Compliance and Legaltech: How Technology Helps Firms Stay Compliant

5 min read

Here’s how legal technology solutions can make regulatory compliance more manageable.

Regulatory compliance is a key priority for both law firms and in-house legal departments. For law firms, managing clients’ regulatory obligations and mitigating risks is part and parcel of providing effective legal services. For in-house legal teams, it’s a day-to-day activity designed to protect the company’s viability and reputation. But regardless of whether you’re in-house conducting compliance for your employer or a law firm providing compliance services for clients, one fact remains: Regulatory compliance is a complex task that never ends.

Thankfully, emerging legaltech solutions are making regulatory compliance faster and easier for both law firms and in-house legal departments. With these new technologies, lawyers can de-risk their clients’ activities in a faster, simpler, more efficient way. Here’s what you should know about how regulatory compliance technology, or regtech, is changing the face of compliance.

Regtech Makes Compliance Faster and Easier

Regulatory compliance technology was built with one goal in mind: Making compliance faster and easier. Designed for heavily regulated industries like healthcare, law, and finance, regtech leverages technologies like machine learning, big data analytics, and cloud computing to help regulated companies meet their compliance requirements. 

According to one study by Juniper Research, regtech spending by financial institutions and other regtech users will soar to $207 billion USD globally by 2028. Mid-sized and large organizations are adopting regtech in droves, spurred by an emerging need to simplify regulatory compliance.

While regulatory technology’s main goal is to make it easier to manage regulatory obligations, Future Processing has identified several other goals that regtech can help organizations meet. This includes enhancing regulatory reporting, promoting regulatory innovation, and enhancing data privacy and security.

Regtech grew up in the aftermath of the 2008 subprime mortgage crisis, when a wave of mortgage defaults exposed deep cracks in the financial industry’s system of checks and balances. When governments introduced new regulations to improve the financial industry’s stability, regtech providers cropped up to meet a growing demand for better compliance. Today, regtech is a key tool for legal and financial services firms to ensure regulatory compliance.

Benefits of Regtech

Regtech offers a variety of benefits to those responsible for managing regulatory compliance, whether for outside clients or for one’s employer. First and foremost, regtech helps automate repetitive tasks, making regulatory compliance faster. Regtech also makes regulatory reporting more accurate by flagging errors and omissions. Some regtech solutions can even monitor transactions in real time and mitigate non-compliance risks. 

Regulatory technology is also evolving at a rapid pace, with new innovations making regulatory compliance more transparent and efficient. Investor relations platform Proxymity has identified several emerging regtech trends that are making regtech smarter and easier to use.

Perhaps the most substantial recent evolution in regtech is the incorporation of machine learning and artificial intelligence into solutions. AI and ML, according to Proxymity, are much more efficient at data processing than humans are, which can help to detect patterns in financial data that a human analyst could miss. As a result, artificial intelligence is superior at detecting financial crimes and predicting potential compliance breaches compared to human auditors. 

Regtech is also now incorporating blockchain technology to create even more transparency around financial transactions. According to Proxymity, blockchain serves as a decentralized ledger where financial transactions can be recorded and tracked in a fraud-proof way.

Categories of Regtech Providers

Regtech providers come in a variety of different types, with each type of provider offering something slightly different. According to regtech provider Ascent AI, regtech solutions can offer services like client onboarding/background checks, risk management, reporting, fraud and financial crime prevention, transaction monitoring, communications monitoring, cybersecurity, and regulatory intelligence and compliance management. The regulatory intelligence and compliance management category is further divided into three subcategories: Regulatory monitoring, change management, and compliance management.

If this breakdown sounds complex, that’s because it is. The regtech market is diverse by design: There’s a wide array of risks your organization may face, so providers have to cover all of their bases. Understanding which type of regtech provider you need comes down to identifying the primary threats your organization is trying to mitigate. If you’re worried about your clients’ transactions potentially being fraudulent and the implications this could have for your firm, for example, you’ll want to find a regtech provider that offers transaction monitoring.

Getting Started with Regtech

To get started with regtech, you’ll want to find a provider that suits your needs. While this can sound daunting, it’s actually fairly straightforward, provided that you follow a few simple processes and procedures. 

First and foremost, you’ll want to conduct a Needs Assessment for your law firm or in-house legal department to determine your organization’s specific needs. Next, you’ll want to research regtech providers to determine which ones can meet your highest-priority needs. Finally, you’ll create a shortlist of 3-5 regtech suppliers that can meet your criteria.

If procuring regtech software sounds like a daunting endeavour, that’s because it can be. Thankfully, we’ve got your back. Check out Appara’s software procurement e-book, The Busy Legal Professional’s No-Hassle, No-Fear Guide to Legal Software Procurement, to discover the 5 key steps you need to take to ensure you’re choosing the right regtech provider.

Regulatory compliance is a critical function for law firms and in-house legal departments, and a key responsibility that legal professionals like you carry out every day. Despite its importance, though, many legal professionals conduct compliance in a less-than-optimal way, using manual processes to track compliance. With emerging regtech solutions, legal pros can keep their clients or employers compliant with government regulations in less time and with less hassle.

Regulatory compliance can be a paperwork-heavy process. Appara makes paperwork easier with legal entity management, document automation, and workflow automation technology designed to work with your own precedents. Book a demo to unlock your FREE trial of Appara and discover how much time you can save by automating your paperwork.