Since the 2008 financial crisis, regulatory bodies like the Financial Conduct Authority (FCA) and the European Banking Authority (EBA) have continuously expanded financial regulation, leading to a 500% surge in rule changes over the past decade. For financial services firms, navigating this evolving landscape has become increasingly challenging and costly, with over $14 billion in global fines imposed for non-compliance in 2020 alone¹. In response to these mounting pressures, compliance officers are turning their sights to the use of Regulatory Technology or RegTech. Designed specifically to streamline compliance processes, RegTech offers financial services firms a robust and efficient way to manage regulatory requirements, reduce risks, and ensure adherence in a highly dynamic environment.

But, What is RegTech?

RegTech, refers to the application of innovative technologies that streamline and enhance the process of regulatory compliance. RegTech focuses on helping financial institutions and financial market infrastructures meet regulatory requirements in an efficient manner, something traditional methods are no longer able to do. While both FinTech and RegTech are customer-facing, FinTech startups often aim to revolutionise financial services, whereas RegTech tends to be more behind the scenes, focusing on compliance management and risk management.

The primary goal of RegTech is to automate and simplify compliance processes, such as personal account dealing requests, gifts and hospitality request and management of risks through automated risk management systems. RegTech is set apart from manual processes through its agility, speed and scalability. By leveraging RegTech solutions, manual efforts are reduced, compliance costs are lowered, and organisations stay ahead of the regulatory curve.

RegTech has a broad and expanding range of applications. Through automation, several key compliance activities are taken care of, from transaction monitoring and suspicious activity reporting to risk assessments and enhanced data analysis.

The Importance of RegTech

• Financial institutions are required to demonstrate ongoing compliance and leave an audit trail or face financial and criminal penalties, which can thereby lead to irreparable reputation harm. As the regulatory environment becomes increasingly complex, more advanced technology is needed for firms to track and manage Governance, Risk and Compliance (GRC) activities.
  
• Financial regulations have not only grown in number but have become more stringent as competitive pressure has risen with swathes of innovative Financial Technology (FinTech) entrants. This has accelerated the demand for RegTech solutions.
  
• Expanding regulatory obligations are becoming more complex and comprehensive. This dramatically increases the risk of non-compliance, requiring the need for compliance solutions that adapt as the regulatory environment changes.
  
• Traditional compliance methods like manual audits and spreadsheets are no longer sufficient, resulting in a fragmentated data landscape, unreliable management information, and a lack of transparency. RegTech enables the uninhibited growth of financial institutions whilst keeping up with the rapidly changing regulatory landscape.
  
• Automated, scalable RegTech solutions help companies stay ahead when new regulations are introduced. These technologies reduce costs and prepare firms for future regulatory changes, moving from reactive compliance activities, to proactive.

RegTech provides an essential solution to financial services firm – aiding firms to stay compliant while enhancing efficiency. By automating processes and offering real-time risk management, RegTech not only minimises human error but also turns compliance into a strategic advantage, freeing up resources for growth an innovation.

Axiol simplifies compliance with a user-friendly, no-code platform that centralises compliance and risk management, reducing data fragmentation. Its scalable design and seamless integration streamline operations, while drill-down technology helps compliance officers to swiftly address the root causes of potential risks.

Discover how Axiol can transform your approach to compliance by booking a demo today. Visit our website or contact us at info@axiol.com for more information and to explore how we can help you to achieve seamless, efficient regulatory compliance.

¹ Thomson Reuters Cost of Compliance Report