RegTech is no longer an experimental corner of financial services. It is becoming part of the infrastructure firms rely on to manage an increasingly complex regulatory environment. But the growth of the market has not translated into widespread adoption of third-party solutions. Vendors are pouring investment into AI, automation and new compliance capabilities, while many financial institutions remain cautious about bringing those technologies into their existing operations.
That caution is not necessarily about whether the technology works. For firms running on years – or decades – of legacy systems, adopting a new RegTech platform can create its own set of problems, from integration and data challenges to cost, procurement and internal resistance. There are also harder questions around whether firms are prepared to trust external technology with critical compliance functions, particularly when accountability ultimately remains with the institution. So, what is really standing between RegTech innovation and adoption?
The Global State of RegTech 2026 – a report co-authored by RegTech Analyst and Parker Lawrence Research – delved into this key topic during the report. You can download the full report here.
As part of the report, vendors and institutions were challenged on a number of key areas within the FinTech market, with the central discussion point being where they identified the biggest barriers to third-party RegTech adoption.
The report saw certain areas of almost agreement, with integration of legacy systems seen as key barrier by both, 52% of institutions and 58% of vendors. On the opposing side, an area such as fragmented internal ownership saw 50% from vendors, and only 22% by institutions.
In the second part of a two-part series, we speak to industry thought leaders to get their take on it.
“On paper, third-party RegTech is an easy sell,” says Bhavin Shah, CEO of Sherlocq. “It promises faster regulatory work, fewer manual errors, and a lighter load for compliance teams who are already stretched thin. Yet plenty of financial institutions still hesitate to bring in outside tools, and many pilots quietly stall before they ever reach full rollout.”
This leaves Shah to ask the question: what is actually holding things back? For him, the obstacles are rarely about whether the technology works. More often, he says, they come down to trust, control, and the practical reality of fitting something new into a business where mistakes carry real consequences.
“A compliance officer does not get fired for being slow. They get fired for being wrong,” says Shah. “That single fact explains almost every hesitation in this market. Firms are not resistant to technology. They are resistant to anything that makes accountability harder to hold.”
The caution that holds FIs back
Why are financial institutions still cautious about third-party RegTech?
Duco Van Lanschot, CEO and co-founder of RegTech firm Duna, believes this cautious exists still due to the fact that the person who signs off on a compliance decision carries the liability personally, and no vendor takes that on for them.
He explained, “A new tool can speed up onboarding and improve the customer experience, but if it gets a decision wrong, it is the compliance officer who answers for it, by name. Caution is the rational response.”
He added that there is a second reason that gets less attention, which is that most large institutions have never reached the SaaS era for compliance.
Van Lanschot said, “They run identity and onboarding on systems they built themselves, often years ago, wired into seven or eight internal data sources and a layer of analyst judgment that lives in people’s heads. Replacing that is an operational change that touches legal, IT, product, and compliance at the same time, which is a far higher bar than a normal software purchase.”
For Shah, the caution usually begins with a simple, uncomfortable fact – which is that when a firm hands part of its compliance work to an outside provider, it is still the firm that answers to the regulator.
He said, “Responsibility cannot be outsourced. If a third-party tool gets something wrong, the institution wears the consequences, not the vendor. That alone makes decision-makers slow to commit.”
Certain worries for Shah rise up regularly. These includes areas such as data sensitivity, where the Sherlocq CEO explains compliance work touches some of the most confidential information a firm holds: customer records, transaction histories, internal risk assessments. Sharing that with a third party feels risky, even when the vendor has strong security in place, he said.
Another worry is trust in the results and integration headaches. On the former, if a tool flags a risk, or clears one, then someone senior has to be comfortable standing behind that judgement. He said, “When people cannot see how a tool reached its conclusion, they are reluctant to rely on it. A sanctions alert with no visible reasoning behind it is not a shortcut. It is a new problem wearing the shape of a solution.”
On the latter, Shah states that banks and larger firms often run on older systems can run on older systems, and the fear of drawn-out expensive integrations is often enough to kill a project before it starts.
Other areas of worry detailed by Shah include vendor stability, cost and an unclear payoff, poor internal data and no clear owner. On the latter for example, Shah detailed, “Compliance, IT, risk, and procurement all have a stake, and when responsibility for a new tool is spread across several teams, decisions drift. A project that belongs to everyone often ends up driven by no one.”
None of these worries, Shah explains, are unreasonable. “They reflect an industry where the cost of getting it wrong is measured in fines, enforcement action, and reputational damage. Caution is the default setting for good reason.”
However, he states there is a quieter problem worth naming – that of firms and vendors not always agreeing on what the real obstacles are.
He explained, “Institutions often point to practical, on-the-ground issues, messy internal data, high cost, no clear return, while vendors tend to assume the holdups are things like tight budgets or scattered internal ownership. That mismatch matters, because a vendor solving for the wrong barrier can pour effort into a pitch that never lands. The firm feels unheard, and the deal stalls for reasons neither side has actually named out loud.”
“I have sat on both sides of this table,” Shah adds. “As an advisor, I have watched firms quietly shelve a perfectly good tool because nobody could explain its logic to an auditor. As a founder, I have learned that if you cannot show your working, you have not built a compliance product. You have built a black box with a nice interface.”
Jesus Sanchez, CPO at Muinmos, meanwhile, states that caution ‘is not what it used to be’, stating, “The vast majority of institutions now recognize that modern compliance cannot be delivered efficiently or consistently without specialist technology. The volume of data, the pace of regulatory change, and the ongoing monitoring required have made RegTech an essential part of the compliance infrastructure.”
He remarks that institutions still carry out extensive due diligence before adopting a provider, particularly around DORA, information security, data protection, operational resilience, and subcontracting. But these checks, he states, are now a normal part of procurement rather than evidence of resistance to RegTech itself.
He added, “The focus has shifted from whether to use RegTech to which provider can deliver the greatest improvement in compliance. Institutions are looking for solutions that increase consistency, strengthen auditability, reduce manual work, and help compliance teams identify risk more effectively.”
Sanchez has seen these changes clearly at Muinmos, remarking that institutions increasingly approach them not simply to digitize an existing process, but to create a more connected and controlled compliance journey across client classification, KYC, KYB, screening, and risk assessment.
For Anthony Quinn, CEO of Arctic Intelligence, the biggest barrier to third-party RegTech adoption is trust. Financial institutions are increasingly willing to modernise their compliance technology, but they remain cautious about outsourcing critical risk and regulatory processes to external vendors. Compliance leaders need confidence that a RegTech solution is secure, resilient, aligned with evolving regulatory expectations and backed by a vendor that will continue to invest in the platform over the long term.
“Financial institutions aren’t buying software – they’re buying confidence,” said Quinn. “If a solution can’t demonstrate regulatory credibility, security, longevity and measurable outcomes, it simply won’t make it through procurement, regardless of how innovative the technology is.”
He added that many organisations have also invested heavily in legacy systems and bespoke compliance processes over many years.
“Replacing or integrating with these environments can be complex, expensive and disruptive, particularly for large financial institutions operating across multiple jurisdictions,” he said. “Procurement cycles often involve extensive security assessments, legal reviews, data governance, architecture approvals and multiple business stakeholders, meaning adoption can take many months despite a compelling business case.”
Aurimas Bakas, CEO of Copla, stresses that the key thing found in the barrier data is where institutions and vendors part ways on why adoption stalls, and it matches what Copla hears in its own conversations.
He said, “Institutions point to substance. Their data isn’t clean enough to feed the tool, and the price doesn’t clear the internal bar. The chart backs that up, with data quality and cost ranking high for institutions. Vendors read the situation through the buyer’s organisation: no clear owner, no budget, slow procurement.
“Each side is describing something real from where it sits. When we speak to prospects, the caution usually comes back to a version of “we’re not sure we can operationalise this yet,” which is a data-readiness worry underneath the hesitation.”
Andrew Davies, global head of financial crime compliance strategy at ComplyAdvantage, said that accountability is usually what restrains firms from utilizing third-party RegTech.
He remarked, “When a regulator questions a screening decision or a missed alert, responsibility sits with the firm, not the vendor. Institutions can outsource a process, but they cannot outsource the risk, which makes many compliance leaders – and rightly so – sceptical about adopting tools they cannot fully explain or defend.”
For Davies, that scepticism amplifies when AI is involved. He stressed that in its 2026 State of Financial Crime Report research, only one in two compliance leaders (50%) said they were very confident that AI regulations in their jurisdiction would help them mitigate the risk of explaining AI-driven financial decisions.
“If firms doubt the regulatory framework can handle explainability, they will hesitate to put a third-party model between themselves and their regulator,” he said.
Allison Lagosh, VP and head of compliance at Saifr, commented that nearly two decades after the emergence of the RegTech industry, financial institutions continue to approach third-party solutions with measured caution.
She detailed, “Contrary to popular belief, that caution is not primarily about whether the technology works. Rather, it stems from a fundamental reality of financial services: regulatory accountability cannot be outsourced.”
No matter the sophistication of a tech provider, responsibility for compliance remains with the financial institution, she says.
She added, “Regulators expect firms to maintain oversight of their processes, controls, and risk management frameworks, including those supported by third-party vendors. As a result, adoption decisions often involve much more than evaluating product features. Firms must assess governance frameworks, operational controls, cybersecurity posture, vendor stability, and the ability to demonstrate compliance outcomes.”
As AI is increasingly integrated into RegTech solutions, this challenge has become even more pronounced.
Lagosh remarked that AI can deliver significant efficiency gains, but many institutions are still working through questions surrounding explainability, model governance, and oversight.
“Compliance teams need confidence that they can understand how outputs are generated, validate results, and defend those outcomes during audits or regulatory examinations. FINRA’s new proposed risk-based approach to approving materials seems to echo this,” she commented.
In addition, third-party risk management requirements can further slow adoption. Technology solutions, Lagosh remarked, introduced into regulated processes are frequently subject to cybersecurity reviews, procurement assessments, legal evaluation, compliance review, and operational due diligence. These reviews are appropriate and necessary, but they can extend approval timelines significantly.
Beyond governance concerns, Lagosh commented that financial institutions must still justify the investment. Compliance leaders increasingly need to demonstrate measurable business value from technology initiatives. While automation and AI can improve efficiency, decision-makers are looking for evidence that solutions will produce tangible outcomes, such as accelerating reviews, improving consistency, strengthening audit readiness, reducing operational burden, or speeding time to market.
She said, “The challenge is that firms are evaluating these benefits at a time when technology is evolving rapidly. Organizations are not simply asking whether a solution meets current needs. They are asking whether it will remain relevant, adaptable, and compliant as regulations and technology continue to evolve.”
The adoption barriers to overcome
Which adoption barriers are the toughest to scale? On this point, Van Lanschot said that the first barrier is build-in-house syndrome.
He explained, “Well-capitalized companies, especially those expanding into Europe, default to building compliance themselves. They treat it as a solvable engineering problem, then discover that European data fragmentation and registry coverage is much harder than it looks. That assumption is the hardest thing we argue against, and the honest move is to show the complexity rather than pitch around it.”
He added that the second is accountability and explainability, stating that a team cannot adopt a system it cannot explainto a regulator.
Van Lanschot commented, “A team cannot adopt a system it cannot explain to a regulator. A probabilistic model that is right most of the time is not good enough when the rule is absolute: a sanctioned entity must never be approved. This is why the bar for AI in compliance is higher than it is for AI in sales or support. Determinism, auditability, and zero tolerance for error are the price of entry. Vendors who treat them as differentiators have misread the market.”
Sanchez, meanwhile, stressed that the hardest barriers are rarely technical – they are about change management.
He quipped, “Many financial institutions still operate through a patchwork of older platforms, departmental databases, and separate point solutions. Introducing a new RegTech is therefore not simply a technical integration. It often requires the institution to rethink how data, decisions, and responsibilities move across the entire compliance process.”
This for Sanchez matters more as firms move towards a more connected architecture. “Client classification, identity verification, screening, risk assessment, and ongoing monitoring should not operate as isolated steps. Connecting them requires buy-in from compliance, IT, operations, legal, information security, and senior management, each of which may have different priorities and concerns,” he said.
Whilst Sanchez believes the technology may be capable, but adoption still stalls if ownership is unclear or teams are not aligned around the target operating model.
Trust is the most difficult barrier for Lagosh, stating that tech capabilities can be evaluated and compared. Pricing can be negotiated. Integration challenges can be solved. Trust, however, takes significantly longer to establish, as is clear across many areas in life.
She explained, “For financial institutions, trust extends beyond confidence in the technology itself. Firms need confidence that a vendor can operate as a long-term partner, maintain strong governance practices, support regulatory expectations, and produce reliable, defensible outcomes. This is particularly important for AI-enabled solutions, where explainability and transparency increasingly carry as much weight as accuracy.”
Lagosh stated that the second major challenge is the lengthy due diligence process that is required to establish that trust.
“Financial institutions often conduct extensive reviews covering cybersecurity, privacy, data management, operational resilience, legal requirements, and third-party risk management. While these reviews help reduce risk, they can also create a form of analysis paralysis. By the time a firm completes its evaluation, the technology landscape may have evolved again,” she said.
Such a dynamic, Lagosh remarks, creates tension between caution and innovation. Organizations may hesitate, she feels, because they fear committing to technology that could quickly become outdated. At the same time, delaying adoption carries its own risks, particularly as competitors continue to improve efficiency through automation and AI-enabled workflows.
The final challenge mentioned by Lagosh is data quality. “Even the most advanced RegTech solution depends on reliable underlying data. If data is fragmented, incomplete, or poorly governed, firms may struggle to realize the full value of automation and analytics capabilities. In practice, many organizations find that successful RegTech deployment requires equal attention to data governance and technology implementation. “
Ultimately, Lagosh states, the hardest barriers are not technology barriers. They are governance, trust, and organizational readiness barriers.
According to Quinn, the hardest barriers to overcome are rarely technical. “Technology is no longer the limiting factor – perceived implementation risk is. Financial institutions remain accountable to regulators for every compliance decision they make, so introducing a new platform must reduce risk, not introduce uncertainty.”
Meanwhile, Shah is clear in his view that some hurdles are easier to clear than others. Integration problems, for instance, are real but solvable; with enough time and budget, systems can be connected.
“The genuinely stubborn barriers are the ones tied to trust and accountability, because they cannot be fixed with a technical patch,” said Shah.
He added the hardest barrier to overcome is the accountability gap. Why? For him, a firm can love a tool and still hesitate, because adopting it means someone has to personally vouch for its output to auditors and regulators. That is a human decision about risk, not a feature comparison, and no amount of product polish makes it automatic, he says.
“Close behind is the trust barrier around how a tool actually works,” said the Sherlocq CEO.
“When a compliance officer cannot explain why a system reached a particular conclusion, they cannot defend it in a review. Picture a head of compliance in a supervisory meeting, asked to justify why a tool cleared a transaction that later drew scrutiny. “The system said so” is not an answer a regulator will accept, and every experienced compliance professional knows it. A tool that produces answers without showing its reasoning tends to stay on the shelf, no matter how accurate it is.”
Rounding off the list for Shah is cultural inertia. On this point, he believes that compliance teams have often spent years building processes they know and trust. Asking them to swap a familiar way of working for an unproven one meets natural resistance, not because people are stubborn, but because the old way has never landed them in front of a regulator.
Legacy integration is the barrier everyone agrees on, says Bakas, and it’s the one he said he expect to outlast the others. It’s hard for both parties because it lives in infrastructure neither of them fully controls.
He added, “The one I’d watch is fragmented internal ownership, which vendors rank high. We’ve seen the same thing. When no single person owns the vendor lifecycle, the work scatters across teams and onboarding a new tool takes months longer than it should. DORA has pushed this into the open, because someone now has to own the register of information and answer for each dependency. Regulation is quietly forcing institutions to close the gap vendors keep flagging.”
ComplyAdvantage’s Davies detailed meanwhile, that although integration, internal data quality or high cost can slow adoption, they are solvable problems. The more challenging barriers remain explainability and auditability, because they determine whether a firm can stand behind a decision it did not design.
He said, “In our research, when asked which criteria matter most when choosing an AI technology vendor, 43% of compliance leaders ranked explainability fourth – ahead of many commercial criteria. And when asked what is most challenging about financial crime compliance overall, completing a regulatory audit ranked third (61%). These combined findings show two things: firms are required to defend increasingly sophisticated systems to regulators, and they will not adopt tools that overcomplicate that defense.”
But many institutions, he said, also face time-consuming governance gaps internally. In our survey, only 59% of firms reported having a comprehensive AI assurance program in place, covering effectiveness, auditability, adherence to privacy standards, and model risk governance.
“Without that internal structure, even a well-designed third-party tool can feel daunting,” said Davies.
How vendors can overcome the barriers
How can vendors overcome these barriers? For Arctic’s Quinn, RegTech vendors need to demonstrate far more than product functionality.
He explained, “Robust security certifications, independent assurance, regulatory expertise, customer references and proven implementation methodologies all help build confidence. Vendors should also focus on configurable, API-first platforms that integrate seamlessly with existing technology ecosystems rather than requiring wholesale replacement.
“As an industry, we need to move beyond selling software features,” Quinn said. “The most successful RegTech providers become trusted compliance partners, continually updating regulatory content, methodologies and risk intelligence so customers can adapt to changing regulations with confidence. Ultimately, trust is the real currency in RegTech.”
Meanwhile, Van Lanschot suggests sharing the risk instead of selling a product.
He quipped, “The vendors that win the accounts we win are the ones treated as co-builders. A large global customer chose us for their European operations partly because their engineering team was already stretched and building in-house was not realistic, and the deciding factor was a system shaped to how they operate. We have also won accounts against more established names on the strength of that relationship.”
In practice, the Duna CEO remarks, this means three things. First, make the system explainable by design, so every decision can be logged and defended to a regulator.
He went on, “Prove value on a real slice of the problem before asking for the whole lifecycle, because that is how trust gets built. And treat compliance as a revenue lever, not only a cost. Onboarding is where institutions quietly lose customers, and a vendor that lifts conversion while satisfying the regulator is solving for growth, which is the conversation the business side wants to have.”
Bakas suggests that for vendors trying to get past all this, it helps to treat the product as a third party the buyer will have to govern, report, and monitor.
He remarked, “The vendors we see winning make that part easy. Clean integration, documentation a buyer can drop straight into a register, reporting that’s machine-readable out of the box. That lowers the real cost institutions keep raising and speaks to the concern they actually have.”
Davies, on the other hand, is of the view that vendors need to build systems for both the analyst and the audit. That means treating explainability and auditability as core product requirements, including full reasoning behind every score or alert, decisioning audit trails that reconstruct what the system knew and when, and documentation written specifically for regulatory audits.
“It also means meeting firms where their governance is,” he said. “Since many institutions lack a formal AI assurance program, vendors can help close that gap by bringing their own frameworks – model risk documentation, validation support, and clear statements of what a model can and cannot do.”
Honesty about limitations, he said, helps build trust and provides compliance teams with the evidence and confidence they need to stand before a regulator.
Davies concluded, “The institutions we work with are looking for a vendor that helps them mitigate and explain financial crime risk. This means we encounter many of the challenges highlighted in the survey results. How we solve these challenges with our customers is through flexibility in our integration options and configurability, transparency in our approach and models, and finally, explainability in our use of AI.
“When a RegTech partner’s reasoning, explainability, and its audit trail are foundationally built into their solutions, adoption stops feeling like a leap of faith and starts feeling like a shared defense.”
Lagosh stated that the most effective RegTech vendors recognize that they are not simply selling technology. They are helping firms manage regulatory risk.
She remarked, “To earn trust, vendors should prioritize transparency. Financial institutions need visibility into how solutions operate, how outputs are generated, what controls are in place, and how oversight is maintained. For AI-powered capabilities in particular, explainability is becoming a critical differentiator. Organizations are more likely to adopt solutions they can understand, govern, and defend.”
Vendors should also make third-party risk assessments easier to navigate, said Saifr’s Lagosh.
“Comprehensive documentation, well-defined governance practices, strong security controls, and clear operating procedures can significantly streamline due diligence reviews. The easier it is for a customer to evaluate and validate a solution, the easier it becomes to advance through internal approval processes,” she quipped.
The demonstration of measurable business outcomes is equally important, she said.
Lagosh argued, “Rather than focusing solely on features and functionality, vendors should quantify the value their solutions deliver. Metrics such as reduced review times, faster content approvals, improved audit readiness, reduced manual effort, or accelerated onboarding often resonate more strongly with executive decision-makers than technical specifications alone.”
Lagosh commented that flexibility should be another priority. Regulatory requirements, business priorities, and operating models vary widely across institutions. Solutions that can be configured to support existing processes are generally easier to adopt than those that require significant workflow redesign.
Lagosh concluded, “Finally, vendors should prioritize interoperability. Financial institutions continue to pursue technology modernization initiatives, and many are embracing API-driven and microservices-based architectures. While platform consolidation remains an objective for some organizations, there is also growing appreciation for best-of-breed solutions that integrate seamlessly within a broader ecosystem. Vendors that reduce implementation friction and accelerate time to value will be better positioned to succeed.”
Muinmos’s Sanchez outlined his view that vendors can overcome these barriers by making adoption easier, technically and organizationally.
He said, “Technically, solutions must be flexible enough to integrate with existing systems while supporting the institution’s move toward a connected architecture. Vendors should not add another isolated point solution. They should connect data, decisions, and workflows across the wider compliance process.”
Change management matters just as much for Sanchez. Vendors, he said, need to engage each function early and show it how the solution supports its specific priorities. Clear implementation plans, defined responsibilities, and measurable outcomes build confidence and keep internal alignment intact.
“There is also a shift in what regulators expect,” he said. “Firms are increasingly asked to show how a policy operated in a given case, not simply to produce the policy itself. That is a question about the system, not the document.”
He finished, “At Muinmos we keep coming back to four questions: can I onboard this client, are they who they say they are, should I onboard them, and has anything changed. Most institutions can answer all four today. What a connected architecture changes is whether they can answer them in one process instead of four, and whether each answer carries a record of the data and the rule behind it. That record is what has to hold up in front of internal audit, the board, and the regulator.”
The final viewpoint on this came from Pooja Shah, Director of Product and Clients at Sherlocq.
She said, “The good news is that these barriers respond well to the right approach. The vendors who succeed tend to treat adoption as a matter of earning confidence rather than showcasing features.”
In her view, for firms to overcome these barriers, they should firstly make the reasoning clear and visible.
She said, “If a firm can see how a tool arrived at an answer, the sources, the logic, the trail behind a conclusion, it becomes something a compliance officer can actually stand behind. Transparency is what turns a clever tool into a trusted one. This is increasingly the design standard in regulatory AI: outputs that cite the underlying law, guidance, or enforcement action they are drawn from, rather than presenting a conclusion on faith. Sherlocq, for example, was built around this principle from the outset, on the view that a regulatory answer without a visible source is not something any compliance officer can responsibly rely on.”
Next, Shah believes that firms should start small and prove it, saying, “Rather than pushing for a full rollout, offer a low-risk way to test the tool on a real problem. A contained pilot that delivers a clear result does more to build trust than any sales pitch. A three-month pilot on a single jurisdiction or a single product line gives a compliance team something concrete to evaluate, rather than an abstract promise.”
The last three areas Shah identifies here are taking data protection seriously and saying so plainly, fit it into existing work, do not replace it, be a stable, transparent partner and ask before assuming.
On the last point, Shah commented, “The quickest way to close the gap between what a firm worries about and what a vendor thinks it worries about is to ask early and listen honestly. A vendor who addresses the barrier a firm actually has, rather than the one it assumed, earns trust that no polished pitch can buy.”
“The vendors who win in this space are not the ones with the flashiest demo,” says Shah. “They are the ones a compliance officer can defend in front of their own board. That is a much higher bar, and it should be.” That confidence, she said, is rarely won in a single meeting. It tends to build slowly, through the people on the ground managing the relationship long after the pitch is over.
“The pilot is never really about the product. It is about whether the client trusts the people behind it,” says Pooja Shah, Director of Product and Clients at Sherlocq. “Every question a compliance team asks in those first few weeks, about data handling, about who they can call when something looks wrong, is them testing whether this is a relationship they can rely on. Get that right, and the technology has an easy job left to do.”
Shah concluded, “At its core, third-party RegTech adoption is less a technology problem than a confidence problem. The firms are cautious because they carry the risk, and the tools that win are the ones that make that risk easier to hold: by being clear, by being provable, and by respecting how carefully these decisions have to be made. Vendors who understand that are not just selling software. They are helping a compliance team feel safe enough to say yes.”
Greater industry confidence
Financial services may have used automated compliance technology for years, but confidence in digital solutions has not always kept pace with the technology itself. For RelyComply, that caution is understandable. Financial regulation is complex and constantly shifting, while firms are being asked to navigate increasingly sophisticated AI alongside growing concerns around data privacy, security and regulatory accountability.
“AI can still feel like something that is outside a business’ control,” RelyComply says. The same is true of fragmented and non-standardised AML requirements across jurisdictions, which can make transformation feel less like an opportunity and more like a risk.
The stakes are high. Downtime can disrupt critical compliance processes, poor data practices can expose sensitive customer information, and failures in AML controls can inflict reputational damage that takes years to repair. Crucially, financial institutions remain accountable for the quality of their AML programmes — including work supported by third-party providers.
That responsibility may help explain why some firms remain hesitant to embrace RegTech. If existing AML and KYC frameworks are already complex and expensive to manage, introducing another layer of technology can appear to create more questions than it answers.
The answer, RelyComply argues, is not simply more technology, but greater confidence in the organisations providing it.
“RegTechs must prove their worth as successful strategic partners,” it says. That means technology should complement existing infrastructure rather than force institutions to rebuild their compliance architecture around a new platform.
Effective solutions can provide a centralised source of truth for customer data, simplify investigative workflows and scale as data volumes grow without creating a corresponding increase in cost and complexity. Whether institutions choose specialised tools integrated into existing environments or broader end-to-end platforms, technology should reflect their risk profile, geography, size and operational capacity.
That partnership also extends beyond the software. RegTech providers need to help compliance teams understand and control the processes they are building, with clear frameworks and training around automated workflows. AI should not simply make a process faster; it should make it more efficient, consistent and accurate while keeping firms able to understand how decisions are made.
The responsibility, however, does not sit entirely with vendors. Financial institutions need robust parameters for assessing providers and the risks they introduce. This is particularly important in Europe, where the Digital Operational Resilience Act (DORA) places greater emphasis on managing ICT third-party risk.
Greater management buy-in is equally important. The relationship between financial institutions and RegTech providers needs to move beyond a traditional buyer-supplier dynamic towards a more accountable partnership. Stronger bridges can enable more interoperable data environments and a more effective, industry-wide approach to AML.
The pressure to make that shift is only increasing. As legacy technology struggles to keep pace with regulatory requirements, customer volumes and increasingly sophisticated financial crime, institutions cannot afford to treat modernisation as an endless future project.
“Complementary platforms can instil tailored, risk-based monitoring across AML and fraud teams,” RelyComply argues. The objective is not technology for its own sake, but a flexible compliance infrastructure capable of adapting as risks and regulations evolve.
Daniel Willis is the Editor of RegTech Analyst
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