RegTech: an AML/CFT compliance


Even to an outsider, the term ‘RegTech’ is gaining noteworthy exposure and momentum throughout the compliance industry. Government regulators responsible for monitoring and enforcement have increased their interest in the FinTech/RegTech industries. AUSTRAC, the supervisor of anti-money laundering for Australia, the Financial Conduct Authority – the regulator in the UK, and the Monetary Authority of Singapore have all opened their doors to bring a sand-box environment of FinTech/RegTech start-ups and businesses together.

RegTech is increasingly being recognised as the modern day practice of managing compliance laws, such as financial market licensing requirements and oversight for compliance of laws linked to Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT). Basically, RegTech is presenting modern solutions that address a growing number of compliance commitments and controls.

The fast development of RegTech notably coincides with an increase in complex AML/CFT compliance laws. These AML/CFT laws require showing the implementation, such as a written record of a business risk assessment for evaluating ML/FT risks. In doing so, businesses typically identify the very nature of their business activities that present greater exposure, and for the purpose of developing policies and procedures – require greater commitment of resources and the strengthening of controls. For small and medium sized businesses, this is new territory where they have direct and indirect oversight by a government body, with the potential of enforcement action and significantly large regulatory fines for non-compliance. It is here where RegTech really comes to the forefront as a potential solution.

The solutions which RegTech advocate includes the development of a more effective and efficient regime, improved delivery of regulatory requirements over existing capabilities and the automation of 70-90% of manual processes. When businesses are grappling with an abundance of regulatory requirements, either general to the country they are trading in, or specific to the very nature of their business activities – RegTech can take complex requirements and streamline them into day-to-day business activities.

Not only is human resourcing significantly reduced, so too are the operating costs. With RegTech offered as a Software-as-a-Solution, businesses do not need to invest in hardware before becoming operational. A subscription to a cloud-based computing solution is all that is needed to start complying with regulatory requirements.

ABOUT THE AUTHOR: Dr Nicholas Gilmour is an Executive Consultant at AML360 and frequent author on various topics relating to AML/CFT compliance – including the use of RegTech and SupTech solutions to support industry and national supervisory authorities. Having worked with businesses around the world, Nicholas is passionate about strengthening AML/CFT controls to increase safety and wellbeing for all. In March 2019 he moderated a group discussion at the Central Banking FinTech and RegTech Global Supervisory Summit in London.