SEC chief pushes RegTech as proactive response to shifts in sector regulation

Onome Amuge

Financial institutions, historically weighed down by a heavy regulatory burden, have been urged to embrace RegTech as a means of improving compliance and simplifying the process of navigating the continuously expanding volume of regulatory change. 

Emomotimi Agama, director general of the Securities & Exchange Commission (SEC), recently acknowledged RegTech as a groundbreaking innovation that is transforming the way financial institutions manage compliance and mitigate risk. 

According to Agama, RegTech represents a paradigm shift in the way compliance is approached, enabling financial organisations to simplify regulatory processes, enhance transparency, and improve risk management. These innovative solutions, Agama suggests, could facilitate a more efficient, effective, and robust regulatory framework in the financial sector.

The SEC DG elaborated on his perspective regarding RegTech and its potential impact on the financial sector, in a presentation titled “Regulatory Technology (RegTech) and Compliance” delivered recently to the PhD students at the Institute of Capital Market Studies, Nasarawa State University.

Agama defines RegTech as an umbrella term for the innovative use of technology to simplify and enhance regulatory compliance, risk management, and reporting within the financial services industry. He noted further that this method involves the use of advanced tools, such as artificial intelligence (AI), machine learning, blockchain, big data analytics, and cloud computing, to streamline, automate, and enhance the management of regulatory processes.

Agama focused on several crucial financial regulations augmented by RegTech, noting their significant impact on the financial services industry. Anti-Money Laundering (AML), Know Your Customer (KYC), and the General Data Protection Regulation (GDPR), he explained, have reshaped the financial landscape, requiring financial institutions to prioritise compliance and data protection.

In exploring the applications of RegTech in the financial sector, Agama pointed out that compliance management is a primary area where these innovative technologies can be implemented. Compliance management comprises regulatory reporting and filing, compliance monitoring and tracking, as well as risk assessment and management. Through the adoption of RegTech solutions, Agama believes that financial institutions can improve their ability to navigate these vital regulatory aspects, reducing the likelihood of errors and ensuring a more robust and agile compliance infrastructure.

Risk management was another key area of financial services that Agama identified as ripe for RegTech implementation. Risk management includes applications such as anti-money laundering (AML) and know-your-customer (KYC) processes, transaction monitoring and surveillance, as well as credit risk assessment and monitoring.

Exploring further the potential of RegTech in the financial sector, Agama identified additional areas where these innovative technologies are making a significant impact. These include identity verification, data management, audit and assurance, Environmental, Social, and Governance (ESG), and digital onboarding.

The SEC DG highlighted how RegTech is transforming these areas, streamlining processes, enhancing efficiency, and supporting organisations in meeting increasingly complex regulatory requirements, whether in the realm of protecting sensitive customer information, implementing sustainable practices, or ensuring that new customers are onboarded in a secure and compliant manner.

Assessing the future of RegTech in the financial landscape he stated, “As regulations evolve, RegTech will play a crucial role in helping organisations stay compliant, reduce costs, and respond swiftly to regulatory changes.

“The integration of RegTech with broader digital transformation initiatives will also be essential in fostering a more resilient and adaptable financial system.”

Agama underscored that RegTech is revolutionising compliance management within the financial sector by delivering innovative solutions that streamline regulatory processes, enhance risk management, and support regulatory compliance.

With the increasing complexity of regulatory environments, Agama argues that RegTech will continue to become a vital tool for financial institutions, enabling them to navigate evolving compliance requirements and achieve their compliance goals in a more efficient and effective manner.

Looking ahead, Agama predicts that the future of RegTech will bring further breakthroughs in automation and data analytics, transforming compliance from a mere obligation into a competitive differentiator. Financial institutions, Agama stressed, must embrace the advantages of RegTech to remain agile and precise in navigating an ever-changing regulatory landscape.