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The RegTech industry is undergoing rapid transformation, and its impact on regulatory compliance and customer experience is becoming increasingly significant. In 2023, the global RegTech market was valued at approximately USD 12.82 billion, with projections estimating growth to USD 86 billion by 2032—an impressive compound annual growth rate of 23.6%.[1] This trajectory reflects both the escalating regulatory complexity faced by businesses and the evolving expectations of customers in a digital-first world.
Why RegTech? Why Now?
In 2024, the RegTech Association’s Industry Perspectives Report emphasized that rising customer expectations are now the primary driver of RegTech adoption. Today’s customers demand seamless onboarding, prompt resolution of complaints, and transparent, secure data handling. They expect businesses to meet regulatory obligations with minimal disruption, regardless of when those obligations were imposed or where the organisation is on its compliance journey.
For newly regulated entities under the Australian Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime, the expectation is clear: deliver consistent, high-quality regulatory compliance experiences, no matter the industry or degree of regulatory maturity.
Leveraging RegTech for seamless compliance
RegTech solutions are designed to operate in the background, enabling businesses to meet compliance obligations without compromising customer experience. Although regulations remain technology agnostic and do not mandate the use of RegTech, manual regulatory compliance processes are becoming increasingly unsustainable as businesses scale. As seen in many AML/CTF regulatory enforcement actions, these traditional methods risk becoming fragmented, neglected, and inefficient over time and as the complexity increases, so does the risk.
It’s important to note that no single RegTech solution can deliver end-to-end compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) and corresponding Rules. Core obligations, such as appointing an AML/CTF Compliance Officer and maintaining board oversight, must still be fulfilled. However, when used thoughtfully, RegTech can address specific pain points that are ripe for automation, giving legal and regulatory compliance teams space to focus on high-value, impactful work.
Targeted Solutions for targeted challenges
RegTech excels when tailored to specific compliance needs or areas. In the context of AML/CTF regulatory obligations, several capabilities currently stand out and they’ll be more to come:
- Enterprise-Wide Risk Assessment (EWRA): RegTech can aggregate data across an organisation to generate a comprehensive and objective risk profile. Automated, data-driven assessments ensure alignment with an organisation’s size, nature, and complexity, as required under the AML/CTF Act.
- Risk Calibration: By harnessing data intelligently, RegTech can help avoid both overestimating and underestimating money laundering (ML), terrorism financing (TF), and proliferation financing (PF) risks—thereby enabling more effective and efficient mitigation strategies.
- Enhanced Customer Onboarding: Technology can improve onboarding for all customers, including minority and underrepresented groups, by:
- Automating information gathering and analysing customer information ensuring that this is commensurate with the customer’s ML/TF/PF risk profile.
- Using biometric verification (facial recognition, voice recognition, fingerprint scanning) and optical character recognition to streamline the verification and authentication process
- Using natural language processing to reduce false positives in sanctions screening and overcoming problems in data quality by linking elements of information i.e. connecting search engines with PEP lists.
- Aggregating risk-relevant data from multiple systems using APIs, enabling a complete risk profile of your client
Key considerations prior to deployment
1. Data Privacy and security
Data privacy compliance should be integrated into the design and implementation of a RegTech solution that processes personal data. If captured under the Privacy Act 1988 (Cth), organisations must:
- Ensure lawful grounds for processing personal information (APP 6).
- Take reasonable steps to secure client personal data (APP 11). This includes ensuring that the RegTech provider maintains the same standard of data security as expected by customers and in line with industry best practice. We may see more demand for on-premise solutions as a result of heighted concerns about data security and data privacy compliance.
- When using an overseas RegTech provider, take reasonable steps in the circumstances to ensure the overseas provider does not breach the Australian privacy principles. (APP 8). This often involves imposing these principles via contract and monitoring compliance regularly.
2. Alignment with regulatory requirements
Businesses must also rigorously assess international RegTech providers to ensure that their product facilitates compliance with Australian regulatory requirements. For example, UK-based products may allow delayed verification in different circumstances or different simplified due diligence thresholds. These must be amended/reconciled to ensure the product facilitates compliance with requirements under the Australian AML/CTF Act and Rules and also meets AUSTRAC’s specific expectations.
3. RegTech as a “System”
When a RegTech solution is embedded as part of an organisation’s formal AML/CTF Program, it may be considered a system under Section 26F of the AML/CTF Act. This carries significant implications. Failure to adequately design and maintain these systems, particularly if AI enabled, could result in multiple breaches of the AML/CTF Act.
RegTech – a Strategic Imperative
Regulated entities that approach RegTech implementation thoughtfully, paying close attention to data governance, privacy, AI risk, and regulatory alignment, are well positioned to realise substantial benefits. These include operational efficiency, improved customer satisfaction, and enhanced risk management.
Moreover, early adopters of RegTech often find themselves better equipped to innovate across a broader range of compliance challenges. They may also gain opportunities to participate in sector-level intelligence sharing initiatives and collaborative analytics projects.
In short, embracing RegTech is not just about compliance. It’s a strategic move to future-proof operations, exceed customer expectations, and build trust in a rapidly evolving regulatory landscape.