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The report contains a wealth of material that will be useful for banks――and other FIs and firms――that are considering or undertaking their own regtech initiatives. The material is organized to make it easily accessible and no matter what stage of regtech adoption the reader is at, there will be something relevant for the institution and to the circumstances. The main insights can be summarized in the following six key areas:
• Stakeholder buy-in and executive support: Early adopters stressed the importance of securing buy-in and support from senior management early on——they approve the budgets after all. This is especially important for complex and larger-scale deployments.
• Cross-functional and interdisciplinary teams: Diversity broadens perspectives and enables banks to evaluate vendors comprehensively, identify additional benefits, anticipate potential barriers and secure the all-important buy-in. In simple terms, the AML/CTF experts will need input from data people and data experts will need to understand the opera- tional requirements thoroughly. Getting this balance right by putting all relevant parties on the implementation team is key.
• Forums to exchange views and experience: Many early adopters, especially those being part of larger banking groups, found that sharing and exchanging views and experiences helped accelerate AML/CTF regtech adoption. This goes beyond the implementation team and encom- passes people doing similar things in other places or parts of the organization who can share techniques or propose answers to operational challenges.
• Data readiness: It is a truism that initiatives can run into trouble if data inputs are not properly prepared. The report cautioned that the time, effort and support required to source and prepare essential data should not be underestimated.
• Working with third parties: Regtech is still an emerging field and many early adopters have engaged with vendors that were relatively new, sometimes new startups that might not have the track record and financial strength often looked for by banks. The report shares experience and strategies for addressing these situations.
• A holistic definition of value: Early adopters have looked beyond financial and operational benefits as the return on investment, but have also considered the people impact
through experiential learning and cross-functional collabo- ration, customer impact and adaptability in terms of other uses for technologies, some of which might not have been foreseen in the beginning.
AML/CTF regtech adoption has been made even more relevant by the challenges arising from COVID-19, which has had the interesting effect of both increasing risk and acting as an additional driver for the wider use of technology.
The HKMA’s work in this area is far from over. Encouraging regtech adoption in the banking and stored value facility sectors remains a key focus of its supervisory engagement in the coming year. In addition, the HKMA recognizes that the modernization of super- visory activities must go hand in hand with the adoption of AML/ CTF regtech by the private sector, so it has also set a road map to make greater use of technology in supervisory work thereby ensuring that the HKMA keeps pace with developments in the industry and peer regulators internationally.3 The overarching aims are to make AML/CTF supervision more proactive, targeted and collaborative, and to increase the contribution to the AML/CTF ecosystem in Hong Kong.
Put simply, the HKMA has a vision and strategy to leverage technology to increase efficiency and effectiveness in its AML/CTF work, and as a committed member of FATF, the HKMA could not wish for more.
Stewart McGlynn, head of anti-money laundering and financial crime risk, Hong Kong Monetary Authority; co-chair, Evaluations and Compliance Group, Financial Action Task Force
1 “HKMA AML/CFT RegTech Forum Record of Discussion,” Hong Kong Monetary Authority, December 2019, https://www.hkma.gov.hk/media/eng/doc/ key-information/guidelines-and-circular/2019/20191223e1a1.pdf
2 “AML/CFT Regtech: Case Studies and Insights,” Hong Kong Monetary Authority, January 2021, https://www.hkma.gov.hk/media/eng/doc/ key-information/guidelines-and-circular/2021/20210121e1a1.pdf
3 “AML/CFT Supervision in the Age of Digital Innovation,” Hong Kong Monetary Authority, September 2020, https://www.hkma.gov.hk/media/eng/doc/ key-information/guidelines-and-circular/2020/20200929e1a1.pdf
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