How can RegTech help streamline AML compliance?

To keep pace with the ever-evolving regulatory framework around anti-money laundering and the emerging sophisticated ways developed by financial criminals, the AML measures call for advanced technology and tools. This new tech-based solution growing in the market, specifically focusing on anti-money laundering or anti-financial crime regimes, is popularly known as Regulatory Technology or RegTech.

Let us understand what RegTech is and how RegTech can help the regulated entities streamline their AML Compliance.

What is RegTech?

As mentioned above, RegTech is an abbreviation for regulatory technology, a solution developed using innovative technology to facilitate legal or regulatory compliance with the applicable regulations. RegTech brings in the power of emerging technologies like artificial intelligence and machine learning, data analytics, etc., modernizing the compliance function of the business with optimum automation.

The acceptance of RegTech solutions has grown tremendously over the years with increasing complexities of regulatory obligations and the need to align business operations with compliance processes.

RegTech enables the processing of huge data sets, managing compliance activities efficiently and on a timely basis with effective utilisation of resources and informed decision-making. RegTech solution includes customer identity verification functionality, gathering and monitoring the financial transactions, assessing and managing the customer and business risk, regulatory reporting and compliance management solution, etc.

Regulated entities must consider implementing an appropriate RegTech solution that complements the AML compliance function, reducing the risk of financial crime exploitation and regulatory non-compliance.

How can RegTech foster the AML Compliance Program?

In current times, where the financial crimes around misuse of technology and AML compliance obligations are growing, RegTech solutions come as a saviour with customized tools and software to address the financial crime risk and the challenges around AML compliance.

Following are the AML-compliant aspects where automation and RegTech support cannot be overlooked:

Customer Due Diligence (CDD) is an essential element of AML compliance, involving identifying the customer screening and assessing the risk posed by the customer. Here, RegTech solutions can be deployed for identity verification, screening the customer for sanctions, Politically Exposed Person (PEP) list and adverse media and determining the customer’s risk profiling based on the collected customer details. Moreover, this can also be integrated with the entity’s existing systems, like the Customer Relationship Management tool, automating the CDD process in real time.

Ongoing transaction monitoring is another crucial element of AML compliance, aimed at monitoring customer activities and financial transactions to identify red flags. With countless transactions taking place through the entity per day, manually monitoring the transactions and detecting unusual activities is challenging. The task of transaction monitoring becomes effective and efficient with RegTech, which can analyse vast volumes of data, including unstructured data, determine the patterns and predict the transactions to flag potential risks or anomalies. This enables the regulated entities to address the alerts or warning signals immediately and make necessary reports to the Financial Intelligence Unit on a timely basis.

Not limited to customer or transaction-related activities, RegTech solutions do provide functionalities to integrate these two into AML Enterprise-Wide Risk Assessment (EWRA), enabling the regulated entity to identify and manage the overall business exposure to money laundering and terrorist financing. With EWRA being updated on a real-time basis with every customer onboarded and transaction executed, the entity can stay on top of the entity’s ML/FT risk and promptly modify or upgrade the controls to mitigate the assessed risk.

Further, some RegTech solutions extend this transaction monitoring system to support automated reporting of the Suspicious Transaction Reports (STRs) of any other regulatory report with the authorities, using API. This feature ensures the quality and comprehensiveness of the reports submitted to the FIU or other supervisory bodies.

RegTech offers advanced technologies to regulated entities to simplify AML efforts, enhancing the efficiency and accuracy of overall AML compliance.

What are the benefits of using RegTech for AML Compliance?

The following are the key benefits that a RegTech solution can offer to regulated entities with its powerful tools and automation:

Improved efficiency of the AML Compliance Processes

With automation and the capability to churn a large volume of data in a few seconds, the RegTech solution empowers the AML compliance Program of the regulated entity by reducing the time and effort for completing the AML compliance activities. RegTech automates the manual tasks, bringing in quality, speed and accuracy in AML compliance.

With proper tools and technologies, the regulated entities can:

  • automate the Customer Due Diligence process, making the customer onboarding process smooth while ensuring that no suspected financial criminal slip in the business operations,
  • process a large number of transactional data, monitoring the business activities in real-time to draw the trends and suspicious patterns and promptly generate an alert for cases warranting further investigation.

This automation reduces manual intervention, with immediate detection of risk indicators and elimination of human error, increasing the efficiency of the AML compliance function.

RegTech enables regulated entities to combine human brains and technological intelligence to run the AML compliance show, allowing optimal use of resources, adhering to the regulatory regime, and creating a robust shield against financial criminals.

Enhanced Accuracy and Reduced Non-Compliance Risk

RegTech solutions offer the power of artificial intelligence and data analytics capabilities that improve the accuracy of compliance tasks. With inherent characteristics of adapting and learning continuously, RegTech monitors the transaction, predicts the trends, and reduces the false positive, enabling the AML compliance team to invest more time investigating the genuine risk vulnerability.

With real-time triggers and alerts for compliance and potential red flags, the regulated entities can promptly handle and address suspicious transactions. This will help the entities prevent money laundering and terrorism financing while complying with the applicable provisions of the AML laws.

How can RegTech help streamline AML compliance

Improved brand image and confidence

Deploying RegTech solutions demonstrates the entity’s commitment to fighting financial crime and safeguarding the economy. This boosts the entity’s reputation in the market, building trust and confidence in the business’s customers, stakeholders, and regulatory authorities.

RegTech gives wings to the business to fly high without worrying about the chain of compliance pulling it down, enhancing the effectiveness and efficiency of the AML compliance framework.

What are the best practices for implementing RegTech solutions?

For the successful implementation of an appropriate RegTech solution, it is necessary to consider the following factors and adopt the best practices to make the most out of the investment in AML tools and systems:

  • Before choosing and deploying the RegTech solution, the AML compliance requirements must be mapped as per applicable laws (the Prevention of Money Laundering Act, 2002 (PMLA) or the IFSCA (AML, CFT, and KYC) Guidelines, 2022) and the industry in which the entity operates. Preparing a formal Business Requirements Document specifying the AML compliance obligations and the corresponding features and functionalities needed to meet these obligations is suggested.
  • As a lot of sensitive data is input into the solution, it is essential to evaluate its security and data privacy standards. The regulated entities must ensure that RegTech complies with data privacy requirements and adequate cybersecurity measures to avoid data breaches and maintain the entity’s reputation and customers’ confidence.
  • During the pre-implementation phase, the RegTech solution must be tested rigorously using sample data to train and fine-tune the technologies (like Artificial Intelligence or Money Learning) used in the solution. This will reduce the number of false positive alerts, saving time on unnecessary investigations.
  • RegTech must be checked for its compatibility with the existing systems of the entity. Integration between the two systems is crucial for ensuring the seamless flow of comprehensive and accurate data to stay AML compliant and detect the red flags at the earliest. The regulated entity must upgrade the legacy systems to integrate the required technologies.
  • The benefits of RegTech cannot be achieved in its true sense unless the compliance team of the entity understands and accepts the solution. The regulated entity must invest time and resources in imparting necessary RegTech training to the team on how the solution can streamline the AML compliance function.

With a systematic approach, the regulated entities can identify the apt RegTech solution and unlock its full potential to augment the AML compliance framework.

How can AML India assist you in leveraging the benefit of RegTech to enhance AML Compliance?

With growing AML compliance requirements and the need to strike a balance between compliance and business activities, the value of RegTech cannot be discounted. With years of experience and understanding of AML compliance activities, AML India can assist the regulated entities subject to PMLA and IFSCA AML Guidelines, identify the right RegTech solution and implement the same spotlessly. AML India can also handhold during the implementation and post-implementation phase, ensuring you stay regulatory compliant and safeguard your business against financial crime vulnerabilities.

With careful implementation of the RegTech solution, let’s gear up for the impactful fight against money laundering and terrorism financing.

About the Author

Jyoti Maheshwari


Jyoti is a Chartered Accountant and Certified Anti-Money Laundering Specialist (CAMS) with over 7 years of experience in regulatory compliance, policymaking, risk management, RegTech solution consultancy, and implementation. With an understanding of the different jurisdictional AML regulations, including PMLA, 2002 and IFSCA (AML, CFT, and KYC) Guidelines, has been closely working with clients to implement Anti-Money Laundering measures, including conducting Enterprise-Wide Risk Assessments, imparting AML training, etc.