How The Latest RegTech Helps Finance Stay Compliant

Regulatory technology has offered struggling firms innovative ways of keeping up with compliance obligations. Discover how the latest RegTech helps finance stay compliant.
09.05.23 Charles Griffiths

The FCA handed out £215,834,156 in fines in 2022. These included a £107 million fine to Santander and a £29.7 million fine to TSB.

Increasingly strict regulations and compliance obligations mean financial firms must take care when conducting their operations. Reports need to be compiled and recorded accurately, data must be stored securely and deleted after a certain amount of time, and networks need to be secured against an ever-changing cyber threat landscape.

Doing this manually is nearly impossible with the amount of data modern finance firms process and constantly changing regulations. ‘RegTech’ has become a popular solution for ever-increasing FCA and GDPR compliance demands in the finance sector.

How does RegTech help finance firms stay compliant?

RegTech uses artificial intelligence, big data and emerging financial technologies like blockchain to reduce risk, ensure compliance and protect consumers. The global RegTech market is expected to be worth $28.33 billion by 2027, growing at a Compound Annual Growth Rate (CAGR) rate of 22.3% between 2020-2027.

Its benefits are evident for firms, helping them keep track of changing regulations and ensuring that their processes and services are compliant. RegTech software also benefits consumers, who can be sure their data is secure and can access online services safely.

A good example of RegTech is customer verification software. As part of the ‘Know Your Customer’ (KYC) requirements, banks must verify customers using ID, proof of address and any other required information to ensure that person isn’t attempting fraud or money laundering. RegTech automates these checks so that customers can quickly open accounts online, and the bank can be sure that no illegal activity is taking place.

RegTech can either be developed in-house to supplement internal systems, bought from a vendor, or entirely managed by an external partner. RegTech is popular; one survey found 95% of respondents were satisfied with the new technology. The main benefits cited were improved compliance and increased efficiency.

We’ve listed 5 areas where RegTech solutions help firms with their regulatory obligations:

Regulatory Compliance

The Financial Services Regulatory Initiatives Forum publishes a document twice a year that sets out impending regulatory changes or additional measures that firms need to prepare for.

It’s no longer feasible to effectively keep up with these changes without assistance. Larger firms may operate in multiple areas of the sector and therefore need to keep track of differing regulations. Smaller firms may not have the manpower to implement changes in time.

Once the regulation has been changed or implemented, any firm that is found to violate it could face an investigation and fine. RegTech helps firms stay abreast of any changes and ensures that their products or services are compliant with the latest regulations.


Accurate reporting is a requirement for regulatory bodies. Getting those reports wrong can be costly, and as such firms spend a lot of time and money making sure every detail is correct. A 2020 survey of senior financial services leaders found that 29% estimated that they spend more than 5% of their firm’s overall revenue on compliance, including reporting.

RegTech helps with data compilation and analysis, drawing relevant information from across the firm and presenting it in accurate formats. Real-time reporting and big data analytics ensure that firms have all the information they need to stay on top of compliance.

Using specialised technology to generate reports saves time and free up operational resources. In addition, better access to, and visibility of, data can help firms create better strategies for investments, service provision and growth.

Risk Management

The recent Silicon Valley Bank collapse highlights the importance of risk management. Firms need to be able to identify their own risk factors and those of their customers.

Specialised software can help firms automate compliance processes such as KYC (Know Your Customer) checks, and AML (Anti-Money Laundering) screenings. Automating these processes reduces the risk of human error and improves the speed and accuracy of compliance efforts. RegTech can also help firms to identify potential risks more quickly and accurately, enabling them to take proactive measures to mitigate risk.

RegTech enhances data analytics capabilities, giving firms deeper insights from large amounts of data and helping them identify potential risks. Machine learning algorithms can be used to analyse patterns in transaction data and identify anomalies that may indicate fraudulent or suspicious activity. Firms can detect potential risks more quickly and accurately, and take action before an issue arises. RegTech can also help firms generate more accurate and timely reports, improving transparency and enabling firms to better plan and implement risk mitigation strategies.

digital transformation for legal firms

Identity Management

The finance sector is slowly modernising, with many services now available online. Customers can now open bank accounts, make trades and check their finances from their phones. While this is convenient for customers, firms need to ensure that those services are secure and that all data is protected.

Identity management involves several processes, including Know Your Customer (KYC) checks, which require firms to verify the identity of customers using government-issued identification documents such as passports or driver’s licences. Firms may also use biometric technologies such as facial recognition or fingerprint scanning to verify the identity of customers more accurately and quickly.

In banks, these checks used to have to be carried out in person, requiring staff to make copies of ID and then send it for verification in a process that could take several days. However, advancements in technology mean that these checks can be completed in minutes, ensuring security and convenience.

Transaction Monitoring

Transaction monitoring is essential for financial institutions to identify and prevent illegal financial activities such as money laundering, terrorist financing and fraud. It involves reviewing and analysing transactions within the institution’s accounts and detecting any suspicious or abnormal behaviour.

The process involves analysing various data sources, such as transaction history, customer information, and external data sources, to establish a baseline of normal behaviour and identify any deviations that may indicate illicit activity. Once a suspicious transaction is identified, it is flagged for further investigation or reported to regulatory authorities.

AI and machine learning innovations can largely automate these complicated processes. Advanced systems scan and analyse huge amounts of data from multiple streams, reducing the risk of financial crime. Firms can better track the movement of money and ensure they remain compliant.

RegTech companies that are helping the finance sector:

We’ve listed some examples of RegTech companies that are helping firms stay compliant and competitive:

Trapets: Trapets is a compliance and surveillance company for the finance sector. Its end-to-end compliance platform helps firms with Anti-Money Laundering (AML), Counter Terrorist Financing, Know Your Customer Screening (KYC), Customer Onboarding and Ongoing Due Diligence, and Anti Market Abuse.

Onfido: Onfido uses AI and machine learning to automate identity verification processes, helping businesses comply with KYC and AML regulations.

ComplyAdvantage: ComplyAdvantage uses AI and machine learning to provide real-time financial crime screening, helping businesses comply with sanctions, AML, and other regulatory requirements. Its ComplyData technology helps reduce false positives by 70% and shortens the onboarding cycle time by 50%.

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