Regulatory Challenges and Opportunities for Reg Tech in AML

Can advanced Regulatory technology finally put a full stop to money laundering and other financial crimes?  

Yes, It is possible for financial organizations, but they also have to fight against the challenges and hurdles in  RegTech AML. Because it has been observed that Since the technology has evolved, the fintech industry has become a pivotal point for financial crime.

The culprits involved in such financial crimes not only affect companies but also cause significant distress to customers and clients.  The primary reason behind the surge of such crimes in the FinTech industry is the anonymity of online transactions, which further complicates monitoring and detection.

So, what should organizations do? Businesses need to strictly enhance their compliance efforts in a more advance manner, set by regulatory bodies to prevent money laundering and terrorist financing. 

We’ve observed that traditional AML checks alone are insufficient to combat these crimes.

So, businesses are advised to adopt advanced technology (Regulatory Technology) in AML solutions. With this technology in place, Companies have a better chance of tackling these challenges. However, there are still some obstacles in opting for advanced technology that also need to be discussed. 

This blog will explore the challenges institutes may face while adopting RegTech for AML solutions and the benefits and recommendations for enhancing their compliance programs. .

Why are AML regulations important for Businesses?

As technology has evolved and financial institutions have shifted their business operations dramatically to the economic landscape, criminals have also been encouraged to use technology for criminal activities. 

Regulatory bodies have implemented a series of obligations and measures for financial organizations to combat these crimes. Therefore, the regulations contain multiple benefits for businesses. 

However, the importance of AML regulations can be divided into a couple of sections. First and foremost, the compliance program helps companies protect themselves against financial crime. Regulatory bodies strictly monitor organizations’ compliance programs. Another reason your business should comply with regulatory compliance requirements is to avoid financial penalties and fines from the body.

Benefits of RegTech in AML compliance program for businesses  

Firms are always thirsty for financial crime-fighting solutions to retain their reputation while complying with evolving regulatory requirements. 

1. Cost Saving  

Implementing strategies that maximize an organization’s savings has always been a top priority. However, regarding regulations, companies must also implement more efficient monitoring solutions for detecting and reporting financial crimes. RegTech solutions can do this for businesses by reducing the operation time, cost, and resources needed to handle them. Another benefit is that RegTech’s solution helps you update your compliance program according to the regulatory body’s requirements, thus saving you from regulatory bodies’ penalties and fines.  

2. Mitigate the Risk

As regulatory technology is incorporated with cloud computing, data can be analyzed in less time and more efficiently. Biometric recognition features like face, fingerprint, voice, and iris recognition can protect businesses from any risk of breaching regulatory compliance.  The RegTech solution allows the assessment of automated risk in a time-monitoring solution that prevents crime from occurring in the first place. The advanced risk assessment process automatically monitors and detects suspicious transactions, if any, and reports them to the relevant agencies. 

Challenges of RegTech Implementation for busy businesses

1. Legacy System  

Businesses have been using the compliance system for too long, and when we compare it with the Regtech solution, we see that it has many advantages over the other methods.

 However, knowing the facts, the organizations still need to opt for advanced Regtech solutions.   

There are many reasons, but one such reason is that organizations are still working on old patterns, so if they want to implement these in their systems, they will have to modify their existing systems extensively.

Adopting the latest and most advanced technology is the most prominent challenge. 

2. Ever- evolving Regulatory requirements

AML compliance programs have evolved dramatically in the last decade, and businesses must follow the latest regulations. 

There are also dozens of requirements from local and international bodies. So, which compliance program should companies comply with? 

The advanced system has a high initial cost, and if it has to be replaced in the future due to another regulation in place, companies will have to implement another software. 

Therefore, managing such a vast amount of compliance takes a lot of work. Investing in different software solutions for other regulatory bodies’ compliance requirements also needs a lot of money. 

3. Cybersecurity issues  

The technology has revolutionized AML efforts and provided a platform for criminals to commit crimes using the Internet. 

This was witnessed in 2020 when the coronavirus hit the whole world, and organizations shifted towards the Internet for their business operations. 

What did Cirminal? They saw it as an opportunity to attack more cybercrimes with less suspicious tactics. 

What’s the way forward for business?

The business needs to work on the strategy plan, understand what goal it wants to achieve with the Regtech solution, implement an advanced Regtech solution like the one provides, and train its employees. 

An advanced, efficient, and reliable Regtech solution that updates its database every 15 minutes, along with the ever-evolving regulatory compliance program set by different regulatory bodies worldwide.