Tool Sprawl Risk Audit — RegTech Providers

Signs of tool sprawl in RegTech Providers

• Model auditability is the platform-level KPI the regulator cares about — the customer's regulator (OCC, FCA, FINRA, FinCEN, MAS, BaFin) will examine the model's decisions, the platform's documentation has to support that examination, and the in-house ML team is not yet operating with model risk management discipline.
• False positives are the customer's biggest operational complaint — every AML alert, every sanctions hit, every fraud flag, every adverse media match the platform produces is investigator time, and the customer's renewal conversation is shaped by the alert-to-true-positive ratio.
• Regulators are still figuring out their own AI posture — every 6-12 months a new SR letter, a new EBA guideline, a new FCA discussion paper, or a new state DFS bulletin shifts the rules, and the platform has to ship into a moving target.
• Customer procurement and security review cycles are punishing — the regulated buyer has SOC 2, ISO 27001, model risk management documentation, third-party risk management questionnaires, and regulatory notification requirements, and the cycle is 3-9 months for a meaningful enterprise deal.