The UK’s Financial Conduct Authority (FCA) published feedback from its consultation on the challenges in accessing high quality data for innovation in financial services, including synthetic data. The key themes, including risks, benefits and generation techniques, are: synthetic data use cases and the requirements to meet these use cases; the role of the regulator with regards to synthetic data; and who this is for.
Respondents to the FCA’s consultation unanimously agreed that data is crucial for innovation, however there are challenges to accessing and sharing data in financial services. Although respondents indicated that data protection regulation places specific conditions on the data they can share and access, they also reiterated the importance of consumer privacy, and that data access should have privacy built in by design at every stage of the process.
Feedback also strongly indicated fraud and anti-money laundering as a key use case for synthetic data, in part due to its ability to augment rare patterns of behavior in a dataset. The FCA is interested in exploring this use case further, building its own internal capabilities and working together with industry to employ synthetic data as a novel regulatory and compliance tool. Given the UK regulator’s position to convene industry, academia and the broader regulatory community around common initiatives, respondents indicated that the regulator could perform an intermediary role in the provision of synthetic data. Feedback also strongly indicated the need for guidelines, standards and/or governance frameworks to build trust in synthetic data and encourage wider adoption.
Based on the feedback, the FCA will be hosting a joint industry-academic roundtable in early 2023 in partnership with the Alan Turing Institute and the Information Commissioner’s Office (ICO) to understand the challenges of validating synthetic data. The FCA is also setting up a Synthetic Data Expert Group. This group will create a framework for collaboration across industry, regulators, academia and wider civil society on issues related to synthetic data.