Regulatory Technology (RegTech) Adoption and Compliance Risk Reduction

Abstract

This study examines how regulatory technology contributes to reducing compliance risk in financial institutions. Regulatory technology is understood as the use of advanced digital technologies, including data analytics, cloud computing, and machine learning, to improve regulatory monitoring, reporting, and control processes in an increasingly complex and data-intensive environment. Drawing on a systematic literature review, the study synthesises evidence from academic research, regulatory reports, and policy documents to identify key applications such as regulatory reporting, transaction monitoring, customer due diligence, and anti-money laundering and countering the financing of terrorism surveillance. The findings show that regulatory technology can enhance data quality, enable near real time supervision, and standardise the application of regulatory rules, thereby lowering the probability of non-compliance caused by human error, inconsistent interpretation, or delayed information. At the same time, the review highlights challenges related to integration with legacy information technology systems, model governance, vendor dependency, data protection, and fragmented regulatory approaches. Overall, the impact of regulatory technology on compliance risk is strongly shaped by regulatory frameworks, organisational capabilities, and ethical safeguards, indicating the need for further outcome-based empirical research.