With the expansion of the Fintech industry at an unprecedented rate, it has become increasingly necessary to avail the use of efficient and adaptive compliance solutions, hence giving rise to Regulatory Tech, now more commonly known as RegTech.
While the original aim of the RegTech was to digitise mundane compliance functions like KYC (Know Your Customer), and AML (Anti-money Laundering) assessments, the introduction and implementation of AI has offered more avenues and advancement towards real-time monitoring, fraud detection, and automated reporting.
The speed and scalability of these systems have made them increasingly attractive to traditional financial institutions and startups alike, more so as financial regulation grows more complex and jurisdiction specific.[1] The article will explore the stance of regulators on the evolution of RegTech as well as widely discussed concerns following its use, as well as how Laven Hosting has adopted RegTech to make compliance functions flow easier.
The Regulator’s Stance
The FCA has been a staunch supporter of innovation of RegTech and has positioned itself as a facilitator of responsible technological development through initiatives like the Regulatory Sandbox and the TechSprint programs, enabling platforms to test RegTech solutions in a safe and controlled environment to promote safer innovation and reduce time-to-market.[2]
In recent years, FCA’s initiative Digital Regulatory Reporting (DRR) has explored the process of streamlining and automating the reporting process through analysis of the entire regulatory lifecycle, from risk identification to implementation. Currently at Phase 3 of the initiative, the FCA is embedding the DRR as a part of their Data Strategy, aiming to harness data and advanced analytics to transform how financial regulation is carried out in the UK. [3]
In the same vein, with the constant evolving landscape, APCC ‘s (Association of Professional Compliance Consultants) alignment with the standards has also become important for firms relying or advising on RegTech solutions. [4]
Confidence vs Overreliance
With RegTech growing its wings at a rapid rate, it does allow for a precarious toeing of the line between confident use and overreliance. The need to ensure that RegTech enhances and not replaces compliance responsibility is prudent.
While the advantages of the use of RegTech are many, they come with their fair share of limitations and concerns.
Limitations
- False Assurance – use of RegTech may create the illusion of complete accuracy and can lead to overlooked violations or risks if not properly monitored.
- Opaque Decisions – certain type of algorithms used may result in decisions that may lack the required explanations, creating a trail of issues with compliance audits and regulatory scrutiny.
- Cyber vulnerability – sensitive data on RegTech platforms may become the target of cyberattacks, raising concerns over security breaches.
- Conventional jurisdictions – one-size-fits-all would not be able to take into account the nuances of local regulations and may lead to gaps in compliance.
- User dependency via third party – outsourcing of critical compliance functions increases exposure to accountability and security risks.
The Sister Bond Between Compliance and RegTech
Compliance and RegTech have long gone hand in hand—this isn’t new. What is new, however, is the broader industry’s willingness to adopt it. Many firms have been hesitant, either unsure of its value or assuming regulatory bodies like the FCA aren’t pushing for it. But as mentioned earlier, the FCA has made technology—including AI—a core part of its five-year strategy.
Laven Partners stands out as a pioneer in this space. Nearly a decade ago, they began using Leo RegTech’s platform—built by compliance professionals, for compliance professionals—to automate routine tasks and enhance oversight. Since then, both Laven and Leo have grown in parallel, working together to push the boundaries of RegTech in real-world compliance environments.
Today, Leo RegTech’s software underpins Laven Hosting’s compliance operations, facilitating efficient workflows and robust record-keeping for their clients. This integration exemplifies a seamless blend of regulatory expertise and technological innovation, enhancing the compliance infrastructure for financial services firms.
The key is integration: aligning technology with regulatory frameworks, internal policies, and expert oversight ensures that automation reinforces—not undermines—regulatory obligations.
Conclusion
The evolution of RegTech has brought transformative potential to the fintech sector, offering scalable, intelligent solutions to rising regulatory demands. Backed by initiatives from the FCA and guided by standards from working groups and compliance groups, RegTech is not just a trend—it is becoming essential infrastructure for compliance.
However, the effectiveness of these tools depends on how they are implemented. Successful RegTech adoption requires a balance of technological innovation and regulatory understanding. The synergy between compliance professionals and smart systems enables firms to stay both efficient and accountable.
Ultimately, RegTech should inspire confidence, not complacency. Organisations must avoid overreliance on automation by combining software with robust oversight, expert judgment, and continual alignment with evolving regulatory expectations. In doing so, they not only manage risk more effectively but also help shape a more resilient and transparent financial ecosystem.
[1] RegTech: Technology-driven compliance and its effects on profitability, operations, and market structure – ScienceDirect
[3] Digital regulatory reporting | FCA
[4] APCC – Association of Professional Compliance Consultants | Enhancing professional standards with a range of member benefits
