RegTech and compliance management
RegTech is composed of the words “regulatory” and “technology”. It is a collective term for the application of modern technologies, to get the increasing regulation in the banking- and financial sector under control both from an IT and a legal standpoint.
Attitude of the country towards RegTech-services
Authorities’ approach towards RegTechs and compliance management providers seem to be shy and can be qualified as a laisser faire attitude where both the legislator and the regulator keep an eye on the field all the while waiting for the system to become more mature and developed. Thus, as of today, RegTechs are not regulated entities.
However, we can observe a certain dynamic where RegTechs are more and more solicited by most financial institutions in order to satisfy their compliance requirement even if there’s still a long way for a perennial implementation in the financial field.
Obligations and requirements to provide RegTech-services
RegTechs are not a regulated technology. Yet, the AMF paved the way for a possible regulation.
The idea of creating a specific label for Regtechs in order to boost the trustworthiness of such actors and to control the quality of the said services was tackled, however the AMF delayed the matter until further notice.
Concerning the outsourcing of compliance functions through Regtechs, the AMF aligned the said rules to those fixed in the Alternative Investment Fund Managers Directive in relation to management’s outsourcing in a response to a public consultation concerning Fintechs by the EBA on March 23rd 2017
The AMF in the said response, also fixed the liability in case of a failing in compliance due to a failing in the technology itself on the regulated entity that outsourced the compliance functions.
Additional comments regarding the legal situation for RegTech-services or what RegTech’s must be aware of in this business area
Market size for RegTech-services and biggest companies in this business area
The RegTech market has seen a significant growth the past few years, especially after the subprime crisis. Even if the regulator still consider that the system needs to gain in maturity, France has seen, since 2019, a 45-strong RegTechs ecosystem through the years (according to France FinTech).
Following the European market, Regtechs are mainly used for Anti-Money laundering compliance (around a third of all Regtechs) followed by those specific to fraud prevention and prudential reporting.
Some of the French Regtechs are Netheon, Neuroprofiler, Particeep, QuickSign or even RegMind.
Additional comments regarding the economic situation for RegTech-services or what RegTech’s must be aware of in this business area