05 Dec RegTech- A silver bullet for Financial Crime?
Writing in a guest post at FinExtra; Reetu Khosla, the Senior Director of Risk, Compliance, and Onboarding at Pegasystems evaluates the potential of RegTech in combating financial crime and regulatory non-compliance.
RegTech, in theory, helps banks mitigate long term risk and staying compliant to financial regulations much more efficiently than before. However, Khosla opines that there are a few key implementation issues that can make RegTech services complicit in the very problem of regulatory non-compliance that they are trying to solve.
Firstly, it is difficult for banks to identify which RegTech solution is the best due to the sheer volume of RegTech companies that are entering the market. International banks in particular are looking for solutions that can scale — posing a challenge to junior RegTech startups who have not gotten off the ground.
Secondly, ill-fitting RegTech solutions poses the danger of creating tech silos and skyrocketing maintenance costs — especially if they are not implemented as part of a broader lifecycle management technology that digitizes the front to back office. This risk is particularly evident with inflexible, hard-coded applications of RegTech which not only complicate but also fail to integrate with existing technological processes in the company.
Khosla ends her opinion piece by suggesting a few vital points that RegTech companies need to be mindful of in order to be truly relevant to large banks. This includes:
1) Constructing RegTech solutions with inherently flexible architecture that allows for rapid uptake of new regulations;
2) Allowing integration of robotics and AI capabilities to automate and centralize client onboarding functions, and;
3) Incorporating scalability as a prime feature from the outset.