Fragmented compliance spurs demand for explainable RegTech
The gist
As compliance teams drown in fragmented data and AI-driven complexity, regulators are demanding not just risk flags but proof—fueling a race for explainable, auditable RegTech.
What to know
- By late 2026, 67% of firms were piloting or deploying AI in compliance while 40% felt least prepared for digital assets and crypto, per StarCompliance.
- Regulators now expect firms to prove and defend every compliance decision as new rules push for explainable AI and robust audit trails.
- Platforms like Quantifind are boasting continuous screening of 100% of customers with massive, diverse data sets—making oversight faster, smarter, and citation-rich.
Compliance Teams Stretched Thin
Fragmented data, multiplying channels, and cross-border rules are overwhelming compliance teams, forcing them to manage complex oversight with no extra resources and risking deeper operational blind spots.
By mid-2026, the compliance problem was no longer simply volume but fragmentation under pressure. Nir Carciente of ACA Group told FinTech Global that teams now must oversee “more communications channels, data sources, AI use cases, and cross-border requirements, often without additional resources,” a shift that stretches operational bandwidth because the challenge is no longer collecting information but unifying it across functions; without connected data and workflows, he warned, AI can deepen complexity instead of improving oversight, exposing how thinly staffed teams are being asked to manage a more intricate ecosystem with the same headcount.
The same pattern surfaced across later 2026 reporting: StarCompliance’s Global Compliance Benchmark Study, cited by FinTech Global, found 67% are deploying or piloting AI while 40% identified digital assets and crypto as the area where they feel least prepared, underscoring how new use cases are outpacing tooling and readiness. Outside financial compliance, ECA’s Global Mobility Now 2026 study said two-thirds of global employers have no formal process for reviewing compliance implications, while HCAMag’s “3 Expansion Pitfalls” warned that “worker misclassification, unbudgeted statutory payroll liabilities, and premature legal entity creation” can stall regional growth.
Proof-First RegTech Takes Center Stage
Regulators now demand firms defend every compliance decision with auditable, explainable AI, as fragmented supervision and relentless new rules make scalable, citation-rich RegTech essential for survival.
By late 2026, the compliance standard had shifted from catching alerts to defending judgment. Quantifind said regulators now expect firms to “prove, document and defend every risk decision,” making disconnected tools and manual reviews harder to sustain, while ComplyAdvantage’s Iain Armstrong argued outcomes-based supervision turns compliance into an evidence problem because firms must reconstruct their reasoning; that pressure is intensifying as the bill introduced on May 20, 2026 promises “a unified supervisory structure,” including “the Payment Systems Regulator folded into the Financial Conduct Authority (FCA).” Kevin McGuinness, global head of strategy at Napier Ai, pointed to how fragmented the current system remains, noting supervision of “legal, accountancy and trust and company service providers is currently spread across 22 professional body supervisors,” with OPBAS overseeing that layer, meaning firms have to re-map their compliance obligations repeatedly between now and 2027.
That is why next-generation RegTech is being sold less as automation that removes oversight than as infrastructure that makes oversight auditable at scale. Quantifind positions its platform as an intelligence layer with explainable decisions and full audit trails, claiming “full population coverage by continuously screening 100% of customers and counterparties rather than relying on sampling or periodic reviews,” powered by an “extensive data set” including “more than 2m politically exposed persons, over 1bn global news articles annotated for financial crime risk, 700m criminal and court records, and more than 25m company” profiles, while AI compliance advocates stress “we don't cut red tape… we make complying with it incredibly efficient, quick, clean and with a high level of citation proof,” making it “10x quicker” as firms try to keep pace with repeated obligation re-mapping through 2027.
