Interview: Professor Philip Treleaven

We talk to the Director of the UK Centre for Financial Computing and Analytics

Professor Philip Treleaven is Director of the UK Centre for Financial Computing and Analytics and Professor of Computing at UCL. He talks to Governance and Compliance about his projects to date – which includes the application of machine learning and blockchain technology to financial asset management – as well as how he envisions the future board will look.

Can you talk us through some of the projects you are currently working on? Where did your interest in the subject stem from?

We collaborate with most of the leading banks, and major retailers, legal firms and regulators on AI machine learning. Probably the most interesting for your readers is our projects on systems to automate regulation and compliance with the FCA and BoE. This include an AI system to automate the work of a Regulatory Lawyer, and work with the FCA on computable (computer-executable) regulations. Our most rapidly growing research area is digital ethics, specifically systems to analyse algorithms for bias, legality and interpretability.

How has the prominence of RegTech influenced the boardroom? What changes have you seen?

I am credited with inventing the term RegTech, in a paper for a previous Chancellor on the regulation of FinTech companies. RegTech has been growing from a small group of start-ups building software for regulators, to an industry sector as companies grapple with the growing compliance requirements. The latest concern is major companies, especially the banks, worried about the legality of their algorithms for CV-sifting, algorithmic trading etc.

How has the implementation of new technologies impacted governance within organisations?

Most of the major financial institutions with whom we work are seeking to automate their compliance functions using AI and blockchain technologies, especially in the areas of tracking documents, monitoring and reporting. Blockchain systems are being increasingly prominent. In addition, the FCA has pioneered the use of new technologies and is seen as the most innovative regulator in the world.

Why are some organisations hesitant to implement new technologies? And how can this challenge be overcome?

This is usually down to lack of knowledge in the emergence of new technologies, and at the same time senior directors (many close to retirement) wishing to avoid disruption. Most professionals don’t realise that we are in a profound industrial (data) revolution, rather than a mere incremental IT development. It is a data ‘tsunami’.

As many scandals emerge about fraudulent activity, how can behaviour analytics be used to try and encourage people to behave well and promote better culture in organisations?

My research group built the first insider dealing detection systems for the LSE using AI over 25 years ago and then my students set up a company called SearchSpace that developed much of the early financial fraud detection techniques for card fraud, insurance fraud, etc. Since then, the power of AI techniques has expanded enormously, especially in the areas of behavioural analytics and predictive analytics. At the same time, however, the sophistication of fraudsters has grown probably even more rapidly. It’s an ongoing war.

Having been in the field for many decades, what are some of your biggest achievements?
Contributing to the development of automated fraud detection, pioneering algorithmic trading systems with the major banks over the past 15 years, and helping to develop algorithmic regulation, RegTech and collaborating with the FCA. In the future we are hopeful of making major contributions to computable regulations and legal contracts.

Looking ahead, how do you think RegTech and blockchain will be used in the future? Will the board room look significantly different in years to come?

A number of major projects are underway to develop a global data infrastructure with the aim of supporting digital marketplaces for audit, legal services, regulation, etc. We refer to this as DataNet -
a global data infrastructure to do for data what the Internet did for communication: identity, privacy, security, trust, sharing, permissioned access. DataNet will be a global blockchain infrastructure running on top of the Internet and will automate an increasing number of audit and compliance functions. This automation should give the Boardroom unprecedented access to data and in real-time. 

Interview by Sonia Sharma, Editor of Governance and Compliance