According to the research “The value of RegTech solutions has been predicted to touch $60.77 billion by the year 2030. The predicted compound annual growth rate (CAGR) of 24.9% shows the struggle of financial institutions to create resilience against bad guys from infiltrating the financial ecosystem and to avoid enforcement upshots.”
Further added, “The importance of AML/KYC controls and compliance can be comprehended from the fact that every year the European Union (EU) spends $83 billion on strengthening AML compliance programs along with updating AML laws.”
Among the global needs of AML screening, businesses have been investing greatly to screen and monitor the users for in-depth background screening.
According to research “90% of the banks and financial institutions are planning to use RegTech in AML to speedify their process of onboarding.”
This blog will be a walkthrough of diverse applications of RegTech for compliance in 2024.
How is RegTech related to AML?
Let’s begin with a common question “What is Regtech?”
“RegTech describes a combination of regulatory compliance and technology applied to ensure AML compliance using advanced algorithms of machine learning, natural language processing and many more.”
Regtech Solutions in the UK raised $8.3 billion in funding in 2020. Furthermore, a substantial increase above the $7.2 billion market valuation was recorded in 2019. While there is still room for development, let’s quickly review the compliance segment that benefits businesses before exploring regulatory requirements linked with RegTech.
Top 10 Use Cases of RegTech in AML
Modern technology has been a major highlight in AML compliance. Check out some of the top ways businesses are deploying this in their daily operations.
- “When it comes to transaction monitoring, Regtech bridges the time it takes to process large volumes of transactions by keeping false positives to bare minimum.” How? By using advanced algorithms and natural language processing, suspicious transactions can be tracked and blocked to break the pattern that builds up to counting as money laundering.
- At the time of onboarding, the biggest problem is linked with the quick process of onboarding. Regtech bridges this gap of slow processing by speeding up the process both at onboarding and anytime during the customer journey by using modern technology such as biometric or cross cultural name matching.
- Risk Assessment is a challenge especially when the consumer base comes from diverse backgrounds and diverse ranks of their professional career. By setting up industry specific risk scoring, transaction patterns and background screening, businesses can prioritize risks and perform efficient due diligence when required.
- Regulatory Update Management is among the most demanding use cases of regtech compliance. Careful and precise monitoring of the upcoming regulations that are emerging can help businesses stay ahead of every regulatory update that comes along, thus enabling the most updated and up-to-the minute AML regulation compliance.
- “Upgrading audit trails and documentation of both external and internal AML controls to keep a complete track of updates and case management at every step of the customer journey and during all regulatory examinations or audits.” is kept as a major requirement, that RegTech plays a very crucial role to manage.
Are there any challenges that come along?
Just like any other new technology that offers a unique set of opportunities, Regtech has its fair share of challenges as well.
- Beginning with shifting from an outdated software solution to RegTech Solutions may require investment, staff training and regular audits to ensure the efficacy and alignment with existing workflows. This is true especially for the organizations that are new to adopting AML/KYC protocols thus lack internal experience.
- If a business is adapted well with a legacy system, it can be difficult to access the modern advances in RegTech while using the same old algorithms of screening against risks.
- AI driven RegTech solutions might be smart enough and may belong to be relevant with today’s technology but might not work with the businesses that work on risk specific scoring or rule specific AML screening.
- Technology can be relied upon for quick processing, however when it comes to data collection, compilation and storage to ensure most up-to-date compliance, RegTech may be challenging and dubious to rely on.
What’s the way forward?
The emergence and rise of RegTech, also known as Regulatory Technology is definitely game changing in the field of compliance, as it would better facilitate the organization’s data analytics thus, strengthen their actions to fight financial crime.
As the requirements of AML checks are consistently evolving, deploying Reg Teech is nearly unavoidable.
With AML Watcher, you can expect to perform searches driven by industry leading technology and complete suit of AML compliance helping businesses to stay compliant with simple yet effective compliance.
