In 2025, the RegTech industry is a thriving and growing sector, with more financial institutions than ever turning to regulatory technology to make sense of growing regulatory burdens and ensure their ongoing compliance.
For many, the RegTech sector emerged as a direct response to the massive regulatory changes following the 2008 global financial crisis. Prior to this pivotal moment, financial institutions relied primarily on manual compliance processes and legacy systems that were increasingly inadequate for managing complex regulatory requirements.
Was this where the birth of RegTech can be officially traced back to? According to Michael Thirer, legal, governance and regulatory affairs director at Muinmos, the first known RegTech is actually 4,100 years old – the legal code known as the Code of Ur-Naamu,
He explained, “Why do I refer to it as RegTech? Because clearly the King of Ur-Naamu had a regulation-related problem – the law of the land (the Kingdom of Ur, in the heart of Mesopotamia) was previously scattered and unknown to the general public (known only in the chambers of clerks); and therefore, was un-unusable to them. The King of Ur-Naamu solved it by codifying the laws and placing the code in the public domain (marketplaces).”
For Thirer, what RegTechs do today is not much different. “They take regulations that are spread across numerous laws, COBs, guidelines, and turn them into one automated process, or “code”. They’re turning legal code into computer code, and by this also making the law more accessible and easier to use,” he said.
The Muinmos director gave a concrete example form his own company, stating that a huge part of KYC client onboarding is regulatory classification – a process of knowing a client is relevant to many financial institutions, including investment firms, asset management companies and more.
This process usually evolves classifying the clients, assessing the suitability of the services to the client – including assessing matters such as financial situation, investment objectives and knowledge and experiences – and assessing the appropriateness of the financial product to the client.
Thirer said, “The problem is, that these rules vary from jurisdiction to jurisdiction; they take a long time to perform; they’re usually highly manual; require high-level staff, etc. If that’s not enough – in the case the client and the institution are from different jurisdictions, this process needs to be performed according to the regulatory requirement of both jurisdictions.
“So, a lot of firms simply decide to, for example, take on only one type of client, not enter new markets, etc. Meaning, the law exists; but, similar to the situation that existed in Ur 4,100 years ago, it is hard to use. So we solved it by feeding the legal requirements of dozens of jurisdictions into our AI powered regulatory engine, that now automates the entire Regulatory Classification process.”
Thirer remarked that what Ur-Naamu solved with his code – which was state-of-the-art technology at the time – Muinmos solves with computer code. “And while doing so, we are not only empowering FIs to stay ahead of regulatory change and accept all types of clients, enter new markets etc.; but also harmonising global regulation in this field,” he said.
Earlier origins
According to RelyComply, despite the FCA coining ‘Regtech’ in 2015, digital means to uphold the financial system’s integrity have more extended origins. “The 2008 crisis was cataclysmic for several reasons: a lack of customer trust in institutional security and criminals could open up vulnerabilities by taking advantage of an increasingly digitally connected financial world,” said the firm.
RelyComply continued, “With institutions having to rebuild, they had to take their financial crime controls and compliance systems seriously. The thought of regulatory action being a ‘checklist’ has taken time to evolve into compliance checks as a necessity. Financially motivated crimes involve making money by infiltrating and exploiting the financial system with real-world consequences. Understanding the joint responsibility to safeguard people from genuine harm is one thing; implementing the processes to weed out launderers, traffickers, terrorist financiers, organised crime networks, and corruption at all levels across the board is another.
The RegTech sector has come into its own from the 2010s onwards, said the firm, honing in on specific compliance monitoring and reporting methods for financial houses (such as KYC and AML, rather than more vague quantitative risk management analysis). “Every part reacts to each other: crime is proliferating, regulatory responses are growing, the cost of compliance is growing, and the financial system has to be proactive,” said RelyComply.
“At RelyComply, we knew how RegTech offers adaptability to the growing ‘data challenge’. Housing data across disparate systems for different compliance processes makes it a game of catch-up to stay alert to any risk factors, and that has to change. RegTech looks to identify crime quicker and make proving compliance to stricter rules more operationally efficient (and, in that case, cheaper!).
“Cloud architecture was imperative to making AML processes flexible and secure to regulatory change—essentially, two birds with one stone. So RegTech’s innovation is all about maintaining that credibility with solutions that can manage formerly costly compliance no matter how fast financial crime moves. Its results and affordability should cause the space to take off even further,” said the business.
Born out of necessity
The financial crisis brought a huge list of challenges to the financial sector, with long-held beliefs and ideas regarding the industry melting away in dramatic fashion. As Joseph Ibitola, growth manager at Flagright remarked, RegTech was born out of necessity and didn’t just appear overnight.
He said, “If you look back at financial history, compliance and regulation have always struggled to keep up with innovation. But it wasn’t until the 2008 financial crisis that the real cracks started to show.
“After the crash, regulators tightened their grip; new AML laws, stricter KYC requirements, and a surge in regulatory scrutiny forced financial institutions to rethink compliance. But here’s the thing, banks and FinTechs weren’t equipped to handle the scale of these changes manually. Compliance teams were overwhelmed, penalties for non-compliance skyrocketed, and traditional methods simply couldn’t keep up with the sheer volume of regulatory updates.”
This is when RegTech began to emerge. Bringing a tech-driven approach to streamline compliance, reduce risk and automate processes. Instead of continuing to rely on burdensome, slow compliance checks, businesses began to build AI-driven, API-first and cloud-based solutions to keep up.
“Fast forward to today, and RegTech is even more critical. With financial crime becoming more sophisticated, regulations constantly evolving, and digital transactions exploding, compliance has to be real-time, automated, and scalable and can’t be an afterthought. That’s exactly why Flagright exists, to give financial institutions a plug-and-play solution for AML, fraud prevention, and compliance that grows with them,” said Ibitola.
Solving a persistent problem
Fraser Mitchell, chief product officer at SmartSearch, explained that as with the creation of any new sector, RegTech emerged to solve a persistent problem for businesses, managing an increasingly complex regulatory landscape.
He said, “As bad actors embraced digital technologies to find more sophisticated ways to conceal their true identities and launder money, understandably so, new regulations were introduced and existing rules tightened to combat financial crime.”
Mitchell explained that from this, businesses had no choice but to also embrace digital solutions and abandon traditional time consuming, manual identity verification processes.
He continued, “The RegTech sector emerged to help regulated industries ensure they were complying with their Anti-Money Laundering (AML), Know Your Customer (KYC) and Know Your Business (KYB) obligations, as well as quickly and efficiently pinpointing concealed or falsified identities amid soaring financial crime.
“RegTech enables businesses to strike the right balance between compliance, protecting themselves from bad actors and delivering a quick, seamless customer onboarding experience.”
4CRisk.ai, another RegTech firm, similarly defined the industry as the use of technology solutions such as KYC/AML compliance, fraud prevention and regulatory research that automate regulatory processes, reduce risk, and ensure compliance, but mainly in the financial services industry.
Meeting the need
Arctic Intelligence – an Australian RegTech firm – was founded in 2015, and despite coming a few years after the industry was founded, the emergence of the new category helped shine a light on companies like Arctic.
Anthony Quinn, founder and CEO of the firm, said “The RegTech sector emerged in response to increasing regulatory complexity, compliance costs, and the need for more efficient risk management solutions, particularly in highly regulated industries like financial services and gaming.
“The RegTech sector itself is quite diverse with many solutions in the KYC/KYB space, transaction monitoring and regulatory reporting, all of which was already overcrowded when I founded Arctic.”
Instead of jumping straight into the aforementioned area, Arctic decided to tackle the financial crime risk assessment problem as many organisations were – and still struggling with this.
“I guess we saw these trends emerging early and built a scalable, digital-first approach to risk assessment and financial crime compliance,” said Quinn. “Our focus has been on helping organisations of all sizes, industry sectors and geographies assess and manage financial crime and non-financial crime risks effectively”
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