RegTech

The term grew in the financial sector after 2008, as rules multiplied and manual compliance became expensive. Typical applications include customer onboarding and identity verification, transaction monitoring, sanctions screening, regulatory reporting, tracking of regulatory change, trade surveillance and management of obligations and controls. Newer tools use machine learning to cut false alerts, or natural language processing to read new rules and map them to internal policies. Digital compliance is a wider label for doing compliance work through such tools, including in health, energy and manufacturing. Poor data quality limits what any tool can do. Buying a tool does not move the responsibility: the firm still has to test it, explain its decisions to a supervisor and keep the records.

A commodity trading house receives 5,000 sanctions screening alerts a week, almost all false matches. It adopts a tool that scores matches using additional data and learns from analysts' decisions. Alert volume falls by about half, and the compliance team documents the testing it did before relying on the new scoring.