In 2021, Nelly Marion Evans Risco “The Nun” held 1 million USD worth of illicit funds in a Swiss bank account that was intended to fund terrorist activities carried out by The Shining Paths, a terrorist organisation that was responsible for approximately 60,000 deaths. Fortunately, Peruvian authorities were able to confiscate the assets before they could reach them.
Here, the operation’s success was largely attributed to the due diligence taken by various organisations through comprehensive regulatory and compliance checks. Today, regulatory technology (RegTech) makes it possible to speed up the investigation.
Understanding of the RegTech Industry
RegTech concerns the use of technology to manage regulatory processes in the financial industry. The purpose is to provide compliance, monitoring, and reporting functions. To add, it makes use of automation to resolve issues that surface from an economy driven by technology. These issues include breach of data, money laundering, terrorism funding and other fraudulent activities which have increased because of technological advancements experienced globally.
As such, RegTech can lower a company’s risk of falling victim to such illegal acts. For instance, it aids a company’s compliance department by providing information on online transactions suspected of masking money laundering activities. In contrast, traditional compliance departments are unlikely to be notified of underground marketplaces online.
Specifically, RegTech does so through cloud computing technologies and Software-as-a-Service (SaaS) which assists companies in adhering to compliance regulations more efficiently and cost-effectively. These technologies can track online transactions in real time and spot issues or abnormalities in the digital world. If any anomaly is found, it is reported to the financial institution which can investigate and determine whether illegal activities are taking place. Thereafter, if fraudulent activities are deemed to be taking place, institutions can detect the threat early on and reduce the risks or costs associated with lost assets and data breaches.
The Applicability of RegTech Solutions
Referencing the case of “The Nun”, the large sum of illicit funds would have been likely split into smaller amounts and transferred via internet banking in order to avoid detection. As a result, the frequency of transfers would be alarmingly higher. In this case, RegTech can detect such abnormality instantaneously and flagging out the account of suspicious high-risk individuals for further investigation.
The Future of RegTech
In fact, clients and investors alike have recognised its importance by pouring funds into the sector. With its continued success in recent years, the RegTech industry is expected to reach a market size of 28.33 billion USD by 2027. This points towards a compound annual growth rate of 22.3%, a stark increment from the market size worth 5.46 billion USD in 2019.
Apart from thriving financially, the RegTech industry is set to become even more relevant in the future. In particular, the COVID-19 pandemic has caused more businesses to create a greater online presence, which calls for more digitalised compliance processes which traditional compliance methods cannot achieve. Regulators have called for stricter compliance regulations, which would require businesses to increase adoptions of RegTech. Therefore, it is highly likely that the industry will become an essential part of all businesses in the long run.
Regtank and RegTech
Operating under the RegTech umbrella, Regtank offers a full-suite SaaS compliance solution which includes digital onboarding, transaction monitoring, Anti-money laundering (AML) and Know-your-customer (KYC) screenings. We aim to provide holistic protection against fraudulent crimes for businesses and organisations.
Contact us at firstname.lastname@example.org today for a complimentary demonstration.