Conduct and culture, financial crime, technology, innovation and operational resilience have all been highlighted as key topics in Guernsey for regulatory professionals and the wider financial services community.
Deloitte has recently issued the Financial Markets Regulatory Outlook for 2021, which examines these types of regulatory trends being seen across the financial services sector. Whilst Deloitte’s publication focuses on the UK regulatory priorities, Deloitte’s Guernsey team told Channel Eye that the areas of focus set out in our report are highly relevant to the Channel Islands financial services industry too.
Digitisation and Innovation
A key driver of economic growth with digital consumer habits developed during the pandemic, these themes will be here to stay. As businesses focus on deploying cloud-based solutions, artificial intelligence and robotics, the regulator will remain focused on their impact on operational resilience, data and cyber risk management.
Conduct, Culture and Governance
This continues to be a key theme on the UK regulatory and Guernsey regulatory agenda. Whilst feedback on local conduct throughout the pandemic has been positive, the pressure to manage financial resilience for financial services businesses will create tension between prudential and conduct obligations. As the pandemic’s impact is felt, the regulatory and Ombudsman spotlight will fall upon firms’ fair treatment of customers.
Financial Crime
The risk profile of financial crime has altered recently as the move to working from home has taken place. This established pattern of working from home has incentivised and facilitated financial crime in 2021. Organisations in the UK and Guernsey will be expected to consider the change in risk profile and respond with enhanced controls covering monitoring, managing, and reporting financial crime. This includes leveraging the availability of appropriate technology to manage this increased risk.
Transaction monitoring, fraud and market abuse will all be areas of close focus.
Operational resilience
Covid 19 has reinforced supervisory interest in operational resilience, and we expect it to remain at the top of the agenda in 2021 and beyond. The fact that operational continuity has occurred through the pandemic will not be enough in itself. Businesses will be expected to test their operations for more significant impacts in the future. Alongside this, outsourced service providers’ operational resilience will be scrutinised, and boards will be expected to have considered such matters and responded to findings.
By simply addressing the issues discussed above and other matters set out in the Financial Markets Regulatory Outlook for 2021, it may not be sufficient in the eyes of our wider society. Deloitte have identified three topics on which wider society and the UK regulators expect to see progress. Those include:
- Supporting sustainability objectives;
- Creating cultures that deliver good customer outcomes and embrace social purpose, and
- Diversity and inclusion.
The Channel Islands financial services industry has the opportunity to make significant in-roads over the coming months before regulatory or legislative requirements are imposed. Whilst action is being mandated for many UK and EU financial services businesses through regulation and legislation; we can expect those caught by such requirement to look at their supply chain for evidence of responsible business behaviours.
