2.5b Regulation to Increase Tax Compliance & Control (Part 2)

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FinTech Security and Regulation (RegTech)

11 calificaciones

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The Hong Kong University of Science and Technology

FinTech Security and Regulation (RegTech)

11 calificaciones

Curso 2 de 4 en SpecializationFinTech: Finance Industry Transformation and Regulation

This course "FinTech Security and Regulation (RegTech)" help you to understand RegTech and to become more confident and persuasive in your ability to analyze and make recommendations to executives within the finance industry regarding how to react to these changes, e.g. Regulations to cryptocurrencies like BitCoin & Initial Coin Offering (ICO). It presents the views of several professors from the top business school in Asia as well as perspectives from industry professionals. You will learn about how FinTech and RegTech disrupt and transform finance industry, such as challenges in protecting data and security with digital forensics, risk management and corporate governance in banking industry in terms of Know Your Customer (KYC) and Anti Money Laundering (AML), and how governments in different countries take initiatives in FinTech and RegTech.

De la lección

Risk Management & Government Control

In this module, we explore some of the tools government use to regulate financial markets and discuss potential challenges for FinTech innovators in complying with these regulations. Some basic terms commonly used in finance such as AML & KYC are defined and described. We examine the role of different government agencies as well as alternative social objectives that influence the development of regulations over time.

2.4a Government Regulation to Protect Consumers (Part 1)9:32

2.4b Government Regulation to Protect Consumers (Part 2)7:20

2.5a Regulation to Increase Tax Compliance & Control (Part 1)8:55

2.5b Regulation to Increase Tax Compliance & Control (Part 2)7:26

2.6a Insurance, Risk Management, and Controls to Protect Society (Part 1)9:39

2.6b Insurance, Risk Management, and Controls to Protect Society (Part 2)4:35

Conoce a los instructores

Theodore Henry King CLARK
Associate Professor
Information Systems, Business Statistics and Operations Management Department

And in fact, you could argue that cash is much harder

to regulate than digital currencies.

In fact, bank accounts are exceedingly easy to track and

regulate, as long as they're complying with AML and KYC requirements,

you know a lot about what people are doing through their bank accounts.

You don’t know much about what they’re doing in cash.

So some societies very much like moving to a digital currency of one sort or

another including your checking account and other wire transfers, etc.

Those are all digital.

They're digital currencies of one form or another.

And they're not crypto currencies, but they're digital money, bits and bytes.

And those are very well regulated and controlled.

Governments like having that kind of control.

So for the nation of China, when they looked at Internet,

at information, and how that might affect society.

One of the appealing aspects of the Internet

was that it could give the government much more control.

Now it's interesting because from a western perspective you may think,

wait a minute.

Didn't China have a government controlled economy?

Didn't it have a centralized economy?

Before they instituted capitalistic reforms?

And the answer is sort of.

There were a lot of quote unquote state-owned enterprises, but

these enterprises were often owned by local governments or

provincial governments, and they often operated as effectively separate fiefdoms.

And one of the frustrations of the central government

is many of these government agencies would do everything they could to avoid taxes.

They didn't want to pay their owners.

They wanted to pay their managers more and the owners or the government less.

And so, there was difficulties of information flows, or knowledge,

or knowing what's going in the economy.

Information would often be reported that was politically nice to here but

not always true, and so that frustrating too.

And so one of the big selling points of why China should invest massive

capital into an information society, was to

create better government information and controls across that society.

And China now has one of the highest Internet connectivity rates, one

of the best information infrastructures of any country in the world.

Because they see information and digital transactions

as a way of better controlling, better managing,

better coordinating their economy, their government, their activities.

Both of government related firms, and

of nongovernmental entities in a market-based economy.

It's very dangerous in a market-based economy for a government to be

out of control, because then you can ended up with booms and busts, and

a poorly managed economy that has risk for individuals and risk for society.

And can sometimes, when governments lose economic control,

can lead to political revolt or protests across the people.

So the government of China wants control.

Information can help them to get control.

They also want taxes or revenues.

And many countries that have gone through revolutions or have failed,

have failed because they're no longer able to collect tax from their citizens.

When a country has lost the trust of its people,

when it's lost the ability to enforce tax or collection policies.

That is a government heading for collapse.

And so, of course, China doesn't want to be even close,

not even near to anything of that sort of risk.

And so they need better controls, better information, and

therefore a better information economy.

And regulations that enforce both the tax collection ability,

and the ability to know what is happening across the economy.

Now it's not just governments that want to know that,

because it's also Alibaba, or Wechat or Tencent I should say.

They also want to know what's going on.

They also want to know what's going on with their customers.

And some people argue that if you were to combine information from Facebook and

Amazon and Uber, Airbnb, they've put that information together,

you'd know a lot more about people than the government does.

And in China we have large organizations that offer similar services and

they know a lot, the government would like to share in some of that knowledge.

And so one of the interesting restrictions in China about security and

regulation is we'd like to be able to have a back door into

financial service firms into financial transactions so

we can look for terrorist activities, money laundering,

security and maybe tax fraud or other fraud kinds of compliance.

Of course, once the government get's a back door into financial systems,

they may want to know more.

And you may not know when they know enough or too much.

But so there's sort of some overlapping of government and

private enterprise in China.

Which you may find objectionable and maybe reasons to start a trade war or

do something else crazy.

It's not illegal and it is sort of the nature of doing business in China.

What you really have to recognize in this part of the world is control

matters a lot.

And the government is not going to do anything which is going to

give up their ability to have control.

And it's not always a bad thing because with control also

comes personal security in some ways.

So that when criminals do bad things,

the government may be able to deal with that very quickly.

So you may not like it but you'll live with it and

you need to recognize it as a government need or

important value that drives regulation and,

to some extent, interpretation of security.

I'm not saying all things turn out good, I'm not saying all things turn out bad,

I'm saying they're different.

And so regulation, the goal there is partly about control.

It's not different from the US, it's just different in degree or

tone, the US would like control too.

There are just things they are not willing to do to get that control.

And so at any rate, that's some background on regulation and

why it's there to help us get more taxes but

also to get more information and control in society in general.

Thank you.

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