RegTech

Financial institutions face complex and constantly changing rules, covering areas such as anti-money laundering, sanctions, risk management, reporting and consumer protection. Meeting these requirements manually is expensive and error-prone. RegTech aims to automate and improve compliance.

Common RegTech applications include digital identity verification for customer onboarding, automated screening against sanctions lists, transaction monitoring to detect suspicious activity, regulatory reporting, tracking changes in regulations and monitoring employee communications for misconduct.

For example, a bank might use software that analyses millions of transactions to spot patterns associated with money laundering, flagging suspicious cases for human review rather than relying on simple rules that generate many false alarms.

RegTech can reduce compliance costs, improve accuracy and speed up processes. Challenges include integrating new tools with older systems, ensuring that automated decisions are explainable and keeping up with changing rules. Regulators themselves use similar technology, sometimes called SupTech, for supervision.