Laura Douglas, PSL (Senior Associate), Financial Regulation

How does FinTech fit into Clifford Chance’s practice groups?

FinTech is pretty much part of all of the Clifford Chance practice groups.

We don't have a separate FinTech group because the types of expertise that we need to bring to our FinTech clients are drawn from all areas of the firm.

I sit within the Financial Regulation team, but I regularly work with colleagues from across the firm on FinTech matters, whether that's with litigators on questions about cyber risk or the enforceability of smart contracts under English law, or working with corporate teams, looking at cloud outsourcing agreements and other commercial contracts that FinTech clients need.

So, in that sense, I think it's actually a really great example of where the firm comes together to deliver Clifford Chance's expertise in all of these different areas to a particular client, in this case, a FinTech.

It also means that if you're interested in FinTech and law, there's not just one group in the firm that you'd need to join to do that kind of work. There are definitely opportunities pretty much wherever you are in the firm.

Do you think Brexit will impact FinTech regulation in the UK?

I don't see Brexit having very much impact on the UK's approach to FinTech regulation. That might be surprising, but actually, we've already seen the UK consulting on and developing its policy in a number of FinTech related areas, including regulation of crypto-assets.

Plus, the UK regulator, the FCA [Financial Conduct Authority] has had a regulatory sandbox programme running for a number of years now, and the sandbox is something that allows FinTechs to test their business propositions in the market with support and advice from the FCA. Often that's a steppingstone to those FinTechs becoming fully regulated in the UK.

So all of these things have already been going on whilst the UK has been a member of the EU.  I don't see any of this changing as a result of Brexit.

Although, of course, being outside the EU may allow the UK even greater flexibility in the future potentially to adapt to the regulatory regime in ways that are appropriate for FinTechs, and particularly for crypto-assets.

That's something, actually, the EU and the UK are both considering in a lot of detail at the moment. On the whole, I would say no real change, just more of the same in terms of the UK's approach to regulating FinTech.

Noting the differences between Facebook’s initial global stablecoin proposal and Libra 2.0, as well as the significant drop-off of corporate backers for the project, do you think this proposal will ever come to market? Are will likely to ever see an “appropriate” regulatory response?

This is a tricky one. But, if I had to answer I'd say, yes. Libra, or something like Libra, will arise at some point in the future. But do I think that we're going to be paying for our groceries with Libra in say five years' time? Absolutely not, but then I might be proved wrong. Who knows?

To unpack this a little bit: What we’ve seen since the Libra announcement is that policymakers and central banks around the world have taken the disruptive potential of Libra extremely seriously. So, a number of regulators have said effectively that Libra won't be allowed to operate in their jurisdiction until they are satisfied with the way it's regulated. I guess the million-dollar question is, will Libra ever meet the bar that is set by regulators or will regulators just keep raising the bar?

I think part of the answer to this question lies in thinking about the broader policy questions that Libra throws up for governments and for central banks, for example, the risks it might pose to the effective control of monetary policy.

I think, actually, Libra may only be given the green light when policymakers in these jurisdictions really have a handle on how to respond effectively to those risks. And I think that part of that response might lie in the development of Central Bank Digital Currencies (CBDCs).

In fact, we've seen a real shift in central banks' attitudes to CBDCs since the Libra announcement, I think in part because they recognize that this change is coming in some shape or form and they absolutely cannot afford to be left behind.

The other thing I wanted to mention in the context of this question is that one of the trends we've really seen accelerate during the COVID-19 pandemic is the decline in the use of cash. Whilst digital payments might be really convenient and a good thing for most of us, it does come with its own set of challenges, particularly around financial exclusion risks for vulnerable communities. That’s something the UK is really attuned to at the moment with its Access to Cash Review. And as such, I really do think that these sorts of broader social implications will be another sort of key area of consideration in the whole Libra debate.

Herbert Swaniker, TMT Associate and Member of  Clifford Chance's Tech Group  

What do you think the Audiovisual Media Services Directive will mean for online platforms?

What a great question. I think the short answer is change and innovation.

The Directive recognises the huge shift in the types of content and how we consume content. So the old rules really focused on actual TV, the sort of TV that we sat in our living room with friends and family to watch, but obviously, the way that media is consumed has changed. So through our own devices and through online platforms a lot of content is made available, and that means that new types of risks are created. The rules will mean that online platforms will need to think about, firstly, whether the rules apply to them, and if they do, how they comply.

The ‘how’ is the challenging part, given the way that the directive will be implemented in different ways in different member states. Consistency and thinking very carefully about what is necessary and what’s appropriate will be very important. In the UK, for example, the Directive has recently been implemented and the focus involves things like thinking about content and content protection. So, for children, it is important to have age verification controls in place to make sure that online platforms aren’t giving access to vulnerable individuals. It’s also thinking about the types of content that might incite racial hatred or harm or terrorism and making sure that appropriate controls are in place to pull that content where necessary. And this is something we’re seeing in other countries as well.

So there’s a coalescing picture and people need to make sure that they keep on top of that; but, most importantly, really thinking about the harm. And that will involve real thoughtful exercises for individuals and organisations within them to really think about what’s the right thing to do and what’s the right way to deliver on that.

A study published by the AI Now Institute of New York University suggested that a “diversity disaster” is resulting in AI systems that propagate gender and racial biases. Do you feel that diversity is being given due consideration in discussions on AI governance?

I recorded this one a few times because there are so many things I wanted to say.

I thought it was a trick question, at first, but I mean, I think you can never give enough consideration to diversity, be that gender, racial or any other kind of bias that will be created or perpetuated by Artifice Intelligence (AI). And this year has made this incredibly clear: The importance of technology companies and all companies that use technology to make sure that AI governance frameworks really think about this sensitively and put in place controls to protect against the risks.

That’s right from the design stage, so if you’re creating facial recognition technology, thinking about how your AI might perpetuate or create bias and taking steps to remove that. And that might involve, when you’re testing the AI, making sure that you have diverse data sets. But then also, moving into implementation, people that are buying and using these technologies are also having to really think about what is the risk, what is the harm that this technology can pose.

I think this is where AI governance needs to go a step further and public, private and governmental organisations are all thinking about how. And that involves not only thinking about the design but also making sure that the governance frameworks have and represent people that are at risk. That will involve thinking much more sensitively about having a diverse board, a diverse group of people who are responsible for the creation and design of these technologies. And that has to be a really important step. I’m encouraged by the positive steps that many organisations, be they both public and private, are taking; and, that we will hopefully see AI governance being taken as seriously as it has been in the last couple of years.

What advice would you give to an aspiring solicitor with an interest in FinTech regulation?

I think my number one point would be that you have to start from somewhere that you’re genuinely interested in.

Fintech regulation isn’t just about reading up the latest laws, it’s actually thinking about is there somewhere where there’s a gap or is there a new technology relating to financial products, where it would make sense to have something more or make sense for something that already exists to change.

And that involves you engaging, I think that has to be the first point.  So, looking at technology, looking at your mobile phone even and thinking, when I go onto an online baking app, how is this working? Do I feel that, for example, an algorithm will be used but I don’t understand how? That relates to AI explainability, and there’s a whole load of regulation around that which you can follow, but you have to understand what the need is and where the impact and regulation might need to step in.

I think it’s also worth, obviously, following what regulators are saying and what they’re doing. So looking at consultations, so what do the Competition Authority think might need to change in terms of Fintech? What does the Data Protection Authority think? What does the European Commission think? And then just think further afield and just keep on top of the developments. I think that’s one of the main ways to make sure that you can engage, and where there’s opportunity to take part in surveys, do that.

Adam Hunter, IGNITE Trainee

Can you explain the differences between IGNITE and a regular Training Contract? What are the different initiatives you have been involved in?

IGNITE is essentially the traditional Training Contract, where you spend six months in four different departments, but you are also working on Legal Tech matters when you are in those departments.

So on my Training Contract, I have worked on giving training sessions to some of the teams, I’ve worked on introducing new client products, particularly in the areas of data protection and cybersecurity, and I’ve also worked at introducing legal tech on a lot of our client matters to make them a lot more efficient.

How much of your day is spent doing legal work versus engaging with Tech initiatives?

In terms of how much of my day I spend doing legal work as opposed to working on legal tech initiatives, it’s a really difficult question.

First and foremost, it’s a Training Contract, so I’m working as a Trainee and I’m helping the team on providing legal advice to our clients. However, as an IGNITE Trainee, I work on those matters in a way that utilises legal technology and encourages the team to also make good use of the technology that we’ve got available.

So quite often, I’m using legal tech throughout the day. I do work on specific legal tech projects and put time aside once or twice a week to really progress those matters. But, first and foremost, its a Training Contract, so I’m working as a Trainee.

What skills have you developed on the IGNITE Training Contract that you feel you would not have developed on a traditional TC?

I think there are two types of skills that you develop on IGNITE, the first being client skills. And this is because IGNITE encourages you to really think about how we can move away from some of the more traditional ways of providing advice, whether that was in lengthy legal memos, maybe perhaps over email to ways that are much more client-friendly, maybe that’s through a portal, maybe it’s through a toolkit. It’s about being much more client-centric and this is something that IGNITE encourages you to do and to think in that manner.

The second skill would be commercial awareness, and this relates back to understanding Clifford Chance as a business and the understanding that there are many other ways that the firm can reach out to clients and create a profit beyond the traditional way of providing advice through the billable hour model. So whether that’s through creating a client product that you then sell to the client, whether that’s through new services, through collaborations, IGNITE encourages you to think a little bit more commercially about working as a Trainee and also working as a lawyer at Clifford Chance.