RegTech: essential for regulatory compliance

A few days ago I read that the digital transformation requires rethinking the entire business model and a redesign that covers from the front office until back office, including risk management surrounding the company and regulatory compliance[1]. There is no doubt that digital transformation is changing the way companies are managed.

In a world where corporate reputation is a crucial asset, regulatory compliance is key. Lately, there is much talk about RegTech and how it is revolutionizing, particularly, the financial industry.

Now, what is RegTech or Regulatory Technology? It is about the application of technology to optimize compliance work -compliance- and business risk management. This tool allows mechanisms and solutions to be developed so that companies can comply with regulatory requirements more easily and less expensively.

The importance of RegTech is in the benefits it provides, so it is possible that in the short term it allows reducing compliance costs by simplifying and standardizing procedures. In addition, it gives the company greater flexibility to adapt to regulatory changes. Among the long-term benefits are providing positive experiences to consumers and promoting greater confidence in the entity's governance, as well as the transparency with which it works.

RegTech solutions take advantage of technologies such as cloud computing (cloud storage), machine learning (branch of artificial intelligence that creates automatically learning system), blockchain y big data analytics (mass data analysis) to help companies reduce physical infrastructure and automate manual processes, making them more efficient to comply with regulatory controls.[2]

An example of the applicability of RegTech, in the financial industry, is the use of technologies such as machine learning y big data analytics to prevent the risks of money laundering and terrorist financing (LA / FT). Through big data analytics it is possible to analyze and determine among a massive database which operations would qualify as unusual or suspicious, thus activating alerts that allow these operations to be tracked. Additionally, using machine learning You can evaluate these preselected operations and detect patterns of conduct that offer greater certainty to report to the competent authority (in the Peruvian case to the FIU-Peru) the identified suspicious operations.

The take-off of RegTech is almost a fact, and a clear example of this is Rabobank, a Netherlands-based bank, which has reinforced its compliance work by implementing a technology-based risk management solution (Accuity's Firco Trade Compliance). It is a tool that has optimized compliance controls, by redistributing the workload of the bank's compliance team more efficiently.[3] This has allowed it to project greater confidence in the market and fulfill its regulatory obligations as a banking entity in the various countries in which it operates.

The investment in RegTech is on the rise as it is considered a promising tool, which can be evidenced in the following graph:

Companies that work with RegTech solutions generally offer software to automate compliance with regulatory requirements, as well as optimize the cost and time involved in updating or modifying the regulatory entity. This tool adapts to the needs of the company and the regulation that applies regardless of the country in which it operates. In this way, a personalized and rigorous solution is provided to fully comply with all regulatory requirements.

It is clear that RegTech is the future, as it allows compliance with constantly changing regulations and at the same time reduces compliance costs for companies. Its applicability is quite diverse, it can optimize areas such as: regulatory compliance in general, control and management of customer identity (know your customer - KYC), risk control, supervisor reporting activities and operations monitoring.[4]

Finally, another concept that has also begun to be treated a lot in the sphere of financial authorities is SupTech (Supervisory Technology), which is about the application of technologies that automate and streamline processes within regulatory authorities. With this, the supervision work can be optimized and greater efficiencies generated. We will be referring to this interesting concept in a future installment.

[1] KPMG A revolution is coming, Embracing the challenge of the new RegTech era. 2019

[2] Deloitte Regtech, Side B of innovation. 2016

[3] See:

[4] Toronto Center FinTech, RegTech and SupTech: What They Mean for Financial Supervision. 2017

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Alejandra Huachaca
Lawyer from Universidad del Pacífico (UP) and Director of Finance at Lawgic Tec. She currently works at EY LAW Peru in the area of ​​Financial Regulation and FinTech. He has studies abroad at the Institut d'études politiques de Paris (Sciences Po). Former member of the FORSETI Law Review. Email:


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