This lesson provides a critical overview of the regulatory landscape for financial technology, exploring how technology can be used to manage regulatory compliance and the challenges of regulating a rapidly innovating sector .

7.1 The Rise of RegTech
Regulatory Technology (RegTech) refers to the use of technology to facilitate the delivery of regulatory requirements more efficiently and effectively . It addresses the growing complexity and volume of regulatory obligations.

7.2 Key RegTech Applications

  • Know Your Customer (KYC): Automated identity verification and customer due diligence 

  • Anti-Money Laundering (AML) : Transaction monitoring and suspicious activity reporting

  • Compliance Monitoring: Real-time tracking of regulatory changes

  • Regulatory Reporting: Automated generation and submission of reports

7.3 The Global Regulatory Framework
Understanding the regulatory framework is essential for FinTech firms . Key frameworks include:

  • United States: A multi-agency approach involving the Federal Reserve, SEC, CFPB, and state-level regulators 

  • European Union: The European Central Bank (ECB), European Banking Authority (EBA), and PSD2 provide a harmonized framework 

  • Regulatory Sandboxes: Controlled environments where innovative products can be tested with real consumers under regulatory supervision 

7.4 SupTech
Supervisory Technology (SupTech) refers to the use of technology by regulators to supervise financial institutions . This includes:

  • Data Analytics: Analyzing large datasets to identify systemic risks

  • AI-driven Supervision: Automating the review of regulatory filings

  • Cybersecurity Monitoring: Overseeing the cyber resilience of the financial sector

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