• Avril Brenda Chan

Using RegTech to Deal with Risks Faced during the Covid-19 Pandemic

With the Covid-19 pandemic ongoing, many countries are finding themselves on the brink of a recession. We see the world being plunged into a crisis like never before. Many businesses are finding themselves struggling as they have been hit hard economically. Some researchers deemed the recovery to normalcy to be a slow process. The outbreak of the virus was first identified in December 2019 and since then, there have been over 15 million cases worldwide.

Impact of the Pandemic

When the world was hit with the Covid-19 Pandemic, many businesses were forced to digitalise themselves. As Lisa Robins of Standard Charted had mentioned, “Digitizing or tokenizing payment through blockchain” has helped businesses to operate more “safely and efficiently” during these times. As more businesses move towards DPT services, more of them are subject to regulations that are put in place. In Singapore, stricter regulations have been put in place and crypto businesses are now required to first register then apply for a license in order to operate in the jurisdiction. Singapore’s Payments Services Act (PSA) brings Digital Payment Token (DPT) services such as crypto businesses and exchanges under the current AML and CFT rules. Hence, businesses who are digitalising themselves in Singapore have to comply with these newly enforced regulations.

The pandemic has also brought about cash flow implications for businesses, businesses need to now find alternative ways to tackle this during these volatile times. Furthermore, there has been a heightened risk of money laundering. As such, businesses have to be more careful to establish stable compliance frameworks so as to avoid these risks better. This is especially necessary due to the volatile nature of the pandemic, businesses have to be prepared for any unexpected changes.

How are Businesses Dealing with this?

The sudden outbreak of the virus has left businesses with little to no time to prepare. It is thus, even more, essential to be up to date with national and local regulations so as to plan for changes and to ensure compliance. In this aspect, the digitalisation of compliance will be a game-changer for the FinTech industry.

Many businesses still adopt a rather manual and paper-based process for their compliance but with the Covid-19 Situation, change has to happen. It has become simply not viable to rely on paper-based processes and manual labour due to increased risk of infection as well as the safety of the general public. Since it is hard to track who has come across which documents, dealing with physical documents during this pandemic is not an ideal one. Besides, if financial services want to gain new customers without raising the risk of Money Laundering, it is key to turn towards RegTech so that Know Your Customer (KYC) checks can be conducted.

In an official statement by the Financial Advisory Task Force on 1 April, it was noted that there is a need for faster technology, and the FATF encouraged the "fullest use of responsible digital customer onboarding and delivery of digital financial services in light of social distancing measures"[1].

RegTech as a Solution

Thus, we see the importance of RegTech in dealing with risks during this Covid-19 pandemic. With RegTech, it can help to automate compliance work which leads to an increase in efficiency, accuracy and lower cost which is exactly what businesses need in these trying times. RegTech increases efficiency by making use of data analytics that enable regulatory information to be analyzed which helps to ensure that businesses are constantly identifying the risks they face and solving them most efficiently. It also raises accuracy and reduces cost due to the reduced need for manual labour.

RegTech businesses also offer services such as Know Your Customer (KYC) whereby Anti-money Laundering (AML) and Combating the Financing of Terrorism (CFT) screening is conducted. Businesses are thus able to better manage their compliance with the ever-changing regulations during the pandemic. Additionally, RegTech also offers Know Your Transactions (KYT) which helps businesses to manage their risk exposure to illegal activities by utilising advanced risk algorithms for transaction limits, laundering trends, and by layering heuristics and robust cryptocurrency addresses database.

As businesses struggle to recover from the Covid-19 pandemic, looking for alternative solutions to tackle the risks faced is highly important. By seeking RegTech solutions, businesses can better monitor their regulations and manage their compliances in not only an efficient manner but one that has the accuracy and low cost.

One-stop compliance solutions for fintechs, navigating compliance, security and risk management challenges in the most effective manner

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