A slim majority (54%) of global compliance and anti-money laundering (AML) executives plan to step up investment in regulatory technology (regtech) in the coming years as a result of an anticipated increase in their workload, according to a recent report from New York-based Dow Jones & Co. Inc. and Belgium-based SWIFT, a provider of compliance solutions.
Of the more than 500 risk executives surveyed for the report, 69% said that increased regulatory expectations represent the greatest challenge, the report finds. Specifically, many cite the U.S. Treasury Department's customer due-diligence rule, which requires financial services institutions to unmask the people behind shell companies, as weighing on their workload.
By investing more in regtech, financial services institutions may be hoping to get ahead of the curve — or at least keep pace — with the changing regulatory environment. In fact, the report finds that 59% of survey participants said that technology has helped them meet regulatory obligations, particularly for AML, know-your-client and sanctions requirements.
Regtech, for example, has the potential to reduce the frequency of false-positive alerts, which consumes a lot of resources, triggered in the client-screening process.
Still, many survey participants cited having outdated technology as a sore point, with 48% saying that it's one of the main challenges they face.
"Technology can play a key role in providing new and enhanced capabilities that strike a balance between preventing criminal activity, meeting regulatory requirements and containing costs," says Paul Taylor, director of compliance services of SWIFT, in a statement. "The most sophisticated financial crime compliance solutions help mitigate risks and boost efficiency in several ways, from managing workloads to automating payments monitoring and reducing false positives, enabling compliance teams to focus on more strategic risk policy and financial crime prevention work."
Apart from citing a lack of significant upgrades to technology, survey participants said that they also face a shortage in staff skilled in tackling the threats posed by the current geopolitical climate, in which data breaches have become increasingly common.
"The shifting geopolitical environment has created an additional layer of complexity for tackling financial crime around the world," says Joel Lange, managing director of Dow Jones' risk and compliance division, in a statement. "As the political and economic landscape continues to impact international trade, data protection, and tax co-operation, the need for greater transparency and more effective information sharing across borders is more important than ever."
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