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Managing Regtech Evaluations

When To Use

• Evaluating regtech vendors for AML/KYC, transaction monitoring, regulatory reporting, or compliance workflow automation
• Conducting build-vs-buy analysis for compliance technology capabilities
• Assessing whether an existing regtech stack meets evolving regulatory requirements (e.g., new BSA/AML rules, PSD2/PSD3 mandates, open banking standards)
• Comparing regtech solutions across cost, integration complexity, regulatory coverage, and scalability
• Preparing a recommendation report for compliance leadership or board-level stakeholders

Inputs To Gather

• Regulatory scope: Which regulations the solution must address (e.g., BSA/AML, GDPR, SOX, MiFID II, CFPB rules) [VERIFY jurisdiction-specific requirements]
• Current compliance pain points: Manual processes, false-positive rates, reporting bottlenecks, audit deficiencies
• Vendor shortlist: Solutions under consideration with pricing models (per-transaction, seat-based, platform fee)
• Integration requirements: Core banking system, payment processor, data warehouse, and API compatibility constraints
• Budget envelope: Capital expenditure limits, acceptable ongoing operational cost, and expected ROI timeline
• Stakeholder map: Compliance officers, IT/engineering, legal, risk management, and business line owners involved in the decision

Workflow

1. Define evaluation criteria and weighting

   • Map each regulatory obligation to required technology capabilities (e.g., real-time transaction screening, SAR auto-filing, adverse media monitoring)
   • Establish weighted scoring categories: regulatory coverage (30%), integration effort (20%), total cost of ownership (20%), scalability (15%), vendor stability (15%) — adjust weights per organizational priorities
   • Identify deal-breakers: data residency requirements [VERIFY per jurisdiction], API availability, SOC 2 Type II certification, uptime SLAs

2. Assess current-state compliance operations

   • Document existing manual and automated workflows with cycle times and error rates
   • Quantify cost of current compliance operations: headcount, false-positive investigation hours, regulatory penalties or near-misses
   • Identify gaps between current capabilities and regulatory expectations flagged in recent exams or audits

3. Conduct vendor evaluation

   • Request structured RFI/RFP responses aligned to scoring criteria
   • Run proof-of-concept or sandbox testing against representative data sets (transaction volumes, customer profiles, alert scenarios)
   • Evaluate vendor regulatory update cadence — how quickly does the platform adapt to new rules or guidance?
   • Assess data security posture: encryption standards, access controls, penetration test results, incident response history
   • Check reference customers in comparable regulatory environments and institution size

4. Build cost-benefit analysis

   • Calculate total cost of ownership over 3–5 years: license fees, implementation, integration development, training, ongoing support
   • Estimate compliance efficiency gains: reduction in manual review hours, false-positive rate improvement, faster regulatory report generation
   • Quantify risk reduction value: avoided penalty exposure, reduced exam findings, faster remediation of compliance gaps
   • Model implementation timeline with resource requirements and business disruption estimates

5. Prepare recommendation and stakeholder report

   • Rank solutions using the weighted scorecard with clear justification per category
   • Present top 1–2 recommendations with implementation roadmap, phased rollout plan, and key milestones
   • Document risks: vendor lock-in, regulatory change risk, integration dependencies, data migration complexity
   • Define success metrics and post-implementation review schedule (e.g., 90-day, 6-month, annual reassessment)

Output

The deliverable is a Regtech Evaluation Report containing:

• Executive summary with recommended solution and rationale (1 page)
• Weighted scorecard comparing all evaluated solutions across defined criteria
• Cost-benefit analysis with 3–5 year TCO projections and estimated compliance efficiency gains
• Implementation roadmap with phases, resource needs, dependencies, and risk mitigations
• Appendices: vendor RFP responses, POC test results, reference check notes, and regulatory requirement mapping

Quality Checks

• Confirm all regulatory obligations cited are current — flag outdated references with [VERIFY]
• Validate that cost figures come from vendor quotes or documented estimates, not assumptions
• Ensure scoring criteria weights were agreed upon by stakeholders before applying
• Verify that data residency, security certifications, and SLA claims are backed by vendor documentation [VERIFY]
• Check that the recommendation accounts for the institution's specific regulatory profile (charter type, asset size, product lines, geographic footprint)
• Confirm no single vendor's marketing language has been adopted uncritically — use independent validation of claimed capabilities
• Ensure the report flags any areas where regulatory requirements differ by jurisdiction and notes which jurisdictions were assessed