Banks built rules for yesterday’s crime and RegTech is trying to fix that
Criminals are moving money across borders faster, and financial institutions are feeling the squeeze. Compliance teams feel this strain every day as they try to keep up with schemes that shift through accounts, intermediaries, and digital channels. A new academic review of regulatory technology, or RegTech, shows how this pressure is reshaping compliance work and why research in this field is gaining new weight.
What RegTech means in practice
RegTech refers to digital tools that support compliance functions such as monitoring, reporting, and identity checks. The paper describes it as technology that strengthens oversight through data driven processes instead of manual review. It outlines a shift from after the fact controls to systems that operate during activity, which changes how institutions manage risk.
The authors add that these tools place more responsibility on institutions to detect suspicious conduct and move them into a more active compliance role.
An academic lens on financial crime
The study draws on 33 papers published between 2020 and 2024 and maps how researchers have examined RegTech across customer due diligence, transaction monitoring, reporting automation, information sharing, and cost trends.
The authors explain that the goal is to track how technology is reshaping the structure of compliance, not only to measure accuracy gains. They describe RegTech as a “paradigm shift in regulation and the evolution of financial oversight.”
RegTech in customer due diligence
A large share of the work examines how customer due diligence and KYC (know your customer) procedures have changed. Research highlighted in the study shows how blockchain can support secure digital identities that can be reused across institutions, which cuts repeated checks.
The analysis also points to machine learning (ML) models that score customer behavior and flag patterns that deviate from past activity. According to the study, these adaptive systems help institutions track shifts in customer behavior and update risk profiles as needed.
Monitoring that learns from data
The review gives special attention to transaction monitoring since it is a major burden for banks. Traditional rules generate high numbers of false alerts. Several studies referenced in the analysis show that AI can lower false positives by about 30% while improving detection of higher risk activity by about 25%. Another study documents a 51% drop in manual reviews in a bank that tested ML with its monitoring workflow.
The report explains that these improvements come from systems that adjust thresholds based on data instead of fixed rules. Researchers describe a shift toward continuous and real-time analysis that lets institutions react to unusual activity at the moment it moves through a channel.
These monitoring tools also connect with other RegTech components such as identity verification and reporting, forming an interdependent architecture across AML (anti-money laundering) tasks.
Reporting and the changing workload
The report also reviews how automation supports regulatory reporting. Survey results from one study show strong support among banking staff for RegTech tools that guide risk checks and help prepare required filings. The authors note that AI shortens the time to detect questionable conduct and helps supervisors identify institutions that might not be meeting AML expectations.
Sharing information across borders
Financial crime moves across borders, and the report stresses that cooperation is essential. It cites research showing that RegTech tools support transparency in cross border operations by giving institutions shared data structures and secure channels for exchange. Blockchain stands out here since its records cannot be altered and can reduce delays in shared compliance work.
Differences in data standards and regulatory expectations across jurisdictions undermine coordination as technologies advance at different speeds.
Cost pressure and adoption
Cost is another driver of interest in RegTech. Institutions report major savings through automation of onboarding and transaction monitoring. The authors add that shared systems based on blockchain can help institutions lower duplicated compliance tasks.
Still, these benefits are not evenly distributed. Smaller institutions face barriers tied to cost, staffing, and integration with older systems. They may not have the capacity to retrain models, audit algorithms, or replace legacy workflows, which widens gaps across the sector.
Download: Strengthening Identity Security whitepaper