Regtech and AML — do these technologies have a chance?

The sector of financial technologies is evolving at an astonishing pace and its overwhelming growth of adoption turns the whole financial market upside down by digitalizing all components of traditional finance, including private and public sectors and regulatory bodies. In light of the above, a new term — “regtech” — emerged, standing for regulatory technology, or the management of regulatory processes in the financial sector with the help of technologies. Regtech easily found its place in the constantly progressing world, facilitating compliance with regulations and requirements for businesses in the financial sector.
Regtech has become popular due to strict limitations and regulatory uncertainty that were emerging in the financial sector and influenced the fintech industry and cryptocurrencies. It started to become more and more complicated for fintech companies to comply with current regulations and be on time as the rules of the game changed rapidly. It has been calculated that the employees of such companies spend up to 15% of their time at work on arranging compliance with regulations.
As per Deloitte’s relevant research, legal uncertainty and too strict limitations represent great problems to fintech companies as they constantly find themselves on the verge of violating this or that law. Apart from that, managing red tape is usually costly, reaching hundreds of millions of dollars in Australia as an example. In addition to that, noncompliance with ever-changing regulations or uncertain laws leads to big fines. As Boston Consulting Group states, the total amount of charged fines that global financial corporations have been fined with for regulatory inconsistency has summed up to $300 billion for the last 12 years.

What regtech is about

Regulatory technology and anti-money laundering (AML) technologies combined

AML instruments and regtech realization

Implementing AML instruments is quite expensive, in regard to which companies tend to require a compliance job to be done with the utmost efficiency to provide as much benefits to the company as possible.
Some businesses focus on the use of regtech and AML instruments so much that they spend lots of funds on traditional AML and regtech solutions, instead of making investments and diversifying income sources.
AML and regtech usage
- Facilitated audit and reporting for data to be better used for regulatory compliance. It is aimed at reducing user error.
- Getting the most out of possessed data, including using it in decision-making processes. It enhances the company’s positioning and value.
- An advanced approach to implementing changes and innovative solutions. This is of the highest importance as state legislature and business directions are changing all the time.
In this regard, newly emerging technological solutions like artificial intelligence, NLP approaches and smart contracts enrich anti-money laundering techniques and regulatory technology with greater opportunities, putting them on top of must-haves in the financial world. The innovations and fast-pacing developments that characterize the modern economy make it completely impossible to stay up on the financial market without using these solutions, which is also applicable to fintech businesses.
With each passing day, the issue of legal compliance becomes more and more topical, and compliance costs are believed to be increasing in the coming years. The industry is becoming more complex and sophisticated, and soon it will be too complicated to enter and exist there without regulatory guidance. Regtech is expected to become a competitive advantage in the future, giving great benefits to companies using it and facilitating their red tape and operational routine and automatically updating highly-important information viable to a company’s existence. After all, technology always does things much faster than people.

Regtech and AML — too much or the future of finance?

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