In this era of digital transformation and Artificial Intelligence (AI) applications, the regulator aims to assist financial institutions (FIs) in developing solutions that can improve regulatory compliance processes, enhance operational efficiency and reduce costs. In particular, 6th RegTech Adoption Practice Guide provides detailed practical guidance to FIs in Hong Kong on using AI-based RegTech to support regulatory compliance functions. It also offers technical information about how to design, develop and deploy AI-based RegTech solutions.
Issue #6 illustrates common industry pain points, pre-requisites, and critical considerations for AI-based RegTech implementation, followed by examples of what others have done successfully to overcome adoption barriers and design robust AI governance frameworks. These strategies are absolutely essential to face upcoming challenges related to stricter regulatory requirements and more demanding customer experience (CX) expectations.
Key Insights and upcoming trends
There are some upcoming trends and key insights that FIs are suggested to consider when working with third-party vendors or upskilling their internal team in relation to AI:
- Regulators increasingly expect control activities within banks and FIs to be highly effective at identifying regulatory breaches; the traditional testing approach of a small sample of control execution is not sufficient anymore.
- Key challenges to be addressed by AI-based RegTech solutions include dealing with increasing regulatory complexity, managing the associated costs of compliance, and meeting greater expectations on control and system auditability.
- Data quality determines the outcomes of AI applications. Therefore, FIs should establish a specific framework to review and address data quality issues.
- The pandemic has accelerated the adoption of digital technologies. Customers have become accustomed to receiving services digitally and are increasingly expecting the same frictionless digital experience from their banks, hence the need to leverage AI to improve efficiency.
- Since cloud computing provides the data storage capacity and massive processing power fundamental to AI innovation, the HKMA openly encourages its adoption at banks and FIs.
How RegTech partners can help
The right AI-driven RegTech solutions will make it easier for FIs and regulated organisations to translate written compliance policies into step-by-step digital procedures. This approach not only strengthens all lines of defense against dirty money, minimising FIs’ economic risks, but also improves the customer experience.
At Know Your Customer, we have built a cloud-based, modular and AI-based solution that transforms AML compliance, making it easier to meet changing regulations and improve efficiency over time.
With our award-winning modular technology, banks and FIs can:
- access in real time Single Source of Truth (SSOT) company registry documents worldwide
- reap the benefits of AI-based processes for document reading, data extraction and shareholder identification
- get full support in relation to the growing need for intelligent case management, stricter regulatory requirements, and increasing customer expectation
- implement highly customisable workflows to reflect specific risk-based decision guidelines for compliance and AML monitoring
- be audit-ready at all times with automated KYC compliance reports and perpetual KYC checks
- get immediate support from a trustworthy RegTech vendor with a recognised FIs client portfolio