UK vs USA: RegTech Edition

Sofia Schiller Solti

Since the war of independence, the US and UK have been separating themselves one from another, whilst being close friends. Whether regarding the pronunciation, meaning, or spelling of some words to their government systems, the differences have grown. Whilst the Americans are getting better at football (sorry soccer) we still see many gaps.

The economic differences have always been the biggest and most interesting ones. For example, the US economy is placed first worldwide with more than US $14 trillion of gross domestic product while the UK is in sixth with about US $2 trillion. However, the UK was the first industrialised country in the world and the most powerful country in the 19th century.

However, today we want to focus on other differences, notably what is the approach of both nations to compliance, business infrastructure and how RegTech is used and developed in the US and UK.

RegTech, or regulatory technology, is defined by the FCA as ‘new technologies developed to help overcome regulatory challenges in financial services’.

One main difference in each country is the regulatory environment. The US has a more complex and varied regulatory landscape, with many different agencies including the Financial Industry Regulatory Authority (FINRA), the National Futures Association (NFA), the Commodity Futures Trading Commission (CFTC)and the Securities and Exchange Commission (SEC), to name a few. The UK has a more centralized regulatory system, with just two authorities, the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA), responsible for regulating financial services. This difference in regulatory environments impacts the development and adoption of RegTech solutions in each country.

A second difference is how the focus of RegTech solutions seem to vary in each country. In the US RegTech solutions are often focused on specific regulations, such as Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements as well as  pre and post trade surveillance, transaction reporting and reconciliation.

In the UK, although the single-purposed solutions are available, RegTech solutions are more focused on the regulatory reporting, compliance workflow and compliance requirements of the financial sector as a whole and on improving the efficiency and effectiveness of regulatory processes, such as risk assessment and monitoring.

Overall, both the US and UK have active RegTech industries, with companies working on a wide range of solutions to help businesses comply with regulations and improve regulatory processes. Both approaches can be utilised in either jurisdiction, although the more ‘fragmented’ US system may be challenging to condense in a comprehensive workflow.

How can RegTech shrink the divide?

RegTech tools have the unique ability to reconcile the oft quoted observation, “England and America are two countries separated by the same language.”

Since the regulatory landscape is continually changing, (MiFID II – 2019, Brexit – 2020, 6AMLD – 2021, IFPR -2022, Consumer Duty 2023) staying compliant and up to date with the various responsibilities is more and more difficult and complex for all financial services firms.  Further highlighting and accelerating the trend of embracing RegTech as an important tool to stay compliant.

Until there is a more homogeneous regulatory system governing financial services, RegTech will be the primary solution to efficiently and flexibly satisfy the growing and divergent obligations of the various competent authorities.

Leo is a RegTech system that increases the efficiency and effectiveness of human resources by automating the manual elements of the reporting process. To know more click on the link below.

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