Using RegTech to win the fight against financial crime and strengthen compliance

Mark Kane

By Mark Kane


RegTech is short for ‘regulatory technology’. It applies to technology solutions used to address regulation and compliance issues. Through the likes of machine learning, artificial intelligence (AI) and natural language processing, RegTech promises to strengthen compliance, mitigate risk and cut mounting costs and inefficiencies.

We estimate financial institutions dedicate up to 12 per cent of their workforce to supporting compliance, costing the industry £250 billion annually. As the quantity of regulation grows, this amount of resource is increasingly unsustainable.

The fight against financial crime

One area of compliance that is particularly complex and where RegTech can make a significant impact, is financial crime. The regulatory hurdles (such as know-your-customer and anti-money laundering rules) and constantly changing criminal landscape, mean firms today struggle to stay abreast of customer on-boarding and transaction monitoring requirements. Staying compliant requires re-thinking internal systems, processes and third-party vendor relationships.

 Our research – Partners Against Crimehighlights three emerging, yet vital, financial crime themes:

  1.  Organised crime is becoming increasingly sophisticated and is evolving more quickly than legislation.
  2. The cost of complying with financial crime legislation and regulation is growing rapidly – our research suggests it’s grown 400 per cent since 2005.
  3. There’s increasing need for collaboration and data sharing across geographies and ecosystems to effectively combat financial crime.

 It’s clear that, to address these challenges, firms need to be more agile, efficient and intelligent when it comes to using and sharing data.

So where can RegTech play a role? In recent years, we’ve worked with several regulators to analyse innovative technologies emerging in the anti-money laundering compliance space. Three technologies stand out as powerful ways to tackle the challenge:

  • Data-driven analytics technologies, including machine learning, AI and natural language processing, are a powerful answer to many financial crime compliance challenges. These tools help to deliver valuable business insights that facilitate faster onboarding, customer screening and transaction monitoring.
  • Blockchain can also be a powerful tool. Trade finance, for example, is notorious for its manual processes, hidden costs and intra-jurisdiction settlement time lags. By using distributed ledgers, it’s possible to host all documentation in a shared digital database, removing data inconsistencies and promoting transparency.

 Business leaders already admit they need to transform their approaches to compliance. Our Re-thinking Regulators research found that 55 per cent of financial services leaders said the way they manage risk and compliance could be better. We believe using RegTech in the fight against financial crime is a great place to start.

About the authors

Mark Kane
Mark Kane PA financial services expert

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