A new report from the International Institute of Finance (IIF) calls for reforms designed to allow the financial services sector to fully exploit the potential of regulatory technology, or “regtech,” to help curb compliance costs and enhance industry efficiency.
The IIF’s report examines the potential for new technologies — such as machine learning, robotics, biometrics and distributed ledger technology (DLT) — to improve the anti-money laundering (AML) and anti-fraud capabilities of financial services firms. The report also makes several recommendations to ease the adoption of these innovations.
“Regtech solutions hold promise to improve the ability, speed and efficiency of [financial services institutions] in analyzing and sharing data for the purpose of detecting and reporting financial crime, and complying with associated regulations,” the report says.
New technologies could also enable more effective detection of suspicious transactions and activities, reduce human error and enhance security, the report suggests.
In addition, regulators could benefit from the adoption of these technologies, the report says. Furthermore, financial inclusion could improve if regtech lowers barriers to access to the financial system and bolsters risk management at firms.
The report sets out a series of proposed reforms designed to help the industry implement regtech. Specifically, it calls for policymakers to close gaps in the international AML framework; improve data sharing policy and data quality; create an environment for regtech experimentation; ensure regulatory frameworks are resilient to continuous innovation; and evolve the supervisory focus as regtech alters the risk landscape.
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