Artificial Intelligence's role in the Consumer Duty regulations

Accelerate a positive culture: AI’s role in the Consumer Duty’s future

This week we’ve been reflecting on how the financial service industry is personified following the ‘From Zeroes to Heroes’ speech delivered by FCA Chief Operating Officer and Executive Director of Authorisations, Emily Shepperd.

Think Wolf of Wall Street which neatly sums up Emily’s point– a “hedonistic stockbroker… whose main purpose is to con wealthy clients”.

Obviously not a complimentary or trustworthy industry portrayal. And the list goes on of examples where the industry is depicted as either risky and reckless… or the polar opposite – dull and dreary.

And between these two profiles, the sector is often painted in a not-so-positive light.

But let’s cut to the chase, how does big screen portrayal impact on industry culture?

Culture shapes conduct – and it’s conduct that the FCA is keen to overhaul in the new Consumer Duty era. It’s a trickle-down approach. Those at the top shape company ethos and so need to be leading from the front to embrace this change.

And what should those leaders be banging the drum about? It all comes down to good outcomes. This is what Duty champions and boards have been signposted to as the nub of the Duty. And here lies the crux: spotting and supporting customers in need, those that are most vulnerable.

AI is repeatedly highlighted as a tool that can help firms embrace this new culture.

By having holistic oversight of customer data, spotting, and supporting customers when they’re in need becomes a more manageable and evidencable feat for QA teams. Firms that embrace this tac will be able to demonstrate how the Duty’s ethos is at the heart of its customer and business life cycle, as they quickly, succinctly, and concisely analyse customer interactions.

Advance with AI

Using AI-powered tools such as Recordsure’s unique platform for QA compliance reviews means firms can move away from the more traditional random sampling form of quality assurance. Businesses can now futureproof their approach by embracing the actionable insights that AI tools provide. Increase the efficiency and effectiveness of your QA teams and ensure consistency of QA reviews. 

Want to learn more about how AI can help review customer communications and the wider cultural shift? Get in touch today.

Download our whitepaper to explore how AI-enhanced RegTech can make relying on a random sampling approach to compliance reviews a thing of the past – and introduce simplified audit trails with 100% oversight of all client interactions.
Recordsure-BSA-Webinar-Consumer-Duty-Outcomes-Evidencing

Webinar recap: What is the FCA’s approach to enforcing the Consumer Duty, and the role of smart data

On 16th November, our resident compliance experts hosted the second in our three-part series of webinars centred around the FCA’s Consumer Duty initiative.

In part one, we took a whistle-stop tour of exactly why the Consumer Duty is as important as advertised and the host of challenges awaiting firms on the road to compliance.

For the follow-up, we delved deeper into why the new rules shouldn’t be mistaken for just ‘Treating Customers Fairly (TCF) on steroids’ and why firms can’t afford to be caught asleep at the wheel with keeping up their end of the bargain.

The host, Recordsure’s Chief Product Officer Garry Evans, was joined by Ex-FCA and now Senior Product Manager at Recordsure, Olivia Fahy, and TCC’s Associate Director Neil Dethick. Our panellists answered the questions on everyone’s mind: how will the new standards be monitored and enforced?

So, what did we learn during round two?

Point 1: The FCA is serious about demanding more from firms

By requiring firms to clearly show how they’ll be implementing the Consumer Duty, the FCA signalled right out of the gate that it’s expecting firms to buy into the initiative and deliver on the promises it makes to customers. In fact, the regulator has already asked several firms to present their Implementation Plans for scrutiny over the coming weeks. So, it’s clear these aren’t just a tick box exercise – businesses will be monitored on their progress over the coming months.

With this in mind, everyone within the organisation should now be aware of the Consumer Duty and be on the same page about their direction of travel. Staff should be made aware of the main changes to processes and policies that will be taking place between now and July 2023, with working groups busy drilling down into the detail of what, when and how actions will be taken to align with the rules.

In terms of supervision, the FCA is taking a portfolio approach where firms will be grouped according to sector and business model. It will then draw up a bespoke, outcomes-focused strategy for each grouping to address their different risk profiles.

All is well and good so far – but how will the FCA actually verify the standards are being met?

Here comes the tricky part: compliance checks will be embedded into the regulator’s existing supervision practices – meaning there won’t be dedicated ‘Consumer Duty’ audits as many may have assumed. For larger ‘fixed’ firms, their named supervisors will regularly gather outcomes information as part of their standard oversight activities, while smaller firms are likely to be monitored as part of specific issue-focused, multi-firm checks.

Of course, the challenge here is that there won’t be any assigned test you can wait to be examined on or prepare for ahead of time. Instead, every touchpoint with the regulator will feed into Consumer Duty compliance, and so it’ll require constant effort and diligence across all aspects of the business.

Point 2: This isn’t a ‘boy who cried enforcement’ situation

Despite all the fanfare, it’s been noted that there doesn’t seem to be a sense of urgency to prepare for the legislation among many organisations. And this largely stems from a feeling that, tough talk aside, the FCA won’t actually take steps to police it once it’s underway – as happened with the previous TCF regime.

But the key difference that bears repeating is that TCF was mainly principles-based guidance, whilst the Consumer Duty is a full regulatory overhaul made up of hard and fast rules. It’s a fundamentally different beast, and the FCA has repeatedly said firms will not be getting away with a slap on the wrist this time around.

It’s also true that the FCA itself has come under scrutiny in recent years for not being proactive enough. This has led some commentators to see the Consumer Duty as partly an attempt to reboot its image and do good on its word to be more interventionist. So, what’s the key message for firms?

For starters, the Consumer Principle, Four Outcomes and Cross-Cutting Rules are non-negotiable and serious breaches will be met with penalties – either via interventionist powers, fines or remediation. For lesser offences, supervisory enforcement or increased regulatory scrutiny – for example, Section 166 investigations – are also on the table, and the reputational and financial risk of these shouldn’t be underestimated.

On a final common-sense note, the FCA simply can’t afford to let a culture of apathy take root within financial services – and so all signs point to the regulator coming down hard on firms who don’t get with the programme.

Point 3: Data collection is your ticket to sustainable improvements

It’s flown under the radar a bit, but the FCA has confirmed it’s looking for firms to have a workable data strategy within their Consumer Duty game plan. It’s also revealed that any new firms looking to be authorised will need to factor in data usage, and how that relates to evidencing, as part of their compliance framework.

If you’ve been paying attention so far this shouldn’t come as a surprise, as the FCA has talked a lot about wanting to become a ‘data-led’ regulator going forward. But it does mean you’ll need to think long and hard about how you’ll be using data – and the tools you’ll need for the job – to monitor vulnerability, conduct risk and customer outcomes.

It’s also important to point out that the Consumer Duty is here for the long haul, and so firms should be taking a long-term lens to these issues. What do we mean by this?

For one thing, it means focusing less on the 31st July deadline that’s understandably taking up the lion’s share of discussion at the moment, and more on how data can help drive best practice, Duty compliance and lay the groundwork for a customer-first culture in the years to come.

In other words, the implementation date isn’t the finish line, it’s a starting line – and so you should approach the data question with an eye on driving sustained positive change for the future.

Need help delivering your Consumer Duty compliance monitoring and evidencing? Looking to better your data strategy? Get in touch!

AI can help navigate the Duty jungle

AI can help navigate the Duty jungle

Heavy lifting upfront

The phased Duty deadline is on track and the FCA is keen to encourage openness and embrace a pragmatic approach as things develop. The hard work firms are committing to now should mean fewer reactive rules form the FCA in the future.

Industry innovation

Nikhil continued that “the Consumer Duty can help shape a framework for use of Artificial Intelligence (AI) and other new technologies”.

But how can AI help shape your Duty strategy? By embracing RegTech solutions to monitor and evidence consumer outcomes, firms can switch to a more efficient, more sustainable way of working. Spotting the signs of vulnerability and tailoring products to individual needs are all high on the Duty checklist. Couple this with receiving and reviewing accurate customer feedback and data, it’s clear to see how AI will be an integral cog in the Duty machine.

Invest in AI

As Olivia Fahy, Recordsure’s Senior Product Manager recently put it “Firms can either invest in more people or invest in tech to create efficiencies that enable their people to spend their time more productively on what matters.” Using AI-powered tools such as Recordsure’s unique platform for QA compliance reviews means firms can move away from the more traditional random sampling form of quality assurance reviews. Businesses can now futureproof their approach by embracing the actionable insights that AI tools provide to increase the efficiency and effectiveness of their QA teams and ensure consistency of QA reviews. And get Duty ready to monitor for compliance and evidence customer outcomes.
Download our whitepaper to explore how AI-enhanced RegTech can make relying on a random sampling approach to compliance reviews a thing of the past – and introduce simplified audit trails with 100% oversight of all client interactions.
stem day WP

Welcome new talent and diversity into the world of RegTech: Happy #STEMDay 2022!

8th November marks Science, Technology, Engineering and Mathematics (STEM) Day – and we’re celebrating!

Founded in 2015, STEM Day highlights the achievements of those leaving their mark within these vital disciplines and inspires the next generation to get involved with science and tech-based careers.

But more specifically, STEM Day also seeks to promote the continued diversification of our sector, which despite good progress being made in recent years, still finds women and minorities underrepresented within its ranks.

For example, recent research has highlighted how men outnumber women two to one in the FinTech sector – and amongst the women working in the industry, only 13.5% are from minority ethnic backgrounds.

Why does diversity in STEM matter?

We, at Recordsure, believe that those at the forefront of the FinTech and RegTech spheres have the responsibility to show that women and those from underrepresented backgrounds are welcome and valued within the industry – and that the culture is shifting for the better.

Because at the end of the day, it’s only by doing so that we can expand the conversation, invite new diverse voices and ideas, and inspire the most capable technology professionals to join our exciting industry.

Wishing everyone a happy #STEMDay – here’s to a brighter future!

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Webinar recap: Three things we learned about Consumer Duty compliance

On 31st October 2022, we kicked off an exciting three-part webinar series on the FCA’s Consumer Duty with our first instalment.

We partnered with BSA and TCC to launch our new webinar series on all things Consumer Duty. Our first of three sessions, ‘What is Consumer Duty compliance, and why do I need to take action now?’ offered an insightful guide to the FCA’s Duty.

The panel of Duty specialists was hosted by Recordsure’s Programme Manager, Adeline Han and featured Garry Evans, Chief Product Officer at Recordsure, and TCC’s Consumer Duty expert and Associate Director Neil Dethick.

During the session, our specialist trio broke down the whats and whys of the new rules. We delved into why it’s so important for firms to take these increased consumer care standards seriously – and of course, gave some actionable tips on how you can show the regulator you’re really doing your bit.

So what were the main takeaways?

The Consumer Duty: what’s all the fuss about?

As well as being spookiest day of the year, financial services firms will know that 31st October 2022 marked the first significant milestone on the FCA’s Consumer Duty roll-out. From this point on, businesses need to have their implementation plans finalised, Board-approved and ready for inspection by the FCA.

In other words, firms should have decided by now how they’re going to align their compliance strategy and internal processes with the new regulations. And they need to have answers to basic consumer-centric issues like what a ‘good outcome’ looks like for their customers – and by extension, how this can be reliably measured and evidenced.

Businesses now have until 31st July 2023 to ensure their new and existing products and services are compliant with the Duty’s standards. And then until 31st July 2024 to ensure the same for their closed products and services. This means firms need to be looking very closely at their portfolio and make changes or adjust processes if necessary.

As the Consumer Duty covers almost every aspect of the business lifecycle, right from product design through to client interactions and complaints handling, getting it right long term is going to need a thorough consideration of your approach to customer care at each of these stages.

Point 1: The Consumer Duty isn’t just business as usual – no matter how diligent you’ve been before

It’s true that most businesses already think they’re doing right by their customers. But the reality is that the old guidance many firms are still working to, and the new requirements the FCA has laid out under the Consumer Duty, translate to two very different standards of care.

For instance, the FCA has reported that it commonly finds information being presented in a way that’s misleading or difficult for many consumers to understand properly. Products and services that either don’t offer fair value for money or otherwise offer little in the way of tangible benefits are still being sold to customers.

And it’s exactly these types of issues that the new rules are looking to address. Indeed, far from just being Treating Customers Fairly (TCF) with a new coat of paint, the Consumer Duty signals a new approach to delivering good outcomes and aims to put customers at the heart of every decision that gets made within financial services.

Far from just being Treating Customers Fairly (TCF) with a new coat of paint, the Consumer Duty signals a new approach to delivering good outcomes and aims to put customers at the heart of every decision that gets made within financial services

 

But not only that: it’s also the clearest statement of intent we’ve had so far regarding the FCA’s shift towards a more proactive, ‘assertive supervision’ model of regulation.

Point 2: The Consumer Duty isn’t just TCF by another name – and business leaders need to get onboard, sooner rather than later

Put simply, it can’t be stressed enough how the Consumer Duty and TCF are completely different initiatives – both in scope and in structure.

For one thing, TCF primarily took the form of principles-based, best-practice guidance meant to help businesses achieve positive results for their customers. The Consumer Duty, meanwhile, is backed by a rigid set of enforceable rules – and so there’ll be much less regulatory wiggle room this time around.

Unsurprisingly, then, the duty will place much more emphasis on outcomes than previous FCA agendas. It’s also backed by strict monitoring and testing requirements – alongside enhanced oversight responsibilities for Boards – to ensure good outcomes are consistently delivered and that firms are continuously taking positive steps towards improvement where needed.

Beyond that, the Consumer Duty marks a step up in terms of governance standards, meaning senior managers and executives will be responsible for maintaining compliance – and directly answerable for what goes on under their watch. At the end of the day, when it comes to outcomes and obligations, the Board and management teams will be accountable for the Duty compliance come August 2023.

These higher standards are also reflected in the new Conduct Rule 6 – mandating firms to ‘act to deliver good outcomes’ for customers – which in layman’s terms means it’s no longer enough to simply do no harm. Under the Consumer Duty, firms, including mortgage providers, must be proactive in making sure consumers receive the best possible results from their products and services, while monitoring and evidencing the conversations.

Point 3: There’s a lot of work to be done (and not a lot of time to do it!)

While every firm will inevitably have its own strengths and weaknesses when it comes to getting Consumer Duty ready, our conversations with clients have revealed a few common areas of concern.

First and foremost, Price and Value outcome: what constitutes fair value, and how can this be quantified? The duty’s focus on proportionality means firms will have to take another look at their charging structures – and this will be extra critical in cases where they’ve charged flat fees until now.

As a quick example, take a 10% flat rate on a mortgage. This would cost £10,000 for a £100,000 loan but exponentially more for a £1m loan – under the new rules, this becomes extremely difficult to justify without proving the larger mortgage required your staff to complete 10 times the work. 

Consumer Understanding outcome, meanwhile, has also been causing some headaches. Because for starters, how can firms be sure their customers genuinely understand the information presented to them? How can this be accurately tested, and how often should these audits be carried out? And finally, given that customers’ financial situations and priorities change over time, how far should businesses go to ensure their customers still grasp the implications of their long-term arrangements?

What’s more, some firms are struggling to grasp how they’ll increase their monitoring and supervision to fit the lofty new standards.

For instance, what kind of MI is needed for these new checks? How can this data be compiled when we need it? How much can we rely on it to tell the whole story? What kind of processes and compliance tech firms need to address the gaps in conversation monitoring and evidencing?

And on a more fundamental note, how can the lessons learned translate to effective policy or process change?

Recordsure collaboration with Grant Thornton News

Recordsure and Grant Thornton strategic collaboration to transform customer conversation monitoring

News Release

We’re delighted to announce a new collaboration with leading professional services provider Grant Thornton to support Consumer Duty implementation and compliance across the UK financial services industry. This strategic collaboration is set to transform customer conversation monitoring for FCA‘s Consumer Duty compliance.

Consumer Duty: transforming customer conversation monitoring

Leverage artificial intelligence and machine learning to achieve regulatory requirements

Financial services businesses need to focus on ensuring positive consumer outcomes. Increasing pressure on consumer finances is adding to the higher standards required by the FCA’s Consumer Duty. 

The new regulations stipulate ongoing monitoring of retail customer outcomes. You must monitor key elements and set up continuous feedback loops into governance forums to ensure these standards are achieved, and that appropriate action is taken if not. Reliance on random sampling of customer conversations doesn’t provide sufficient oversight to be confident of Consumer Duty compliance. 

To help you enable this monitoring, we’re collaborating with Recordsure on a new service that makes it easier to get the right quality assurance processes in place. This service brings together our own expertise in data, regtech, automation, and digital transformation with Recordsure’s market-leading artificial intelligence.

Oversight of all customer conversations

Random sampling of customer conversations throughout the customer journey isn’t a reliable quality indicator – and presents a significant hidden conduct risk, both at individual and systemic levels. It’s not an acceptable approach when there are viable solutions available for detecting harm.

Strategic data-driven AI and machine learning

Working together, we’ll enable regulated financial services organisations to automate oversight of all customer conversations and support subject matter experts to review identified risks. Implementing compliance analytics to highlight and better understand non-compliant conversations directly feeds into individual and team coaching, and improves customer outcomes by helping to identify possible systemic issues.

Niresh Rajah, Head of Data, RegTech & Digital Advisory Practice at Grant Thornton UK LLP comments on the strategic collaboration.

Ensuring firms are able to discharge their consumer duty obligations is a complex set of activities and requires a data driven approach underpinned by sophisticated machine learning and artificial Intelligence tools and techniques. This exciting collaboration allows us to support our financial services clients through the Consumer Duty journey by combining our data management, data analytics regulatory change and regtech expertise and experience with Recordsure’s leading machine learning platform

Niresh Rajah, Grant Thornton UK LLP
Niresh_Rajah_Grant_Thornton

Adrian Crean, Partnership Director at Recordsure and TCC Group is thrilled about this new strategic collaboration and looks forward to working with Grant Thornton and bringing more benefits to our clients:

We’re thrilled to launch this new strategic collaboration with Grant Thornton. Both organisations, Grant Thornton and Recordsure, have a strong belief in fair customer treatment, and conviction in helping our clients power their regulatory and consumer oversight obligations with market-leading technology and data, to deliver better customer outcomes.

Adrian Crean, Recordsure and TCC Group
Adrian Crean-Recrodsure-Partnership-Director

Find out more about this collaboration and the efficiencies our Compliance Analytics AI solutions can bring to your Quality Assurance teams. 

recordsure listed at 13 on regtech 50 2022

Recordsure ranked #13 on 2022’s RegTech 50 list of influential tech firms

We’re delighted to reveal that we’ve been ranked #13 on this year’s RegTech 50 list of the UK’s most prominent regulatory and compliance technology firms!

After previously being announced among the 82 companies shortlisted for inclusion earlier this month, we’re very proud to have been confirmed as one of the top 20 brands in the British RegTech sphere for the second year running.

Commenting on this latest accolade, Recordsure CEO Joe Norburn said: 

I’m thrilled that Recordsure has once again been noted as a leading name in the RegTech and ComplyTech fields amongst such fierce competition. To be included in the RegTech 50 is a very well-deserved recognition for the Recordsure team.

Between the rising cost of living bringing customer vulnerability into greater focus and Consumer Duty raising monitoring and evidencing standards across the board, the past 12 months have brought about a number of novel challenges for financial services firms. This is why now, more than ever before, RegTech plays a critical role in achieving compliance.

Joe Norburn, CEO, Recordsure
joe norburn smiling in black and white

In these pressing times, the benefits of Recordsure’s AI-driven voice and document analytics solutions couldn’t be more apparent – offering unique compliance analytics tools for businesses that are looking to level up their oversight and risk management capabilities.

The final RegTech 50 ranking was ultimately decided by a poll of BusinessCloud magazine’s readership alongside an independent judging panel, which included leading representatives from Tech Nation, techUK, the Centre for Digital Banking and Finance, and RegTech Associates.

Organised by Business Cloud, this influential annual list celebrates the most pioneering start-ups and established businesses creating disruptive technologies and platforms for compliance, regulation and fraud protection applications within the UK financial services sector.

We’d like to take this opportunity to congratulate all firms that made this prestigious list and thank everyone who took the time to vote for us!

You can learn more about our industry awards and recognition here.

Sign up to our monthly newsletter to stay up-to-date with the latest Recordsure updates and industry news

RS consumer duty compliance webinar 31st october 2pm

Consumer Duty compliance: why now’s the time to take action

More than simply the latest in a long line of legislative tweaks, the FCA’s ambitious Consumer Duty represents a paradigm shift in the way consumer protections, oversight and compliance evidencing are managed and regulated across the whole of the financial sector.

The new rules are intended to significantly raise standards of customer care and will require businesses to prioritise the needs of the consumer at every step of the decision-making process, spanning the entire business cycle from product and service design through to customer interactions and complaints handling.

And not only that: the regulator will expect businesses to be able to evidence that they’re adhering to a customer-first approach. It’ll also want to see how any emerging risks are being dealt with promptly and that less-than-stellar outcomes form the basis for meaningful change going forward.

The Consumer Duty, then, signals an evolution from the previous ‘Treating Customers Fairly’ doctrine, encouraging firms to do more than simply avoid causing harm and instead actively work to help customers achieve their financial goals.

Why is Consumer Duty compliance so critical for FCA-regulated firms?

The Consumer Duty is emblematic of the FCA’s new ‘assertive supervision’ approach to regulation, pledging to be more ‘proactive’ – as opposed to primarily reacting to issues that have already occurred – and quicker to intervene in the face of emerging risks when necessary.

The duty’s overarching Consumer Principle mandates firms to ‘act to deliver good outcomes’ for customers, whilst the Cross-Cutting Rules and Four Outcomes set out the FCA’s expectations for behaviour towards consumers and the standards that businesses must strive to achieve, respectively.

But equally significant is the Consumer Duty’s emphasis on a ‘show me, don’t tell me’ approach to regulation, whereby businesses will have to routinely evidence:

‒ They’re clear about what constitutes ‘good outcomes’ for their firm

‒ Good outcomes are being consistently achieved

‒ Lessons are being learned, and improvements are being made, when they fall short

It’s undeniable that these stringent consumer protection rules will look to ensure vulnerable customers are better protected – however, implementing and sustaining this considerable step up in monitoring requirements is sure to present a challenge for even the most dutiful compliance teams.

For example, how can firms be sure they’re able to identify signs of vulnerability when relying on random sampling checks? And how can they be sure they’re treating the root cause of any inefficiencies, not just the symptoms?

Want to learn more? Looking for answers to your Consumer Duty compliance questions?

For expert advice on how to maximise your teams’ capacity and optimise your risk management strategy in the face of ever-increasing regulatory obligations, we invite you to view our exclusive webinar from Monday 31st October.

During this productive session, we outlined the main objectives and thought processes behind the FCA’s Consumer Duty regulations – and assessed what maintaining compliance with these impactful new rules will mean for your compliance processes.

Our panel of compliance experts shared some actionable tips on how you can meet your Consumer Duty oversight and risk monitoring requirements, alongside valuable guidance on building a robust compliance strategy that’s built to last.

The discussion ended with a Q&A session, during which our specialists addressed specific points of interest from attendees.

Watch our webinar on demand for critical insights from our compliance experts – and have your most pressing questions answered!

‘What is Consumer Duty compliance, and why do I need to take action now?’

Hosted by Recordsure Programme Manager Adeline Han, the panel for this not-to-be-missed session also featured:

Unlock new Consumer Duty compliance efficiencies with post-conversation Compliance Analytics  

Download our whitepaper to explore how AI-enhanced RegTech can make relying on a random sampling approach to compliance reviews a thing of the past – and introduce simplified audit trails with 100% oversight of all client interactions.

 


Compliance analytic tips for Consumer Duty readiness

Five important factors in getting ready for the new Consumer Duty

1. How will the FCA assess a firm’s Consumer Duty compliance?

The Consumer Duty and how it will regulate financial service compliance is being widely discussed across the industry. The changes are significant and given that the FCA is now leading with more assertive supervision – a ‘show me and don’t tell me’ approach, and assuming that you’ve already got it covered is a risky approach

The onus will be upon proving in practice that your firm is meeting all four outcomes of the Duty and that you can demonstrate a good understanding of your target market and the needs of their customers.  

With this in mind, the practicalities of how the Duty will be monitored are significantly shifting – and this change should not be underestimated. It will no longer be enough for firms to  simply have a theory and policy that meets the Duty’s four outcomes and cross-cutting rules. 

Being able to demonstrate Duty compliance consistently, in real terms, across all your products and service processes throughout every customer journey is going to be the key. Firms will be required to show that they have a clear understanding of their target market and what a good outcome (and equally what a bad outcome) looks like.  

With so much pressure on firms to demonstrate fair customer treatment, it’s unlikely that random sampling of customer calls or interactions will be enough to achieve Duty compliance. Firms will need to go beyond a small sample and a theorised policy when it comes to evidencing that they are achieving good consumer outcomes.

 

2. Who is responsible for ensuring the Consumer Duty compliance at a firm?

In simple terms, the board or an equivalent governing body. 

The board (or an equivalent governing body) will need to make sure that the Duty is embedded in the firm’s culture and ensure that the four Duty outcomes are consistently achieved across the business and that this is clearly evidenced and continually monitored. It will be equally important that the board ensures vigorous measures are in place to tackle and correct any underperformance. 

There is an expectation on boards to have a clear set of management information that underpins the Duty’s presence throughout your business model, with the ability to demonstrate at any given time that their business is doing the right thing by its customers.

A further requirement from the FCA is to select a Consumer Duty ‘champion’ that is an independent non-executive director  or equivalent. It’s the champion’s responsibility to ensure the Duty is regularly included in relevant discussions in a significant way.

Should the board not take a proactive approach to the FCA’s Duty requirements and the firm fails to comply, this change in the FCA’s style of governance could result in increased scrutiny,  reputational damage and brand equity risk for your firm. 

And, although the Board have ultimate responsibility for ensuring the Duty is embedded, the FCA have also strengthened the requirements around governance and accountability to ensure senior managers and executives are held accountable, and added a new Conduct Rule 6 to reflect the new, higher standard of the Duty and the behaviour they expect of all conduct staff, so responsibility for compliance with the duty and delivering good outcomes for customers cascades to all levels within an organisation.

3. What evidence does your firm need to have available for FCA’s Duty compliance spot-checks?

Firstly, FCA may check your Consumer Duty compliance at any time. 

If the FCA wants to check on your firm’s Duty compliance for any reason, they could do this in several ways. They might ask to see evidence of how you’re meeting the four Duty outcomes and conduct a deep dive audit of your firm’s  products, services, policies and processes to assess this. Or they may do random spot checks and request specific management information that evidences a particular customer journey. 

Another scenario may be that they conduct a thematic review, for example, focused on vulnerable clients. Thus, the FCA asks firms to evidence and explain how they identify vulnerable clients and how their firms support their additional needs in practice.

So, if the FCA were to ask to see the last 50 consumer conversations your firm had, and the steps and processes taken within such calls to identify vulnerable customers – would you be able to provide the necessary evidence? Firms in this instance may need to show who was identified as vulnerable and how this was decided upon – not only that, but the regulator will also expect to see evidence that your processes can be adapted to ensure that such customers receive a ‘good outcome’ as the Duty requires.

In other instances, firms may only be asked to provide certain data to evidence an outcome, within a short, deliverable timeframe. More than ever, The FCA will be relying on data-led techniques in their monitoring,  so it will be critical for firms to be able to promptly prove that they are compliant.

 

4. What happens if the FCA doesn’t think a firm is adhering to the Consumer Duty?

If firms are unable to provide evidence of the required level of detail, then they may not be considered Consumer Duty compliant by the FCA. This could lead to increased scrutiny including further in-depth reviews, monitoring and reporting and considerable reputational damage. 

The fact that most firms have been putting customers’ well-being first for many years  is an excellent starting point. 

However, under the new Consumer Duty, if you can’t provide clear evidence that this is the case and demonstrate your compliance, your firm could be classed as non-compliant.

5. How can firms evidence Consumer Duty compliance?

The FCA is moving towards intelligence-led regulation with a focus on outcomes-based supervision. Under the FCA’s Consumer Duty, the regulator will increasingly be asking for data focused on consumer outcomes, and such requests could come at any time.

However, many firms are concerned about how they can sufficiently evidence Consumer Duty compliance and good consumer outcomes without drastically increasing the size of their compliance teams which carries a significant increased cost. This is where RegTech can be used, to great effect, to automate certain processes and free up staff to focus on tasks that humans do best, such as outcomes testing.

For example, Quality Assurance (QA) across the sales, service, advice and collections process can provide a hidden mine of insight to support the delivery of Consumer Duty outcomes, yet, it’s sometimes viewed as burdensome and a box-ticking exercise.

The good news is that intelligent compliance analytics tools, such as Recordsure’s Compliance Analytics AI platform, can look across and analyse the entire population of consumer conversations, allowing firms to proactively identify thematic trends and gain insights into customer journeys that can be utilised to achieve and evidence Consumer Duty compliance.

At the same time, our smart thematic classification and highly-accurate risk profiling of 100% of agent-client conversations enable targeted and rapid review of calls. Having this up-to-date information at your fingertips when FCA data requests come in will show that you take Consumer Duty compliance seriously and provides in-depth intelligence to address potential consumer harm before it occurs.

Download our whitepaper to learn how post-conversation Compliance Analytics can help FCA-regulated firms meet their Consumer Duty obligations.

recordsure regtech 50 shortlist 2022

Recordsure shortlisted for Business Cloud’s 2022 RegTech 50

We’re very pleased to announce that we’ve been shortlisted for inclusion on the RegTech 50 list of influential technology firms for 2022!

Organised by Business Cloud, this annual ranking celebrates the most pioneering start-ups and established businesses creating disruptive technologies and platforms for compliance, regulation and fraud protection applications across the UK.

This year’s shortlist features a total of 82 companies and the final 50 will now be decided by a judging panel alongside votes from the public. The final ranking is set to be revealed on 31st October.

Voting is now open until 10th October and if you’d like to vote for us you can do so here:

https://businesscloud.co.uk/regtech-50-vote-for-the-most-innovative-uk-compliance-technology-firms/

We previously ranked 4th in the 2021 edition – and so it’s especially exciting to us to have our innovative Compliance Analytics solutions recognised as at the forefront of the UK tech sector for two years running.

Good luck to all shortlisted companies and thanks to everyone for their continued support!

Find out more about our industry awards and recognition