The increase in complexity of legal regulations paves the way for the technologies customized for this field.
What is RegTech?
Regulatory Technologies (RegTech) defines technologies developed to manage increasingly complex compliance processes. The increase in sanctions and complexity of compliance operations induced the need for specialized technologies. RegTech emerged to meet these needs and support users to monitor and control compliance processes. The financial sector can be assumed as the main sector of RegTech since their compliance processes are too critical, and they are fined severely in case of violation. The systems provide information through flowing internal and external data, and it is aimed to detect, report, and prevent all activities that do not comply with the regulations.
FinTech Vs. RegTech
FinTech is a rapidly developing and growing field in recent years, and it defines technologies that enhance the financial processes. While FinTech solutions mainly focus on the customer experience, RegTech focuses on the management of the legal processes. Initially, RegTech solutions are accepted within FinTech. However, since the legal regulations against banks and financial institutions are getting more critical and necessities detailed investigation, a new field has emerged.
Financial Sector and RegTech
RegTech systems are built to detect suspicious activities to reduce risks by using big data analytics and machine learning technologies. These systems provide solutions for many operations such as Know Your Customer (KYC), Anti-Money Laundering (AML), sanction list scanning, and risk management processes for the financial sector. In addition to these operations, analysis, and reporting of flowing transaction data to detect problems in digital traffics is also a critical function of RegTech. Each country and even each sector has its own audit and sanction process, and the fines may usually be severe. Compliance violation fines trigger reputational loss too. The costs of complying with legal regulations, especially for financial institutions, are constantly increasing. On the other hand, if companies do not invest in advanced solutions, financial losses may be much higher than this investment when the amount of the fines is considered. Hence, having an advanced solution is inevitable for all financial sectors subject to authority sanctions, such as banking, online payment platforms, and crypto money exchanges. Properly built systems support these companies to obtain a 360-degree view of their customers and quick detection of illicit activities.
The Power of RegTech for Fighting Financial Crimes
As we always point out, technological developments bring new financial crime techniques. Financial crimes such as money laundering, financing of terrorism, and sanction list violations are not only the companies’ problem but also socially minded. RegTech solutions protect financial institutions from such financial crimes when they are designed to detect suspicious activities.
Datactive RegTech Solution has been developed to meet all the compliance needs of the financial sector through a single system. Request a demo to discover!