Regtech initiatives and programs

The Business Research Innovation Initiative (BRII) was a federal government program that provided funding for small-to-medium ‘regtech’ (regulatory technology) businesses to develop innovative solutions to regulatory challenges in government. Sponsored by the Department of Industry, Science and Resources (DISR), ASIC’s selected challenge explores the potential of using technology to help identify and assess poor market disclosure by listed companies.

DISR announced DHI-AI as the successful applicant to work with ASIC on the proof-of-concept phase of the project, where DHI-AI received a grant of $1 million. This stage followed the first stage of the program where five successful regtech entities were awarded grants of up to $100,000 to conduct a feasibility study of their proposed solution over a period of three months (see 22-005MR).

ASIC worked cooperatively with DHI-AI to develop a prototype over 15 months (during 2023 and 2024). On completion, DHI-AI retained the intellectual property rights to their solution and can sell their product both domestically and internationally, including to other government agencies.

The Business Research Innovation Initiative (administered by DISR) concluded in later 2024 and ASIC will not be proceeding with regtech solution worked on by DHI-AI (a regtech scale-up).

At the end of the Initiative, the solution after the proof-of-concept phase was not well-enough advanced to warrant investment from ASIC. The solution was not narrowing down sufficiently poor disclosure matters for ASIC to undertake further assessment – the identified examples of poor disclosure were too simple in their assessment and analysis. The problem was tough – there was not a large database of learnings to work from and to assess compliance against as subject disclosure obligation was difficult.

BRII has been a good experience for ASIC with many learnings on employing advanced analytics solutions to analyse text to identify and assess regulatory compliance with subjective disclosure obligations. DHI-AI has also benefited from the Initiative and is working with some business on related solutions to that worked on with ASIC.

The BRII program is an example of how ASIC could work with businesses to try and produce solutions to some of our supervisory problems (ie: through an open competitive trial process).

ASIC developed additional regtech initiatives for FY2019–20 in the context of the emergence of the coronavirus (COVID-19) pandemic.

ASIC’s Regtech Initiatives 2019-20 report covers observations and findings from the regtech initiatives conducted throughout 2019-20. The report outlines that regtech is particularly useful for identifying and, in some cases, assessing indicators of concerning conduct or activities by financial businesses.

ASIC’s FY2019-20 regtech initiatives included:

• Remote services and supervision webinar (14 July 2020)
  This webinar was a discussion forum between industry, regulators and guests highlighting regtech’s potential to support the provision and supervision of financial services whilst many staff work remotely. The panel included representatives from financial firms and professional service providers.
  
  Key takeaways included the awareness and acknowledgement that people are at the heart of organisations: customers, employees, investors. Rapid mobilisation and flexibility of firms to move to new working environments highlighted adaptation skills while investment in technology was pivotal for successful transitions.
  
  
  
• Responsible lending demonstration webinar (20 August 2020)
  A free, public problem-solving event with a curated synthetic data set in which selected regtech providers demonstrated how AI/ML can be used to support a firm’s compliance with responsible lending obligations. The regtech solutions were showcased at a public webinar and was followed by an industry panel discussion.
  
  
  
• Financial promotions monitoring tool trial
  A suptech trial leveraging previous regtech projects to support ASIC to detect and identify risk indicators of misconduct with financial promotions targeting and/or exploiting vulnerable consumers, particularly during COVID-19.
  
  
• NLP prospectus review
  A first phase application of natural language processing to review prospectus information. ASIC will leverage previous regtech projects and publicly communicate its experience.
  
  
• Voice analytics phase two project
  A suptech trial leveraging previous regtech projects to build ASIC's voice analytics capability, supporting ASIC with enhanced supervision and enforcement investigation.
  
  
• NLP data flow automation and document scoring
  Proof-of-concept projects seeking productivity improvements for our internal business teams through automation of data flows and prioritisation of advanced decision-making.
  
  
• Licensing TAG tool phase two
  Continuing from phase one, the Technology Assisted Guidance Tool is now undergoing testing in an internal environment.

On 7 August 2018, ASIC received federal government funding for financial years (FY) 2018–19 and 2019–20 to promote Australia as a world leader in developing and adopting regtech solutions to risk management and compliance problems relating to financial services. This funding meant ASIC could build on its existing engagement and collaboration approach in promoting the potential of regtech to financial firms.

ASIC used this additional funding in FY2018–19 to develop a series of regtech initiatives. These initiatives focused on the potential use of technology to help businesses deal with conduct of business compliance issues, thereby promoting better outcomes for consumers and market integrity. ASIC consciously chose difficult regulatory problems to examine the potential of regtech that is still in development, or in an experimental phase, rather than focusing on more mature services.

ASIC undertook four regtech initiatives in FY2018–19:

• Monitoring Financial Promotions Demonstration and Symposium (2 August 2019)
  A problem-solving event consisting of five regtech demonstrators analysing financial promotional material from a curated dataset to extract key features to identify potential risk and non-compliance characteristics.
  
  
  
• Financial Advice Files Demonstration and Symposium (22 August 2019)
  A problem-solving event to investigate how regtech can be used to improve compliance in Australia’s financial advice industry. Six demonstrators used a synthetic dataset, along with key risk indicators, to test their regtech solutions in the identification of potentially non-compliant financial advice.
  
  
  
• Voice Analytics and Voice-to-Text Trial and Symposium (24 September 2019)
  ASIC shared findings from an ASIC regtech trial that examined how voice analytics and voice-to-text, applied to over 1,700 life insurance sales calls, may assist in identifying and analysing poor sales conduct in the financial services industry.
  
  
  
• Technology-Assisted Guidance (TAG) Tool Trial
  ASIC designed and developed a proof-of-concept Technology-Assisted Guidance (TAG) Tool to help businesses navigate the credit and financial services licensing regulatory framework. In this case, a proof-of-concept chatbot was developed.

View Report 653 ASIC's Regtech Initiatives 2018-19 for a summary of the initiatives and results.