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 Crime – highlights three emerging, yet vital, financial crime themes:
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:
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.