There’s a whole lot of red tape that tech companies have to navigate, and it’s only getting harder, which is why there is a growing market for “regtechs”.

Regtechs are companies that help other companies comply with regulations like anti-money laundering and counter-terrorism financing (AML/CTF) laws.

These laws are becoming more comprehensive and government agencies are getting tougher in enforcing them.

And slip ups can be costly. Australia’s financial intelligence agency, AUSTRAC, has levied $745m in fines to date according to internal figures obtained by Identitii (ASX:ID8).

This is where regtech stocks can lend a hand.

Kyckr (ASX:KYK), for example, provides live customer intelligence software to help clients comply with “know-your-customer” laws.


Regulation getting tighter

CEO Ian Henderson conceded that when Kyckr began in 2007 it was ahead of its time but that it’s very much an in-demand solution now.

“In some respects Kyckr’s solution was too early, there wasn’t a compelling need for real-time data access that is independently verified as correct,” he told Stockhead.

But laws kept piling on fast and demand grew accordingly.

“Kyckr started to get traction over the last couple of years, we’ve seen an uptake and on that basis we have optimism for the year ahead,” Henderson said.

“You’re seeing the impact of these regulations and you’ll find regulation continues to tighten, but it’s the price we have to pay to ensure AML/CTF doesn’t continue to grow.”

The biggest event for the company last year was WiseTech (ASX:WTC) founder Richard White buying nearly 20 per cent of the company. Shares went as high as 30c before retreating.

While WiseTech is not a client of Kyckr’s, Henderson said White understood from a personal perspective how important the tech was.

“It’s only a personal investment but because he is in the international logistics business he knows you need to be careful about that,” he said.

“There’s no business connection – he just had a general knowledge from his business dealings that there was something interesting.”


Other regtechs

There are two other ASX stocks whose bread and butter is helping their customers comply with AML/CFT laws, among others.

The most noteworthy is ISignthis (ASX:ISX) which has been suspended since October, remaining at loggerheads with the ASX over its operations.

It offers a payments platform which satisfies AML/CFT requirements for applicable merchants.

Identitii (ASX:ID8) also tackles this problem with its own blockchain-based tool that is designed as an entire peer-to-peer payments ecosystem. This enables information to be provided with every transaction.

It too is suspended right now but is expected to exit by the month’s end as it undertakes a capital raising.