The BIG RegTech blog for 2021 and 2022

Taking a look a the major milestones for financial services' this year and the themes for compliance in the year to come is the BIG RegTech blog of the year.

A BIG year for RegTech

Well, this year hasn’t quite been the year everyone anticipated, or at least valiantly hoped for at the end of 2020. The end of the Brexit transition period was further muddied with ongoing Covid-19 uncertainty and there were continued economic disruptions.

It was a year when Credit Suisse was fined more than £147 million for due diligence failings and NatWest was fined £264,772,619.95 for failing to comply with anti-money laundering regulations.

It was a year when hybrid or home working became the norm, rather than the exception, and that put increased pressure on security systems, compliance, and personal responsibility. 

At the same time, the RegTech industry boomed. Globally, it’s now predicted to hit $15.8 billion by 2026, growing at a CAGR of 17.5%.

The rise of RegTech is down, in part, to increased instances of fraud, to the ongoing battle with money laundering, to the increased adoption of digital financial services by consumers, and also the change in people working from home. All of which creates compliance complexities that the financial services industry needs a digital solution to. Enter RegTech.

Financial crime reports for crypto companies

Back in March 2021, the UK’s Financial Conduct Authority (FCA) added crypto companies to the list of businesses required to submit a financial crime report. The new rules apply to cryptocurrency exchanges and custodial wallet providers. 

And changes to regulation in the Crypto space is going to be a big theme for next year as the EU central bank starts to develop its digital currency too…

Regulators publish final rules & guidance on operational resilience

Also this year, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) published their final policy and supervisory statements on operational resilience in March.

By 31 March 2022, firms must have identified any important business services, determined maximum tolerable disruption and undertaken the necessary mapping and testing. As soon as possible after 31 March 2022 – and no later than 31 March 2025 – organisations must have performed mapping and testing so that they are able to remain within impact tolerances for the services.

Data sharing strengthened

The amount of data generated by public bodies, businesses and citizens was expected to multiply 5x between 2018 and 2025. And in November 2021, the European Parliament and the Council of the EU came to an agreement on the proposed EU Data Governance Act

The act is intended to boost the availability of data by increasing trust in data intermediaries and strengthening data sharing across the EU as well as between sectors. It won’t be obligatory for people to share data but instead, a safe and easy way to share will be provided.

Digital identity framework anyone?

Watch this space for the next instalment of data protection regs and how they change financial services.

Perpetual KYC becomes the norm

Where once financial institutions would review customers at onboarding and then at intervals according to their risk rating, it’s become evermore necessary to perform KYC on an ongoing basis and keep customer risk profiles updated regularly. AKA - the focus is on perpetual KYC. 

As the regulatory landscape becomes more rigid (and more complex), it is important for financial institutions to use real-world and real-time data to inform customer profiles on an ongoing basis, while still providing a seamless compliance experience.

So, expect a trend for great perpetual KYC in 2022. 

Advanced RegTech for FinTechs

As regulations become more stringent, technology has of course evolved to cope. Enhancement to AI-driven KYC seems inevitable.

Forrester reports that banks are going to “double down” on innovation in 2022. “Eyeing the opportunity to pick up innovative offerings and plug digital gaps, banks will continue their frenzy of deal-making, investing in, or acquiring fintechs,” they say.

The report also suggests that in 2022, financial services firms will embrace ESG products and services – such as green loans and mortgages – as well as checking accounts with sustainability and carbon-tracking features. 

The war for talent…

Possibly the biggest battle to face FinTech (and RegTech) in 2022 will be the war for talent. With the advent of new regulation, digital transformation, increasing fraud and changing customer demands, more specialised job roles will definitely emerge. And as the war for talent is already raging this could become a flashpoint that causes distress to institutions in 2022. 

We already know JP Morgan has ramped up recruitment for its new UK digital bank and plans to take staff numbers above 1,000 in 2022. Moreover, the global anti-money laundering market is expected to expand at a compound annual growth rate (CAGR) of 15.6% from 2021 to 2028, presenting huge opportunities for new roles in this area.

Get in touch

We know there will be lots to do in the world of RegTech in 2022 - so, if you need any help, please get in touch. The PassFort team would love to talk to you about KYC, AML and other compliance processes you need to manage to keep up with regulation and customer demands.