Over at Lexology.com I came across a good article by King & Wood Mallesons on the 10 things you need to know about regtech and the way it can transform compliance and client relationships. As well as breaking down regtech into these ten points they have provided downloadable BriefSheet in PDF.
So what should we know?
1. Regulatory technology or “regtech” is…
Technology that helps people comply with their regulatory obligations or facilitates regulators to execute their mandates. Regtech encompasses a range of technologies utilising algorithms, data analytics and machine learning, with an endless range of applications.
2. Regulation is costly to comply with — and to supervise.
Compliance costs have increased significantly in recent years. In 2013 one bank hired 4,000 additional compliance staff and in 2014 another bank spent an extra €1.3bn on compliance. Regulators are stretched to monitor compliance, with more regulation to supervise and more data to interpret and understand. Well-designed regtech can ease these burdens.
3. Regtech tools can detect reportable matters, predict problems…
Regtech enables the analysis of large volumes of data to extend to both real-time surveillance and the predictive detection of suspicious matters or significant breaches of financial services laws.
4. …and self-adjust over time.
Machine learning can help compliance algorithms become more powerful over time so that instead of relying on pre-programmed indicators of non-compliant behaviour, the algorithm uses statistical analysis to self-adjust, picking out the truest predictors of risk (rather than the most obvious ones). For example, the algorithm could find that loan repayments made by a third party are a truer indicator of money laundering than repayments of unusually high amounts.
Read the full article here.