Confront risks of financial technologies to reap benefits: federal regulator

Confront risks of financial tech: regulator

OTTAWA — The head of Canada’s financial intelligence unit warns that regulators must grapple with the challenges of emerging financial technologies, some of which he says have been exploited by terrorism and organized crime.

But while it’s necessary to safeguard consumers and the country’s financial stability from the risks posed by some of these innovations, public oversight should avoid slowing progress in a fast-growing area filled with potential, the director of Fintrac said Tuesday.

“We do know that crowd funding has been used to finance terrorist activities, we do know that virtual currencies such as Bitcoin have been used to launder money and to finance terrorism,” Gerald Cossette, who oversees the Financial Transactions and Reports Analysis Centre of Canada, told a conference in Ottawa.

“Some of these vulnerabilities pose significant challenges, if you wish, to regulators.”

Cossette’s remarks Tuesday pulled back the curtains back a bit on some of the regulatory concerns surrounding the rapid rise in recent years of disruptive tech advancements in the financial sector — also known as fintech.

Many say the innovations, which help improve the efficiency and convenience of financial services, are revolutionizing how these services are delivered as well as the entire system itself.

Cossette said another major fintech challenge is the emergence of technologies that make it easier for people involved in all aspects of a transaction to remain anonymous.

“Of course, for an organization such as Fintrac the name of the game is ID,” he said during a panel discussion hosted by the Competition Bureau.

“Can you identify who’s at the beginning of a transaction and who’s at the end of a transaction?”

Bank of Canada senior deputy governor Carolyn Wilkins, who moderated the panel discussion, told the audience that financial-sector innovation can pose a bit of threat from a regulatory point of view. 

But she also highlighted how it offers many potential gains.

“For some, it’s a huge opportunity — big commercial interests here,” she said.

On the one hand, fintech can create opportunities for people to start their own businesses or to use the technology as a way to streamline existing operations and save money.

At the same time, however, Wilkins said fintech means some established companies will see sections of their business models taken apart.

There are also other potential downsides such as risks to the financial stability of the system and money laundering.

“There are just as many potential benefits, whether it’s improved access to financial services that could help inclusive, sustainable growth or whether it’s greater efficiency,” said Wilkins, who has a keen interest in fintech.

“I think that when you look at those different perspectives, you can just imagine how hard it is to get your arms around it from a regulatory point of view.”

The Bank of Canada has been doing a considerable amount of work on fintech.

Wilkins herself has said she’s participated in meetings that bring together regulators, international organizations, traditional financial institutions and entrepreneurs. The goal has been to explore the potential risks and benefits of fintech, which has expanded considerably in recent years.

In prepared remarks of a speech last June, Wilkins referred to findings that showed in the previous six years about 100 Canadian fintech start-ups had attracted more than $1 billion in funding. She added that in 2015 alone almost $20 billion had been pumped into fintech around the world.

At the time, Wilkins listed examples of fintech innovations, including services like Apple Pay or Google Wallet. In the speech, she also pointed to other technologies such as “robo advisers” that offer investment advice and peer-to-peer lending.

Follow @AndyBlatchford on Twitter

Andy Blatchford, The Canadian Press

Just Posted

First recreational cannabis store in Okanagan has quiet opening near Lake Country

Indigenous Bloom has opened on Okanagan Indian Band land

New Lake Country school sports fields to include track and field oval

School rec facilities to be developed on former Aspen Grove golf course

Hail the mighty Caesar: Kelowna Caesar creators expand their shop

Simp’s Serious Syrups has opened a store on High Road

Freezing rain, some snow forecasted for Okanagan-Similkameen-Shuswap

Environment Canada forecasting freezing rain and snow for much of the region

Rockets stumble again, lose 6th straight to Moose Jaw Warriors

The Rockets will have to bounce back with weekend games against the top two teams in the league

B.C. opioid crisis to get same world-renowned treatment approach as HIV/AIDS

A program that focuses on treatment as prevention will roll out Jan. 17

Former welfare clients still owed money, B.C. Ombudsperson says

Investigation found 2,600 people docked illegally for earning income

Prince George could get province’s second BC Cannabis Store

The first brick-and-mortar government retail location opened in Kamloops on Oct. 17

B.C. chowdery caught up in ‘rat-in-soup’ scandal to close

Crab Park Chowdery will be shutting down Jan. 20

Teen vaping is an epidemic: US government

E-cigarettes are now the top high-risk substance used by teenagers, outpacing cigarettes, alcohol, marijuana

Vancouver councillors unanimously approve motion declaring climate emergency

Vancouver joins cities like Los Angeles and London

Caribou herd disappears from Kootenays after last cow relocated

One cow from the South Selkirk herd and two from the Purcells were moved this week

‘I never said there was no collusion,’ Trump lawyer says

President Donald Trump’s lawyer Rudy Giuliani says he has ‘never said there was no collusion’

Body of Canadian miner found after African kidnapping

Kirk Woodman’s body was discovered 100 kilometres from the site where he worked for Progress Mineral Mining Company in Burkina Faso

Most Read