Connecting’s the dots in RegTech | 2023 #1

Weekly news up to Tuesday,11th of July 2023

Jul 11, 2023

Good morning RegTech community,

Buckle up and prepare for an expedition into this week’s world of RegTech!

In this weekly newsletter, we'll be your intrepid guides, leading you through the winding paths of compliance, risk management, and all things regulatory. We'll bring you the latest trends, emerging technologies, regulatory updates, and inspiring success stories from the pioneers who are reshaping the industry.

This week’s takeaway:

UK Government proposes models for AML Reform

Why this matters:

The proposed amendments would definitely affect fintech and thereby instantly effecting the RegTech landscape.

Now on to the list of Regtech news we listed for you this week!

REPORT

The Association for Financial Markets in Europe released a report this week on the outstanding concerns within the Corporate Sustainability Due Diligence Directive (CS3D).

The CS3D is intended to act as a tool for financial institutions to identify risks, engage with clients, and provide a clear legal framework to ensure due diligence on human rights, environmental impacts, and sustainable initiatives.

The AFME outlined where the CS3D falls short of its objectives and could keep financial institutions from achieving the objective of the directive.

Read the full Finextra article here.

👀 NEWS HIGHLIGHT

BBVA announced the launch of a unit to further strengthen the bank’s financial crime prevention structure.

The bank states that technology and data will play a key role in this new unit. BBVA also notes the use of advanced analytical models and artificial intelligence, as well deepening their knowledge of the transaction behaviour of their customers. The bank has opted for a single, vertical responsibility for their preventative operating model.

😎 SPONSORED CONTENT

📊 INFOGRAPHIC

Regtech Rising

Need help navigating the quickly evolving regtech market? Get some clarity here.

📰 ARTICLE

Mitigating Money Laundering Risks in the Rapidly Expanding Payment Space

In 2023 the total transaction value of digital payments is estimated to reach USD 9.46 trillion, up from USD 5.44 trillion in 2020. Such exponential growth is driven by unprecedented technological advancements and historic changes in people’s behaviours, especially in the course of the recent pandemic.

Read the full Finextra article by Claus Christensen here.

Will AI take over regulation and compliance in the future?

AI has long been touted as the future for many industries, and the recent explosion of GenAI platform ChatGPT may have revealed that that future is now here.

A key area ripe for disruption and innovation is that of regulation and compliance. As a market, it has long been seen to involve cumbersome and slow processes that impact both efficiency and the bottom line. A key question many in the RegTech industry have been asking is: will AI take over regulation and compliance in the future?

Read the full Fintech Global article here.

Regtech and Privacy: Balancing Data Protection and Regulatory Compliance

Businesses and organizations are becoming increasingly dependent on technology to handle and retain massive volumes of data. While this has provided various advantages and opportunities, it has also raised worries about data privacy and the need for regulatory compliance.

This is where regtech comes in, a developing sector that tries to help enterprises navigate the complicated web of regulatory mandates while protecting data privacy. This article will look at the critical relationship between regtech, data security, and regulatory compliance.

Read the full Finance Magnates article here.

💡INSIGHTS

Five pillars for managing financial-crime risks.

The success of digital payments channels has challenged the industry to manage the associated nonfinancial risks—in particular, financial-crime risk.

PSPs are in a good position to manage these risks effectively, as they can build on the prior experience of banks, adopting positive lessons and avoiding practices that have not worked.

In shaping their strategy to fight financial crime, PSPs can consider five core pillars (see picture below).

Fintech and Regtech: A Tale of Two Techs

Wondering about the relationship between fintech and regtech, and the future of both? Get our insights here.

The term “fintech” is ubiquitous in financial services. Fintech represents a paradigm shift within the industry. Financial services firms are no longer relationship-driven; they are data-driven.

🧐 ANALYSIS

Challenges in Implementing Traditional KYC and CDD on Blockchain Technology:

One of the primary requirements imposed on crypto entities by these new regulations is the implementation of robust AML programs.

From rules to models: improving AML decision-making with machine learning.

Banking Circle data analysts reveal why embracing machine learning opens new opportunities for collaboration within banking and finance that simply do not exist when using traditional rules.

Banks and other financial institutions face thousands of decision problems every day. Some are simple, and decisions can be made quickly and efficiently by a single person or handled through automation. Others are on a different scale and require much more effort to be solved properly.

NOW, ON TO THE SUMMARY OF LAST WEEK'S NEWS

🔦 REGTECH HIGHLIGHTS

⭐️ Unit21 is excited to share its $45 million Series C funding led by Tiger Global and South Park Commons in 2022.

⭐️ Revolutionising risk and compliance: How large language models combat financial crimes.

⭐️ Dismantling of an encrypted network sends shockwaves through organised crime groups across Europe.

🌎 REGIONAL HIGHLIGHTS

UK 🇬🇧

Mastercard Inc. is selling a new artificial intelligence-powered tool that helps banks more effectively spot if their customers are trying to send money to fraudsters. Nine of the UK’s biggest banks, including Lloyds Banking Group Plc, Natwest Group Plc and Bank of Scotland Plc, have signed up to use the Consumer Fraud Risk system.

The Chancellor of the Exchequer, Jeremy Hunt, has been denied an account with online bank Monzo, it’s been claimed, amid a row about anti-money laundering rules.

FarageGate shows the ‘Trusted KYC Data Sharing’ project must be stopped.

Reforming anti-money laundering and counter-terrorism financing supervision. HM Treasury has published a consultation on reform of the anti-money laundering and counter-terrorism financing (AML/CTF) supervisory system, in line with a commitment in the Economic Crime Plan 2023-6.

EUROPE 🇪🇺

BBVA announced the launch of a unit to further strengthen the bank’s financial crime prevention structure.

Check out the outcomes of the FATF Plenary meeting, which took place in Paris between 21-23 June 2023 with delegates from over 200 jurisdictions from the Global Network and observers from international organizations.

USA 🇺🇸

The Securities and Exchange Commission announced charges against Broward County, Florida resident Sanjay Singh and his trucking and logistics company, Royal Bengal Logistics Inc., with fraudulently raising approximately $112 million from as many as 1,500 investors through an unregistered securities offering that primarily targeted Haitian-Americans.

Twitter's latest meltdown is being blamed on bots. They said it took "extreme measures" to remove bots and ensure authenticity. It's a problem that might go away if Twitter verified all of its users.