Traditional supervision in a dead end; The future of financial regulation is data and artificial intelligence

The first annual RegTech conference became a stage for unprecedented consensus among regulators, banking networks, payment companies and technology activists; A consensus on a clear fact: traditional supervision is no longer responsive to today’s complex, platform and data-driven ecosystem, and the future of financial regulation will inevitably move towards intelligent, risk-oriented and technology-based supervision.

Central Bank: There is no return to traditional supervision

Noushafarin Momenvaqfi, the vice president of new technologies of the Central Bank, emphasized that the emergence of new technologies and platform businesses have rendered the classical concepts of supervision ineffective, and said that the regulator must take the path of intelligent, data-oriented and risk-oriented supervision.
He considered this development “irreversible” and explained that in the 80s, the country’s focus was on building banking infrastructure, in the 90s, transaction monitoring was prioritized, and in the current decade, with the expansion of platforms, even these infrastructures are no longer sufficient. According to him, effective control over the financial ecosystem will not be possible without high-quality data, correct algorithms and the formation of a smart regulatory body.

artificial intelligence; The main engine of modern monitoring

Momenvaqfi described artificial intelligence and machine learning as “the main fuel of intelligent surveillance” and said that today’s fraud detection, risk management and unusual transaction detection systems are mainly based on these technologies. He also mentioned the role of blockchain and big data in the formation of new regulatory models; Technologies that, according to him, some of them have the concept of surveillance in their essence.

SEP: Reactive surveillance holds the market back

Further, Ehsan Turkman, the CEO of Saman Electronic Payment (SEP), criticized the backward and reactive approaches and said that applying regulatory requirements after the product launch can delay the development path for months and disrupt the market.
He emphasized that compliance, risk management and anti-money laundering teams should be with companies from the very beginning of product development. Turkmen considered the use of artificial intelligence in fraud detection not a choice, but a global standard, and said that this approach leads to a reduction in false positive alerts, an increase in the accuracy of detection of violations, and a reduction in operational costs.

Shaperak: Traditional monitoring is not possible with this volume of transactions

Amirhossein Shabiri, the CEO of Shoprak Company, referring to the processing of billions of monthly transactions in the country’s payment network, said that traditional monitoring with this scale and complexity is basically impossible.
He did not consider fraud detection as a technological product and emphasized the need for close cooperation between the regulator, the Central Bank, Shoprak, payment companies and other institutions. According to Shabiri, Shaperk has moved towards preventive detection of violations by analyzing data, behavioral modeling and 360-degree monitoring of receivers.

Bank Mellat: Financial crimes have passed traditional controls

Seyed Mohammad Hossein Mahmoudi, Vice President of Bank Mellat Technology, by presenting examples of money laundering cases and misuse of rental cards, said that the complexity of financial crimes today is such that one-dimensional and traditional controls are no longer responsive.
He announced the operationalization of dynamic customer risk assessment systems in Bank Mellat and explained that these systems determine the customer’s risk level at the moment of service delivery, and corresponding warnings and instructions are provided to the branches.

“Regtech Ecosystem Harmony” panel; Difference of paths, sharing in the goal

In the specialized panel “Setting the Harmony of RegTech Ecosystem in Iran”, Yousefinejad (Deputy Supervisor of Shapark), Mehdi Ahmadi (CEO of Rayan Hamfaza), Maisham Rajabi (CEO of Radin) and Hossein Rezaei (CEO of Novin Payment) discussed the prerequisites for transition to technological supervision.

Emphasizing that “harmony” means coordination between actors and not eliminating the regulator, Yousefinejad said that the role of governance is to maintain stability and frameworks, and innovation should be formed in the heart of the market. He warned that the state ownership of a large part of the economy has led to the expectation of innovation from the government; An expectation that in practice reaches a dead end.

Further, Mehdi Ahmadi, focusing on the concept of “transaction cost”, said that the regulatory philosophy should be to reduce market costs, not to impose new costs. He emphasized that insular infrastructure, parallel software, and repetitive processes lead companies to losses, and regulation becomes ineffective when it becomes a cost factor.

Maisham Rajabi also openly criticized the role of the government and said that until the government moves from the position of “controller” to “regulator” and “facilitator”, the RegTech ecosystem will not be formed in a real way. He considered costly interventions and insular decisions not only as an obstacle to innovation, but also as a source of corruption.

On the other hand, Hossein Rezaei focused the discussion on implementation and said that many of the current monitoring processes are manual, time-consuming and expensive. According to him, digital authentication, online monitoring of transactions and intelligent risk calculation systems can both increase the accuracy of monitoring and reduce the cost of manpower and human error. Rezaei emphasized that effective monitoring should be removed from the report-oriented and backward mode and should be monitored at the moment.

Despite the differences of opinion, there was one point of commonality among the speakers and panel members: the RegTech ecosystem cannot be formed without coordination between the regulator, banks, payment companies and startups.

What stood out the most at the first annual conference of RegTech was the general agreement on the fact that traditional supervision no longer works and that the future of financial regulation in Iran is tied to smart, data-driven and proactive supervision; A path whose realization requires up-to-date infrastructure, expert personnel, a clear economic model and real cooperation between the government and the private sector.