As our digital landscape continues to grow, businesses in industries like Fintech are exploring new product and service opportunities that make life more convenient and accessible for potential customers. However, with those opportunities come additional ways that bad actors can attempt to commit fraud or money laundering.
Many government agencies like FinCEN are responsible for ensuring financial institutions (FIs) comply with an ever-growing list of regulations designed to protect consumers and improve anti-money laundering (AML) efforts.
The process of maintaining compliance can be overwhelming, but risk and compliance teams can greatly simplify it by implementing Regtech software as a way to relieve risks and compliance pain points.
To help you learn how Regtech compliance can strengthen your risk and compliance efforts, we’ve gathered information on some of its most important capabilities, sorted into the following categories:
Let’s start by covering how Regtech came to be before going into some common use cases and applications. Then we’ll finish by covering how Regtech and compliance go hand-in-hand to increase security.
Keeping pace with new - and changing - regulatory requirements in the financial services industry is extremely challenging. To solve this problem, risk and compliance teams have increasingly turned to Regtech - regulatory technology.
With a heavy focus on regulatory compliance, these tools help teams manage, track, and report on their efforts in the fight against financial crime.
The ability for regulatory compliance solutions to utilize information technology to create more efficient processes has allowed for the enhancement of security across many different industries. This is especially true for companies who must remain committed to protecting their platforms from fraud and money laundering, like those who work with crypto regulations.
Putting the right automation in place allows risk and compliance teams to place their focus on accurately identifying and preventing fraud attempts as they happen while keeping customers and government agencies happy.
Below are some regtech use cases and applications that will help your risk and compliance team manage regulations in your industry:
- Identity Verification and Management: Leverage KYC/KYB procedures to securely onboard users, allowing you to reduce fraudulent accounts - and, in turn, activity. Identity verification software checks the legitimacy of users by comparing different pieces of information. This greatly increases security and helps prevent fraud in its tracks.
- Regulatory Compliance and Change Management: Regtech compliance tools track and flag changes in regulations that are relevant to your risk and compliance procedures, and even know which regulations apply in the jurisdictions you operate in. These solutions are updated regularly to ensure your platform meets all applicable requirements.
- Regulatory Reporting and Case Management: High-quality case management software automates a variety of regulatory reporting tasks, saving you time filing SARs with FinCEN and reports to goAML. This helps your team spend less time and money on managing cases, allowing you to put more resources into fraud prevention.
- Risk Analysis and Management: Regtech software can analyze scenarios using past activity, behavior, and other warning signs to predict possible instances of fraud, and continuously monitor cases with high threat levels using predetermined rules. By implementing this risk management solution, your risk and compliance team can spot the potential for fraud to prevent it from happening.
- Transaction Monitoring and Screening: Transactions are observed in real-time for suspicious activity using rules established by transaction monitoring software. Being able to flag suspicious activity gives your team the power to quickly catch attempted fraud and stop it before it costs you money.
- Anti-Money Laundering Compliance and Detection: AML regulations are confidently met by monitoring for suspicious activity, as determined by AML monitoring solutions. Regtech regulatory reporting is also used to collect the necessary data and information needed to submit suspicious activity reports (SARs) and conduct investigations. This allows your team to better prevent money laundering from occurring and keep government agencies informed (which helps you avoid fines and penalties).
- Fraud Detection and Prevention: New fraud schemes are popping up regularly, making it extremely challenging to keep up. Use a fraud detection and prevention system that can handle various fraud types, including account takeover fraud and ACH Network fraud.
Maintaining compliance can be challenging and requires a lot of manual labor. Engineers can spend hours meeting regulations, and teams may even put more of their energy towards compliance measures than investigating potential instances of fraud or money laundering.
The introduction of Regtech in the financial services industry has improved the accessibility and efficiency with which risk and compliance teams can implement new requirements and maintain credibility in their workflows.
This section covers a few of the key ways Regtech is able to help maintain compliance.
1. Staying up-to-date on regulatory requirements
While your FI might be perfectly compliant one day, it’s entirely possible that you won’t meet regulatory requirements the next. This makes it crucial that your risk and compliance team is staying on top of all Fintech compliance regulations and that the team is able to move quickly to meet them.
Regtech software alerts your team to the newest regulatory requirements that apply to your product, while factoring in the jurisdictions that apply. Paired with a compliance management software, your team can adapt, act quickly, and remain confident that you’re meeting compliance standards.
2. Performing regulatory monitoring & screening
Being able to access regulations and update workflows is one thing, but it’s entirely another to make strategic use of them. As stated, regulations are constantly expanding, so it’s important for neobanks and other growing industries to be prepared for these changes and quickly determine the steps that need to be taken to stay compliant.
Your risk and compliance team can use Regtech to remove guesswork in meeting regulatory standards and determining required changes to your workflow. Compliance-ready tools use KYC/KYB procedures to verify how effectively your workflows are meeting regulatory standards, and they can even accelerate operations by introducing new pre-built rules approved by compliance consultants. This is all available in an easy-to-view dashboard, so your team can implement the minimum requirements and maintain protective measures with confidence.
3. Automated compliance management & reporting
Although Regtech has the ability to greatly reduce the time and effort needed to stay compliant, updates to your product will always be a major undertaking. It’s crucial that risk and compliance teams are able to track their progress towards maintaining compliance and ensure that every action meets the relevant standards. Industries that are responsible for collaborating with law enforcement agencies, such as payment processors, understand the significance of these steps.
In addition to informing you of what needs to be done, Regtech is equipped to track and manage your compliance efforts, so you can see firsthand how well your system updates are meeting new regulatory requirements. It can also follow every action taken within your workflow to ensure it meets compliance measures, and it even uses these measures to ensure all reporting - including SARs - contain all necessary information before being shared with FinCEN, goAML, and more.
Regulatory Technology for Compliance: Final Thoughts
Compliance will always be a big part of operating in the Fintech space, as customers need to know that their financial data is protected. This is why maintaining regulatory requirements cannot be ignored for one second.
Automating these processes by creating rulesets with Regtech software is the most efficient way to stay on top of important requirements and ensure they’re smoothly implemented into your product. If you’re ready to prioritize compliance, Unit21 offers high-quality software solutions that will help keep your organization’s regulatory practices up-to-date.
Schedule a demo to learn how Unit21 can help your team stay compliant - and save time doing it. If you want to know what our customers have to say, check out how Unit21 helped Metal Pay cut investigation times down by 50% and removed the stress from their compliance management.