RegTech: How Technology Helps Banks Meet Compliance In Digital Worldputri
More and more financial institutions, including banks, are migrating to digital by adopting financial technology (FinTech), the more complex the challenges and risks to be faced. Ranging from rapid technological innovation, fighting cyber crime and complying with prevailing regulations, forcing banks to be more mobile, agile and flexible than ever.
According to Deloitte’s report, fines for financial regulatory violations over the past ten years have reached more than US$ 300 billion and compliance costs increased each year. Therefore, the need for regulatory compliance solutions is fundamental. Thus, the term regulatory technology or RegTech was born. It refers to the technology developed to provide financial regulatory solutions.
RegTech Vs Traditional solutions
RegTech utilizes artificial intelligence technology to build a more comprehensive and time and cost- effective system of governance, compliance, transaction control and reporting.
The main difference between RegTech solutions and traditional solutions, which rely on spreadsheets, inefficient reporting and curative tendencies, is regtech featuring agility and flexibility. Although traditional solutions can be tailored to company-specific needs and systems, these solutions are often unable to integrate new rules and configurations. RegTech offers agility in studying, supporting and assessing new rules.
In addition, RegTech solutions are generally cloud-based that can store and maintain companies’ data remotely. This mechanism allows companies to cut costs and enable better data control and information security. In essence, RegTech usually has four characteristics: agility, speed, integration and analysis.
RegTech implementation on compliance
One of the benefits of RegTech’s contents is facilitating financial institutions in compliance with anti-money laundering regulations because it provides and develops mechanisms to verify consumer identity. This area is called KYC (Know-Your-Client) or due diligence, which takes a large scope of work in the financial institution’s compliance department and is a precautionary measure of money laundering activities.
Another area of RegTech implementation that can enhance the level of efficiency and effectiveness is the automation of interpretations of regulatory publications. Thus processes, areas and systems affected by changing regulations can be immediately identified.