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How is regtech AML compliance enhancing anti-money laundering programs?


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Regtech is the technology that controls the company’s compliance with AML regulations. It requires close monitoring of customers and transactions for banks and financial companies. Unfortunately, manual processes are very time-consuming and have high error rates.

Regtech uses emerging technologies to automate AML compliance tasks and deliver real-time insights. Tech-driven solutions in things like artificial intelligence, machine learning, and analytics help financial firms become more process-efficient so they can devote more time to high-risk cases and less time to paperwork. Regtech supports companies in the enhancement of AML programs and the fulfillment of all regulatory obligations. 

In this article, let’s discuss in detail how Regtech is strengthening anti-money laundering compliance for banks and financial firms.

Automating Manual RegTech

Most of the processes in banks for RegTech AML compliance are still manual, like customer due diligence checks and transaction monitoring. This leads to mountains of paperwork generation with widespread human errors. RegTech is the automation of such repetitive work. For instance, customer onboarding software carries out verification of digital IDs and data collection in seconds, saving thousands of hours every month.

More than 30% of the monitoring is now being done using APIs and AI-driven anomaly detection through RegTech AML solutions. This leaves compliance officers free to focus on high-risk cases rather than the struggle of the documentation work.

Continuous Monitoring and Screening With Advanced Technology

To meet regtech AML compliance standards, financial institutions need to monitor all activities in real time. Screening thousands of daily transactions is impossible. Regtech is helping here through continuous transaction screening tools that leverage technologies like AI. 

Over 60% of banks now use such advanced regtech AML solutions to monitor all payments. These solutions flag anomalies based on intelligent models and patterns of criminal behavior. They also generate alerts instead of the manual weekly or monthly reviews done earlier. This ensures any suspicious activity is caught much faster.

Risk-Based Approaches Powered by Big Data Analytics

Risk management is at the heart of driving effective AML compliance programs, and RegTech is now underpinning a risk-based approach with big data analytics. These include tools that can aggregate several terabytes of data on customers, transactions, and third parties every single day. 

Advanced algorithms then analyze these massive volumes of information, mapping risk scenarios. 75% of the top banks in the US apply big data analytics driven by RegTech. It allows banks to develop precise risk profiles of their customers and channel resources to high-risk cases. Such a data-centric view of risk was not possible through manual processes alone.

Streamlined Workflows and Improved Efficiencies

Regtech is also easing compliance workflows around antimoney laundering through cross-solution integration. Where such tools do exist, the work of regtech-related tasks like screening, transaction monitoring, and sanctions checks is used to remain standalone. Today, almost 80% of banks use the regtech platform for AML. 

This ensures that all compliance functions link back to the same dashboard. Therefore, over 60% of big firms report reduced duplication and hand-offs. Work allocation becomes automated through such solutions. For example, a regtech screening tool raises a suspicious activity alert, and it is assigned to the right investigator without manual intervention. This improves turnaround time on cases by almost 30%.

Keeping Pace With Changing Regulations

The regulatory landscape of regtech AML keeps changing. Compliance teams find it hard to remain updated. Regtech helps alleviate this issue. Now, most regtech solutions come with built-in regulatory updates. New rules are integrated so as to be implemented for over 50% of top banks. The tools can even notify users of impending changes in advance to ensure compliance programs are always aligned. Regtech has helped organizations adopt reforms in a timely manner by reducing fines from regulatory lapses by almost 40% on average.

Adoption of AI and Machine Learning

Advanced technologies have changed the ways most AML screening and monitoring are done. 75% of large financial institutions utilize AI and machine learning regtech tools for risk mitigation. Artificial intelligence is used to analyze petabytes of real-time transaction data and learn patterns of regular and suspicious behavior. 

Currently, self-learning models powered by Regtech screen over 30 million transactions per month on average. Unlike a manual review, AI can also detect new complex schemes quickly. This helps increase risk detection rates by more than 20%, according to leading compliance experts.

Future Potential of RegTech

  • Some regtech AML compliance solutions do not integrate well with the hosts of the banks’ infrastructure. At this point, APIs and the adoption of the cloud need to be scaled higher.
  • Regtech solutions can only work as well as the data input used.
  • The complex algorithms used in advanced Regtech AML screening tools are still not transparent. Regulators want understandable reasons for alerts.
  • Shortage of data scientists, coders, and compliance experts in regtech solutions and finance. It remains hard to train the talent.

There is tremendous potential for the likes of blockchain analytics, smart contracts for reg reforms, and unstructured data use from emails for surveillance‚ÄĒif technical and operational challenges can be crossed.


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