Large Language Model Application for Regulatory Horizon Scanning: Case Study on ESG Greenwashing Regulations
This white paper explores the application of Generative AI, specifically Large Language Models (LLMs), to enhance regulatory horizon scanning within financial services. Using the Financial Conduct Authority’s (FCA) 2024 anti-greenwashing rule as a case study, we demonstrate how LLMs can be integrated into the strategic foresight process to detect early regulatory signals, analyse stakeholder feedback, and forecast future regulatory developments.
Our framework builds upon the traditional horizon scanning model, comprising exploration, assessment, application, and continuation, and incorporates advanced text analysis techniques including semantic similarity testing with models such as BERT and RoBERTa.
The study shows that LLMs can significantly improve the efficiency, accuracy, and scalability of horizon scanning by extracting meaningful insights from large, unstructured datasets. The results highlight the potential of LLM-driven foresight to enhance regulatory preparedness, guide compliance strategies, and inform policy design in an increasingly complex and dynamic regulatory environment.
Innovation Accelerator Fuels Glasgow City Region’s Fintech Future: Driving Growth, Jobs, and Global Leadership
The Centre of Innovation for Financial Regulation, known as the Financial Regulation Innovation Lab (FRIL), is shaping the future of regulatory responsible innovation as part of the UK government’s Innovation Accelerator programme.
Led by FinTech Scotland in partnership with Universities of Strathclyde and Glasgow, FRIL is delivering pioneering advances in artificial intelligence and accelerating innovation that helps protect people from financial crime. It is also creating digital services that help citizens and businesses get access to the right financial products at the right time, helping citizens live better financially resilient lives.
The FRIL initiative is already in the process of delivering an impressive return on investment of £6 to every £1 in public funding.
It is one of 11 projects funded within the Glasgow City Region portfolio of the Innovation Accelerator (IA) pilot programme, which is transforming the innovation landscape in the UK and paving the way for the future of place-based research and development (R&D) investment.
Since its launch, the Innovation Accelerator programme has invested £100m in 26 transformative R&D projects between 2023-25, focusing on high-potential innovation clusters across three UK regions – Greater Manchester, West Midlands and Glasgow City Region and has been extended by £30m for 2025/26. The programme builds on regional cluster strengths and brings together the innovation ecosystem, to drive economic growth and technological advancement.
The programme is led by Innovate UK, on behalf of UK Research and Innovation (UKRI) and the Department for Science, Innovation and Technology (DSIT) and co-created in Glasgow City Region with regional leadership to ensure it is locally led and focused on harnessing the region’s strengths in advanced manufacturing, space, photonics, healthcare, precision medicine and financial technology (fintech).
With over 250 companies engaged, £47 million in co-investment secured, and a thriving ecosystem of high-growth sectors now flourishing, by focusing on innovation – rather than pure research – the Innovation Accelerator programme has leveraged Glasgow City Region’s existing strengths, infrastructure, and partnerships to accelerate progress. The success of the Innovation Accelerator programme underscores the importance of long-term regional autonomy in funding decisions. With the right support, Glasgow City Region’s innovation ecosystem is poised for sustainable growth, ensuring it remains a premier destination for business, talent, and groundbreaking ideas.
Two years since its launch the projects supported are demonstrating globally competitive research and development that is putting the region’s innovation strengths on the map, including FRIL.
FRIL is built on four workstreams namely innovation challenges, actionable research, skills and education, and knowledge exchange. Crucially FRIL’s industry-led accelerator model has demonstrated how to drive economic growth, job creation, and productivity in financial services and the broader economy as well as position Glasgow City Region’s as a global powerhouse for next-generation fintech innovation. It is accelerating business development by up to 12 months, advancing technology adoption and enabling fintech partnerships that are driving strong commercial outcomes.
This has all been reinforced by the industry co-investment in FRIL, with commitments reaching up to £20 million across financial services institutions such as Morgan Stanley, Lloyds Banking Group, Aberdeen, NatWest, TSB and Advanced Credit Union that have enabled the new services to be created and new fintech enterprises to emerge, as well as job creation projected and realised by FRIL FinTech grant award winners.
Through FRIL there are also 18 diverse fintech SMEs creating new jobs. Examples of this include the fast growing Scottish based scale-up Amiqus, which delivers a product that solves compliance and onboarding challenges for businesses taking on new clients or hiring staff. Amiqus has hired over 20 new employees with further growth plans in the pipeline, following an award from the FRIL innovation challenge initiative.
FRIL is also helping UK regions beyond Glasgow City Region, including Greater Manchester and West Midlands to become globally competitive R&D powerhouses for financial technology, delivering strong economic returns and high-value employment.
Science Minister, Lord Vallance, said:
“The Innovation Accelerator programme is unlocking new opportunities for growth in regions across the UK and this £30m investment backs further collaboration between business, academia and government to build on local innovation that can improve lives across the country.
“Glasgow City Region’s Financial Regulation Innovation Lab’s return of £6 for every £1 invested is helping to strengthen the economy, while its work in advancing technology in financial services will help position the Glasgow City Region as a hub for next generation fintech innovation that benefits the economy across Scotland and the wider UK.”
Susan Aitken, Chair of the Glasgow City Region Cabinet and Leader of Glasgow City Council, added:
“Glasgow has long been at the forefront of financial services and innovation, and setting up the Financial Regulation Innovation Lab cements our position as a leading global fintech hub. The FRIL initiative is driving significant economic impact, creating high-value jobs, driving investment, and fostering collaboration between industry, academia, and government.“It’s exciting to see how the Innovation Accelerator programme has been the catalyst to driving locally led innovation, resulting in significant economic growth and technological advancement.”
Nicola Anderson, CEO of Fintech Scotland, commented:
“We are incredibly proud of the impact that The Financial Regulation Innovation Lab is making, harnessing the power of financial innovation to drive economic growth. The investment in FRIL has been game changing, allowing us to support more businesses and drive meaningful economic impact both at a national and global level.“We continue to build on this momentum by further accelerating innovation and technology adoption whilst developing the skill base, enhancing academic application and driving better financial product engagement for customers.”
For more information and to find out about other projects that have been funded through the programme, visit the Innovate UK Business Connect website.
Sustainable Financial Products and UK Pension Schemes
Sustainable financial products have gained significant traction in the financial world as climate change and social responsibility concerns continue to dominate public discourse. In the UK, Environmental, Social, and Governance (ESG) and sustainability considerations have been steadily gaining attention as both financial product designs and risk management tools.
Economic trends, regulations, and soft laws have been reactive over the last decade to growing transparency and demands for accountability (Palea, 20221; Escrig-Olmedo, Muñoz-Torres, Fernandez-Izquierdo, 20132).
This paper explores the growing role of sustainable financial products in the UK’s Defined Contribution (DC) pension schemes. It highlights key challenges and opportunities, focusing on the interplay between sustainable investment products, pension dashboards, Fintech, and institutional perspectives.
Strategic Foresight in FinTech: Harnessing Scenario Planning for Future Readiness
Strategic foresight is an essential approach for anticipating and preparing for potential developments in a rapidly evolving ecosystem. This white paper explores the critical importance of future thinking and foresight methods in fintech ecosystem. It highlights scenario planning as a powerful tool for strategic foresight in fintech ecosystem. It examines the value of scenario planning for businesses, governments, and regulators, while addressing the challenges and limitations of its application.
The paper reviews specific use cases of scenario planning in government and financial institutions, offering insights into how it can further benefit these sectors. Ultimately, the paper calls on stakeholders to embrace future thinking and scenario planning as integral elements of their strategic planning processes.
Simplifying Compliance: The Role of AI and RegTech
The Financial Regulation Innovation Lab (FRIL) is dedicated to simplifying compliance through emerging technologies, with Artificial Intelligence (AI) representing the latest evolution in regulatory technology (RegTech). Building on previous research and industry engagement—including workshops, blogs, webinars, and a micro-credential course—this White Paper presents key considerations for the conceptualisation, design, and implementation of AI-driven compliance systems.
We begin by examining the nature of regulatory rules and the compliance process before exploring the complexities that challenge AI deployment. The discussion then shifts to Generative AI (GenAI) as a cutting-edge innovation, analysing its capabilities and relevance to compliance functions.
A focused use case on GenAI in robo-advisory services illustrates AI’s potential in asset management, where conventional AI is already well-established. Finally, we consider the broader organisational implications of AI adoption, emphasising the opportunity to view compliance as an embedded and adaptive function able to evolve and respond to changing stakeholder expectations and regulatory frameworks.
Shifting the Skills Conversation: Building a Lifelong Learning Culture to Foster Innovation in Scotland’s Financial Sector
Building a sustainable, productive and inclusive financial services sector in Scotland means thinking beyond the needs of today. ‘Fostering innovation’ requires investing in people’s ability to think broader than what’s right in front of them, and such capability to be dynamic in behaviour, knowledge and practical expertise is built through the process of learning – over and over again, exploring many different skills and interests, and throughout life.
It’s for this reason that in this white paper we propose shifting the skills conversation beyond plugging skills gaps and identifying which is the latest technical need in the workforce, and instead building a ‘lifelong learning’ culture to better foster innovation in Scotland’s financial sector, long-term.
Robo Advisors as a Use Case of AI Systems: Linking Responsible Business Practices, Compliance and Outcomes
In this paper, we explore the workings of robo-advisors as an example of AI-based systems.
We discuss the performance and challenges of robo-advice, as well as offer reflections on how and why robo-advice as part of the broader fintech and financial services sector intersects practices in AI systems, regulation and compliance. We draw attention to the implications for explainable AI, the role of humans in the loop, compliance and business practices.
Our approach focuses on how the AI capabilities in robo-advisors can help to build responsible business practices and compliance elements into operating models and business processes. We explore how these interactions apply to selected use cases in the UK and discuss implications for improvements in responsible business practices, regulations and consumer/client outcomes.
The Shifting Locus of Authoritative Advice for Gen-Z and Their Financial Lives: An Opportunity for the Credit Union Sector?
Gen Z are reshaping the way financial advice is sought and acted upon. Moving away from traditional sources like family, banks, and financial advisors, younger generations are turning to social media platforms like TikTok and Instagram, where financial influencers —“finfluencers”— offer accessible, though often unregulated, advice.
While this shift has democratized financial education, it has also introduced significant risks to advice-seekers, including misinformation, high-risk investment recommendations, and a lack of regulatory oversight.
For Credit Unions, this transformation presents challenges and opportunities. Younger audiences often see traditional financial institutions such as banks as outdated, inaccessible, and misaligned with their values. However, Credit Unions, with their ethical foundations and community focus, are well- positioned to fill the trust gap created by the shortcomings of both traditional institutions and finfluencers.
By engaging with young people where they seek advice – on social media – Credit Unions can offer relatable, trustworthy, and sound financial guidance that aligns with their mission to promote financial literacy and inclusivity.
This white paper explores ways in which Credit Unions can respond to this shift in advice-seeking behaviour to revitalise and grow their memberships. Discussions with UK-based Credit Unions reveal cautious optimism about engaging in the finfluencer space, with several recognizing the potential to use social media platforms to amplify messages of fairness, community, and responsible financial management. However, barriers such as limited digital innovation capacity, regulatory concerns, and a general lack of awareness about the finfluencer phenomenon remain.
To address these challenges, we propose a coordinated approach for Credit Unions to build capacity and credibility in the digital advice ecosystem. This includes developing sectoral guidelines for engaging responsibly with finfluencers, pooling resources to experiment with digital campaigns, creating a practical playbook for social media engagement, and modernizing product offerings to align with Gen Z’s preferences for fast, convenient, and values-driven services.
By strategically entering the online advice ecosystem, Credit Unions can not only mitigate the risks of misinformation but also position themselves as a trusted alternative to both traditional institutions and unregulated finfluencers. This approach offers a pathway for Credit Unions to expand their membership, strengthen their community impact, and secure their relevance in an increasingly digital world.
Authorised Push Payment Fraud Mitigation: The Role of Data and Information Sharing
Authorised Push Payment (APP) fraud has been increasingly steadily, with many of the common types originating on social media and the internet. Combatting and mitigating APP fraud will require cooperation across financial institutions and tech and telecoms companies, with data and information sharing playing a key role. Recent UK legislation aims to facilitate data and information sharing to combat fraud and privacy enhancing technologies (PETs) provide technical solutions to enable better understanding and widespread sharing of fraud intelligence that enable data protection and privacy.
Mapping ESRS Disclosure Datapoints to Relevant Datasets
The integration of geospatial data into sustainability reporting frameworks addresses challenges related to inconsistent and outdated Environmental, Social, and Governance (ESG) information. This third white paper from the Financial Regulation Innovation Laboratory (FRIL) explores the application of geospatial data in enhancing the European Sustainability Reporting Standards (ESRS). By aligning geospatial datasets with specific ESRS disclosure requirements, the study provides a foundation for corporations conducting double materiality assessments, auditors validating disclosures, and third parties—such as financial institutions and environmental organisations—performing due diligence.
Geospatial data can be applied at the asset level (e.g., factories) or aggregated using a bottom-up approach linked to financial ownership, improving transparency and comparability across companies, sectors, and regions. However, the study finds that only 7% of ESRS datapoints can be externally validated due to the dependence on proprietary company information. Despite this limitation, different stakeholders benefit from distinct datapoints: investors may prioritise datapoints linked to external risks such as flooding or greenhouse gas emissions, while water-focused non-governmental organisations may emphasise hydrological indicators.
The EU Omnibus package (February 2025) introduces significant changes to ESRS and corporate sustainability reporting. These include a reduction in in-scope companies (80% fewer under the Corporate Sustainability Reporting Directive), limited value chain coverage, and fewer required datapoints, which may lead to a data gap and reduced transparency. However, the shift towards quantitative over qualitative datapoints presents a critical opportunity for geospatial data to bridge this gap, offering independent, real-time, and scalable insights for ESG reporting.
Furthermore, the revision of assurance requirements under the Omnibus package raises concerns about data verification and reporting accuracy. Given these regulatory shifts, integrating satellite- derived data into sustainability reporting frameworks could enhance objectivity, comparability, and reliability. Future regulations should embed geospatial data as a core element to strengthen the integrity and effectiveness of sustainability disclosures in the EU and beyond.