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.
So says Deloitte's recently issued report, Financial Markets Regulatory Outlook for 2021, which examines regulatory trends across the financial services sector.
While the publication focuses on UK regulatory priorities, Deloitte believes the areas of focus set out in the report are relevant to the Channel Islands financial services sector.
Digitisation and innovation
A key driver of economic growth with digital consumer habits developed during the pandemic, these themes are 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 and Guernsey regulatory agenda. While 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 on firms’ fair treatment of customers.
Financial crime
The risk profile of financial crime has altered 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 to 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 Deloitte expects 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.
Simply addressing the issues discussed above and other matters set out in the report may not be sufficient in the eyes of wider society. Deloitte identifies three topics on which wider society and the UK regulators expect to see progress:
• Supporting sustainability objectives
• Creating cultures that deliver good customer outcomes and embrace social purpose
• Diversity and inclusion.
It says: "Our local 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."
• Financial Markets Regulatory Outlook for 2021 can be downloaded here