​Since the 2008 global financial crisis, the regulatory landscape has undergone a significant shift resulting in a steady increase of compliance requirements, expectations and an unexpected increased impact on staffing.

Compliance has evolved from a mandatory checkbox to a key business function, with risk awareness and management supervision at the top of every corporate agenda. Emerging disruptive technologies have entered the regulatory space over the last couple of years to enable organisations to reduce costs, risk and maintain compliance.

From money laundering to MiFID II and Basel III (plus CRDIV), frequent regulatory change has been the only constant in the finance industry, increasing the need for considerable resources and budget. Under pressure from stakeholders to avoid reputational damage, reduce risk and maximise customer retention, the need for new technology to assist finance professionals has become increasingly apparent.

RegTech, whether utilising machine learning, biometrics or insights from large data sets, are available for every niche aspect of risk and compliance from client management, transaction monitoring to identity management, as well as bigger picture compliance. Embedding this technology into wider operational processes ensures that regulatory compliance is an integral part of business practice and brings a number of other advantages:

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1. Improved accuracy

Augmenting key processes with RegTech significantly reduces risk by taking human process and error out of the equation. In the AML space for example, it can reduce the number of false positives for investigation.

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2. Improved efficiency and insight

As the technology can be continually running, compliance and risk professionals can focus their time on bigger priorities. RegTech can help you to obtain an edge through frictionless client management, training of the right staff to engage with clients and the ability to demonstrate your compliance quickly. Up front work on calibration of technology leads to longer term gains but requires continual reassessments.

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3. Lower staff costs

Aside from the initial investment in the tech, there will inevitably be a reduction in headcount, resulting in longer term savings and more value, both to the client and the firm. However, it’s important to remember that specialist talent will still be needed. According to a recent study, skills shortages were cited by 44% of senior business and technology managers as the biggest or second biggest obstacle to adopting AI solutions for onboarding, Customer Lifecycle Management and KYC.

“Whilst RegTech enhances the ability to identify client onboarding risks and investigate suspicious transaction monitoring events more effectively, it will continue to depend upon the ability of skilled subject matter experts to interpret the output of technology alerts. RegTech is not the panacea but an enabler to identify potential further investigations to maintain the firm and the wider market.”

Stephen Newman, Financial Crime prevention specialist

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4. Improved services

AI allows for greater personalisation of products and services to customer profiles, and faster onboarding of new customers for these products. 50% of senior business and technology managers state that improving the overall process of onboarding a customer is their top or second-ranked area for AI implementation. RegTech can help businesses get closer to their clients: compliance, if implemented correctly, can help to increase revenue.

Such is the uptake that the global RegTech market revenue is expected to reach $7.2 billion in the next three years. The figures are huge because it’s not just those in finance adopting the technology, but the regulators too, themselves struggling with human resources to keep up. Robotic Process Automation helps them process cases and become more efficient, whilst AI can be used to help monitor and identify insider trading, for example. Furthermore, if they use the same RegTech solutions and data sets as financial services organisations, with both parties speaking the same ‘language’, they can monitor and assess all their relevant data quickly and accurately, freeing them up to implement other regulatory requirements and thus the cycle continues!

On both sides of the fence, it’s important that any corporate governance process, regardless of its risk severity or security level, is not outsourced to the adopted technology alone. Compliance professionals will continue to play a pivotal, more valuable role, with the support of the right tech. Personal judgement or intuition cannot be replicated by RegTech, in fact, studies have shown that decisions made exclusively on the basis of tech results can be riskier. Any organisation that puts the tech before human experience and acumen will see their corporate culture change for the worse – the successful ones will have a healthy mix of both sets of expertise. Automated analysis combined with the experience and intuition of a qualified individual will give a truer picture of a risk scenario, allowing a company to react with agility rather than take remedial action later.



“The emergence of technologies, while managing geopolitical and regulatory changes, has enabled firms and regulators to identify opportunities to restructure the use of people and processes. Given the size and severity of the fines, and the reputational risk associated, this has focussed stakeholders’ attention on compliance challenges. However, this is an unfinished story and we look forward to reforming the industry to ensure we are viewed as contributors to the wider global economy.”

Kiran Sudhakar, Financial Crime prevention specialist

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To ensure success, financial organisations should assess how RegTech can be assimilated into their overall current firm structure and how it will benefit from a revenue, compliance and cost perspective. New banking and insurance firms have identified opportunities to achieve this through understanding the balance of people, process, monitoring and technology.

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What other opportunities does RegTech bring to your business? We'd love to know - leave your comments here!