fed is committed to supporting banks’ responsible artificial intelligence (AI) innovation, and noted that the Fed is exploring the role of AI and machine learning (ML) from a supervisory perspective. Ms Brainard also raised potential issues regarding the use of AI in financial services, in particular the ‘black box problem’.

The Fed is currently exploring whether additional supervisory clarity is needed to facilitate responsible adoption of AI. [12 Jan 2021]

#Innovation

#AI

#ML

The DoJ has announced that an individual who was convicted by a federal jury for conspiracy to commit a Racketeer Influenced and Corrupt Organizations Act (RICO) offense and conspiracy to commit money laundering has been sentenced to 121 months in prison. The individual – the owner and manager of a cryptocurrency exchange headquartered in Sofia, Bulgaria – played a key role in a transnational multimillion-dollar fraud. [12 Jan 2021]

#Enforcement

#MoneyLaundering

The FDIC has announced the selection of 11 companies to compete in the third and final phase of the FDIC’s Rapid Phased Prototyping Competition, a tech sprint designed to develop an innovative new approach to financial reporting, particularly for community banks. [11 Jan 2021]

#TechSprint

#Reporting

The OCC has published a statement issued by Acting Comptroller Brian Brooks, following the release of the Consumer Financial Protection Bureau’s (CFPB’s) Taskforce on Federal Consumer Financial Law report, which endorsed the need for federal charters for financial technology (FinTech) companies. [6 Jan 2021]