The turn of the year is a time when annual review articles are written in all areas of business, including regulation and compliance.  The start of 2022 has been no exception, and once again we have been subjected to a superficial look at the headline numbers of fines and secondary sanctions that are the current yardstick used to measure regulatory efficacy, writes Rupert Brown, CTO at Evidology Systems.

What we rarely get, however, is a deeper look at how thorough the regulators have been in completing legal appeal cycles and collecting the fines they initially levied, without any discounts or forcing increases if more data comes to light.

Increasing regulatory scrutiny can only increase the burden on the legal system, and this is now creating a significant logjam in court systems around the world, aided and abetted by the disruption of Covid-19 in the past two years.

The concept of ‘judgement tech’ is an attempt to make the process of completing the regulatory process simpler and faster, and reduce public scepticism in the legal system which it sees as part of the social elite’s hegemony, particularly in the US.

Judgement tech needs to take its cue from the lessons learned in the sporting arena, where the advent of ubiquitous high-resolution digital video data capture and replays being searchable with millisecond granularity (think transaction data) has led to a series of protocols and processes that are now embedded in the flow of many sports.

The LBW decision review process in cricket is probably the most mature of these, with a recognised set of steps (no ball, spin vision, snicko/hotspot, ball-tracking) that umpires not only have to follow, but also communicate over the public address system to the crowd. The result has actually led to greater drama and engagement in the game, as everyone waits for the decision to be revealed, especially as the ball-tracking process has a tantalising delay while the computation is carried out.

In rugby union, the TMO process is also a thorough public interaction mechanism driven not only by key game decision moments, but also the recognition that it has a valuable role to play in improving player safety, with significant scrutiny on high tackles and ‘nefarious activities’ in the scrum and ruck.

VAR in football has still to learn from these processes, but it is also hamstrung by the need to keep the game flowing, so a rigorous, perhaps somewhat plodding, unpicking of the data is only effective in the more extreme violations of the rules.

A big question that requires further consideration is whether a judgement tech capability would introduce the notion of limited reviews/appeals. As England cricket fans retreat under the comfort blanket of Ben Stokes’ heroics at Headingley in 2019 after the recent debacle Down Under, we need to remember that Australia had run out of reviews in the final few overs of the match.  

Modern corporate IT environments are a mesh of complex data interconnections, and when recent well-publicised failures such as AML surveillance and KYC reviews surface, it can take several years for effective remediation to occur. During this period it could be reasonably argued that malfeasant corporates lose their right to appeal any further violations until all the transformation work is completed. This could lead to the improvement in sound engineering management and leadership, rather than attempts to airbrush history by ‘moving on’ PR statements, currently prevalent in many responses to judgements.

Judgement tech also needs to measure and report on the consistency and accuracy of the regulators. Many members of the public will not be aware that cricket’s DRS technology is used to train and assess umpires in the layers below the international and first-class game. I wonder how many regulators in post today would be prepared to submit themselves to this level of scrutiny.

Although technology drives data standardisation and consistency of process, there also needs to be a macro set of constraints applied to the current regulatory appeals process.

Major GDPR appeals processes and subsequent class actions are taking far too long to complete, and there is an unhealthy culture of non-disclosure applied to out-of-court settlements. It would be nice to think a DRS timer approach could be taken here, but it is all too easy to instruct lawyers to file an appeal petition, rather than actually gather the evidence to make the full case, which is the process that needs to be capped.

This foot-dragging has to stop. If there is a significant technical failure there can be no presumption of innocence, and everyone, whether directly affected or not, needs to learn very quickly what technical remediations might need to be made, not forgetting the impact on personal data and financial assets.

In reality judgement tech is still a very loose coupling of somewhat abstract concepts and analogies, but there is clearly a need to demonstrate that well defined and communicated regulatory processes are being carried out efficiently and fairly.  

As the pantomime season draws to a close, perhaps we should be mindful that greater transparency and exposure of the inner workings of regulatory processes may create both heroes and villains.  

Nobody will complain if regulators gain the cult status of leading international sporting referees/umpires, who have the respect of both the participants and public. Perhaps it would be better if the heads of the FCA, OFGEM and the ICO understood that and made themselves more visible than just the occasional walk-on part in a televised parliamentary hearing.