Regulatory compliance driven by technology

What is regtech?

Regtech, short for regulatory technology, is the use of innovative software solutions such as big data analytics, artificial intelligence and blockchain to automate and streamline regulatory compliance processes. Regtech helps businesses reduce the costs, risks, and complexity of meeting the ever-changing and often complex regulatory requirements across different sectors and jurisdictions. Regtech can also enhance the quality and efficiency of regulatory reporting, monitoring, and analysis, as well as provide insights and intelligence for better decision-making.

Why do businesses implement Regtech?

Regtech offers several benefits. First, it can help businesses save time and money by automating manual and repetitive tasks, such as data collection, validation, and submission. Second, it can help enterprises improve their compliance performance and reputation by reducing the likelihood of human errors, fraud, and breaches. Third, it can help businesses adapt to the dynamic and diverse regulatory landscape by providing real-time updates, alerts, and guidance. Fourth, it can help corporates gain a competitive edge by enabling them to leverage data and analytics for innovation and growth.

Growth of the Regtech industry

Regtech is one of the fastest-growing segments of the fintech industry, as more and more businesses seek to leverage technology to comply with the increasing and evolving regulatory demands. The global regtech market size was valued at $6 billion in 2020, increased to $13 billion by 2023, and is expected to grow at a compound annual growth rate (CAGR) of 23.6% from 2024 to 2032. Europe is one of the leading regions for regtech adoption, as it has a strong regulatory framework and a large number of financial institutions that need to comply with various regulations. The period between updates in regulations or implementation of new ones is shrinking while the financial and reputational impact of failing to meet these is on the increase, and traditional manual compliance management techniques are simply no longer viable.

Why Malta for Regtech?

Malta is a prime jurisdiction in which to establish a regtech company, as it offers several advantages, including:

A favorable business environment: Malta has a stable and pro-business government, a sound legal system, a competitive tax regime, a skilled and multilingual workforce, and a strategic location in the heart of the Mediterranean. Malta also has a strong reputation as a leading jurisdiction for financial services, and tech-based industries such as gaming, blockchain, and is a hub for digital innovation, which attracts foreign investment and talent.

A supportive regulatory framework: Malta has a progressive and forward-looking regulator, the Malta Financial Services Authority (MFSA), which is committed to fostering innovation and facilitating the adoption of regtech solutions. The MFSA also collaborates with other regulators and stakeholders, both locally and internationally, to promote best practices and standards in the regtech sector.

A vibrant regtech ecosystem: Malta has a growing and diverse regtech community, composed of local and international players, offering various solutions, such as compliance management, risk management, identity verification, anti-money laundering, data protection, reporting, and analytics. Malta hosts several very well attended annual conferences that provide opportunities for networking, learning, and showcasing regtech innovations.

Funding opportunities: Malta is keen to attract and promote foreign investment and offers a range of funding and incentive programs through which business investment may be rewarded. The support may take different forms, such as advance cash grants, re-imbursable cash grants, tax credits or soft loans, amongst others.

Rewarding R&D and protecting Intellectual Property: Malta offers tax benefits on the investment into research and development and the creation of intellectual property, as well as the commercialisation thereof. The EU and WTO rules regarding intellectual property have been implemented into national law in Malta.

Jacob Appel is founder and CEO of Binderr, a SaaS software for regulated companies that helps with client onboarding, creates more efficiency internally and stronger compliance safeguards. He says the founding team chose Malta as the country has a strong regulatory framework for company incorporation that offers non-domiciled business owners a number of tax benefits. Also, the access to credit facilities with EU financed bank loans and grants were the main drivers in selecting the jurisdiction for the Regtech start-up.

Starting your Malta Regtech Company

The process to set up a Malta company is straightforward. We start by advising our clients at pre-incorporation stage; here our legal team of experts may offer guidance on tax matters, privacy, employment or any commercial matter. We conduct our due diligence process (using regtech software, of course!) and incorporate the company, from which point it may enter agreements, employ personnel, own any legal asset and so on. We also open bank accounts as required, handle all registrations with the necessary government agencies and continue to support the company as it flourishes.

More about author: Steve Muscat Azzopardi – Director, Trust & Corporate Services