managing-regtech-evaluations

# 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