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    IOSCO Focuses on Digitalization Risks and Use of Supervisory Colleges

    January 18, 2022

    The Board of the International Organization of Securities Commissions (IOSCO) has set out good practices aimed to foster cooperation and information-sharing among securities regulators through global supervisory colleges. The good practices are based on a review of literature (including that from international regulators, such as the Basel Committee's Principles for Effective Supervisory Colleges) as well as a survey of IOSCO members, with certain banking authorities also responding to the survey and contributing to the identified best practices. IOSCO is also consulting on measures to address risks arising from digitalization of retail marketing and distribution, with the feedback period on the consultation ending on March 17, 2022. The consultation report addresses issues with respect to online marketplaces, customer onboarding, fraud detection, AML/KYC requirements, and third-party outsourcing, among others.

    The consultation report on risks of digitalization of retail market and distribution is aimed to assist the members in adapting their regulatory and enforcement approaches to meet the challenges posed by recent technological developments and the rapidly evolving digitalization and online activities. Domestic and cross-border online offerings of financial services and products provide new opportunities for firms to reach potential clients and for investors to access a wide range of financial services and products more easily. However, developments in digital offerings also give rise to regulatory and investor protection challenges, spanning the whole distribution chain. The consultation report is part of the efforts of IOSCO to build trust and confidence in markets that are facing these new and emerging opportunities and risks. The overarching objective is to enhance the protection of retail investors who are the recipients of online offerings and marketing techniques. The report addresses issues with respect to online marketplaces, customer onboarding, fraud detection, AML/KYC requirements, and third-party outsourcing, among others. It proposes useful guidance on enforcement measures for IOSCO members to consider in effectively addressing fraudulent online activity globally by leveraging innovative powers and proactive technology-based detection and investigatory techniques. The proposed measures could help reduce regulatory and supervisory arbitrage and increase collaboration among IOSCO members and members with criminal authorities, other foreign and domestic authorities, and providers of electronic intermediary services, fostering credible deterrence.

    The report on lessons learned from the use of global supervisory colleges presents 14 good practices that cover matters such as general purpose, membership, governance, multi-lateral confidentiality arrangements and the cross-border operations of supervisory colleges. Based on member feedback, the good practices also encourage the use of supervisory colleges to share information and solutions in times of crises. The good practices are based on the literature review and on the responses from a survey conducted among IOSCO members. Out of the 25 responses to the received to the survey, five responses were from central banks. The respondents were from Australia, Canada (Bank of Canada, regulators from Ontario and Quebec), Brazil, China, European Union, France (including Banque de France), Germany (Bundesbank and BaFin), Hong Kong, Ireland (Central Bank of Ireland), Japan (Financial Services Authority), Korea, Mauritius, Mexico, the Netherlands (De Nederlandsche Bank), Singapore (Monetary Authority of Singapore), Spain, UK (Financial Conduct Authority) and certain agencies from the U.S. The report provides an overview of the international guidelines and practices followed by global supervisory colleges across various sectors of financial services and the reasons for the use of supervisory colleges for cross-border regulation. The report concludes with a discussion on areas of securities markets where the use of global supervisory colleges in the future could be beneficial. 

     

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    Keywords: International, Banking, Securities, Supervisory Colleges, Regtech, Online Marketplaces, Cross Border Cooperation, Supervisory and Regulatory Cooperation, Fraud Detection, AML, KYC, Outsourcing Service Providers, IOSCO

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