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Building Back Better with RegTech: Big allocations in 2021-22 Budget

by Lucas Tomaschett •
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The Federal government has announced a further $1.2 billion investment into digital transformation initiatives as part of its 2021-2022 Budget.

This builds on the $800 million committed in 2020-21 with Prime Minister Scott Morrison stating that “the digital economy is central to our Government’s economic plan”. 

An additional $120 million in the 2021-2022 Budget will cover 13 deregulation measures requiring the use of RegTech (Regulatory Technology) which are intended to reduce the regulatory burden for businesses; make it easier for businesses to employ people and put in place foundations for future reform. 

The funding builds on the previous Budget’s record-breaking funding aimed at increasing employment by simplifying business interaction with government. The 2020-21 Budget contained multiple initiatives with a RegTech element to support “a broader focus of decreasing the regulatory compliance burden on industry”.  

RegTech utilises a range of current and emerging technologies, including cloud platforms, machine learning, natural language processing and artificial technology to assist business with regulatory compliance. 

To date, RegTech has been most widely adopted by Tier 1 financial institutions and the government agencies responsible for enforcing anti-money laundering and counter-terrorism financing regulations, including the Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Securities Investment Commission (ASIC) because both more manageable compliance and reporting requirements, and simplifying business application processes are candidates for RegTech solutions. 

In the 2016-17 Federal Budget, the government’s focus was very much on monitoring and enforcing business compliance with regulations.  ASIC received part of the $127.4 million package to “support increased surveillance and enforcement activities in areas such as financial advice, responsible lending, life insurance, and breach reporting”.   

However, the 2020-21 budget saw a shift towards supporting businesses, rather than enforcing compliance.  AUSTRAC received funding to “support the development of a new financial data reporting system to assist industry in meeting reporting obligations” and ASIC received funding under the JobMaker Plan - Digital Business Plan initiative to “simplify regulatory compliance”. 

This shift in the governments’ stance to an increased focus on the digital transformation of its systems and processes to meet the needs of business customers (as opposed to the citizen needs) is also tied in with its prioritising of economic and employment growth following the economic impacts of COVID-19.  This focus is reflected in the 2020-21 Federal Budget’s centrepiece JobMaker program. 

Life-journey mapping, a relatively new concept in government, is also likely to increasingly be applied to government to business processes.  Taking a ‘business-centric’ approach to interactions will require an increased focus on business transactions that involve multiple agencies and potentially different levels of government.  

Such complexity will require significantly improved data sharing practices and a national intergovernmental data sharing agreement was discussed at the latest Data and Digital Minister’s Meeting and will be considered by National Cabinet. Data sharing to support contact tracing during the pandemic as well as the need for cross-border provision of emergency service information as evidenced during the 2019-20 bushfires has been the catalyst for such an agreement. 

The ‘starting a business’ journey map is the most oft cited example of the work that is needed to be done to simplify application, registration and approval processes.   

RegTech initiatives are also being funded for: 

  • agricultural exporter assessments,  

  • foreign investment application processing,  

  • enhanced state and local government transactions,  

  • integrated revenue collection,  

  • efficient delivery of welfare services and  

  • easier approval processes for businesses. 

Under the 2020-21 JobMaker Plan - Digital Business Plan initiative, the Federal government will consolidate 32 business registers onto one modern platform to create a “single, accessible and trusted source of business data”. This will make data more accessible for businesses and the wider industry. 

Federal Treasury has gone to market for a foreign investment platform replacement, the scope of which includes advanced analytic capabilities and linkage to a consolidated register of foreign ownership of Australian assets. The Treasury platform will also interact business systems in other government agencies. 

The Federal government’s 2020-21 funding for the fourth tranche of the decade-long Welfare Payment Infrastructure Transformation deliverables will utilise RegTech to reduce manual processes “through automation of claims and process steps” and the “enhanced ability to source and use data to enable organisational outcomes”. 

RegTech is also likely to be used to ensure agencies administer their regulatory obligations, particularly those that involve the safety of citizens.  There are calls for a national firearms registry following the findings of the NSW Coroner regarding the tragic shooting deaths of the Edwards children. The Coroner’s multiple recommendations included amendments to the regulatory regime for firearms licensing; automatic notification by the courts of a domestic violence event to the NSW Police Force which is recorded in a way that is “readily apparent to an adjudicator at the Firearms Registry”. 

Western Australia intends to link multiple information systems and State and Federal Government approval processes to better manage environmental impact assessments through Environment Online 

RegTech features of Environment Online include advanced data analytics and workflow management, real-time data analysis from a single aggregated data source, as well as assisted decision making for environmental assessment officers. The cost savings from reduced assessment times are estimated “in the tens of millions of dollars each year”. 

New South Wales is expected to pursue funding to introduce an e-Regulator initiative in 2021 which will build on its success with the NSW Planning Portal. The eRegulation plan is to bring all State regulations together onto a Whole-of-Government digital platform and provide the foundation to consolidate Service NSW for Business transactions onto a common portal. 

RegTech can also provide benefits through: 

  • Delivering greater transparency and lowering the cost of industry advice,  

  • The flexibility to rapidly make changes to coded requirements,  

  • The ability to investigate outcomes and identify affected stakeholders under scenario modelling, and  

  • The identification of ‘grey areas’ which require clarification or simplification. 

RegTech is also expected to feature heavily in data security and assist in adherence to stricter privacy protocols. Embedded into business processes, RegTech can lower risk through better accuracy, stronger oversight, and delivering consistently reliable outcomes for customers and agencies. 

‘Building back better’ in the post COVID ‘New Normal’ by using RegTech provides governments opportunities to gain efficiency and effectiveness benefits for both themselves and the citizens and business they are serving. 

 

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