Public-Private Forum Focused on Technology Solutions to Protect the Integrity of the U.S. Financial System
WASHINGTON – The United States Department of the Treasury hosted its inaugural U.S. Financial Sector Innovation Policy Roundtable on February 9 and 10. The Roundtable brought together policymakers and regulators with experts from the private sector to exchange views for collaborating on policy issues and innovative technologies that support global financial integrity, while fostering economic recovery, competitiveness, and financial inclusion.
At the event, participants focused on how innovations like interoperable, privacy-preserving digital identity solutions, and more effective anti-money laundering and anti-fraud mechanisms, can provide value to financial services companies and their customers by eliminating redundancies, reducing costs, combating illicit use, and promoting financial inclusion in an increasingly digital world. Participants also addressed policy and regulatory approaches to promote responsible innovation in the financial sector, as well as the role of international organizations and cooperative events, such as Innovation Hubs and Tech Sprints, to support financial products and services for consumers (FinTech), regulatory compliance solutions for financial institutions (RegTech), and new tools for financial sector supervision and examination (SupTech). In addition, participants discussed how governments across the world can work domestically and cooperate internationally to develop and implement new financial and regulatory tools in the era of digital finance, and drive adoption of trustworthy and cutting-edge digital identity solutions to combat money laundering and the financing of terrorism and other crimes.
As part of its mission to promote economic growth and prosperity while protecting national security and ensuring the integrity, efficiency, and stability of the U.S. and global financial systems, the Treasury Department will continue to focus on efforts to improve responsible innovation, combat illicit finance, promote financial inclusion, and a foster a resilient and competitive global financial sector.
Below are the opening remarks from Secretary Yellen at the Innovation Roundtable:
Good morning, everyone – and welcome to the Department’s first Financial Sector Innovation Policy Roundtable. I’ve been on the job exactly two weeks, and I’m very glad to be meeting with this group so early in my tenure.
Treasury touches a wide, wide range of policy areas. That’s the first thing you notice when you become Secretary – how big the Department is. But I want you to know that I’m very enthusiastic about the work of this particular group; the work modernizing our financial system with new technologies.
When my time at the Department is over, I would like to look back and say we’ve been able to out-innovate many of the country’s big challenges. I think we have an opportunity to do that.
When Congress passed the Anti-Money Laundering Act in December, it gave our Department a mandate: to renovate the framework for combating illicit finance. That framework was designed in the ‘70s – and has been more or less the same ever since.
The update couldn’t have come at a better time. As this group knows very well, we’re living amidst an explosion of risk related to fraud, money laundering, terrorist financing, and data privacy. As the pandemic has moved more of life online, crime has moved with it. We’re seeing more – and more sophisticated – cyberattacks aimed at institutions that hold up our society: hospitals, schools, banks, and even our government.
The misuse of cryptocurrencies and virtual assets is a growing problem, too. I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism. From my time at the Fed, I know the crucial role your institutions play in combating crimes like these. The private sector invests enormous resources, finding ways to stop bad actors from misusing existing technologies. You also develop new ones.
My message to you is: Our department is here to help scale and leverage that kind of responsible innovation. By working together, we can better stem the flow of dark money from organized crime and terrorist financiers. We’ll be better able to spot criminals who want to sell weapons of mass destruction on the black market. And we’ll be better positioned to stop adversaries from hacking our institutions or interfering in our elections.
This is important work, but I want to also stress, it’s not innovation’s only role. Treasury is not just invested in innovation for the sake of security. Innovation should not just be a shield to protect against bad actors. Innovation should also be a ladder, to help more people climb to a higher quality of life.
The digital divide has been a persistent problem in this country. So has the fact the millions of people remain disconnected from the financial system. COVID-19, though, has thrown an extra-bright spotlight on these problems. It’s been one of the worst subplots of this pandemic.
America is full of broadband deserts, especially in rural areas. A few months ago, there was a story in the New York Times about the remarkable lengths people have to go to help their kids learn remotely. Parents are spending hours each day parked in McDonald’s parking lots, because that’s the nearest place with high-speed internet access.
Then there are the financial services deserts. One of the things we’ve learned about the PPP program is that it was hard for the smallest small businesses to get their hands on relief funding during the early days of the pandemic. That was especially true for small businesses in communities of color. The application process was complicated, and many didn’t have access to financial services that could help them navigate it.
I know “responsible innovation” has been a motto for our Department. And I believe in it fully. But just as much as we need responsible innovation, we also need equitable innovation; tools that can help bring the benefits of the financial system and modern IT to more people. Indeed, the two types of innovations can be symbiotic. The same digital ID technology that protects against money laundering can also help us reach more people with relief.
Let me close by saying: I greatly appreciate your work and your partnership. Our entire Department appreciates it. I hope that next year, when we hold this meeting, we’ll be able to talk about some new breakthroughs in addressing these challenges– and that we’ll be able to do it in person.