How regulatory technology is redefining fraud prevention, KYC, and AML for online merchants

Behind every smooth one-click checkout lies a dense web of regulations: anti-money laundering rules, sanctions lists, know-your-customer requirements, and data protection laws. For eCommerce platforms, especially those with marketplace models or embedded financial services, keeping up with these rules is as complex as stopping fraud itself.

Regulatory technology—RegTech—is emerging as a critical enabler. These platforms automate KYC, AML screening, transaction monitoring, and regulatory reporting, turning compliance from a manual, error-prone process into a scalable, data-driven capability.ScienceDirect+2Deloitte

Why Compliance and Fraud Prevention Are Converging

Historically, compliance teams focused on satisfying regulators, while fraud teams focused on chargebacks and direct financial losses. In the eCommerce era, those boundaries blur. A weak KYC process not only risks regulatory sanctions but also invites fraudsters to set up mule accounts and exploit marketplaces. Failing to monitor transactions for suspicious patterns can lead to both fraud losses and regulatory penalties.

RegTech platforms increasingly provide shared tools for both functions. For example, the same risk-based customer scoring model can inform how customers are onboarded, what limits they receive, and how their transactions are monitored over time. This alignment enables smarter decisions that protect both the business and its regulatory posture.ScienceDirect

eKYC and Digital Onboarding at Scale

For global merchants and marketplaces onboarding thousands of sellers or buyers per day, manual document checks are not viable. eKYC solutions use OCR, document authenticity checks, liveness detection, and database lookups to validate identities in seconds.

RegTech providers emphasize configurable workflows that adapt verification requirements to risk levels, jurisdiction, and business model. Low-risk customers may pass through lightweight checks, while high-risk entities face enhanced due diligence, such as verifying beneficial owners or cross-checking against adverse media.Deloitte

In the context of fraud prevention, robust eKYC makes it harder for professional fraud rings to scale, as they must provide genuine documents or risk being flagged early.

AML and Transaction Monitoring for Merchants, Not Just Banks

Anti-money laundering obligations used to fall primarily on banks and large financial institutions. As eCommerce platforms introduce stored-value wallets, gift cards, peer-to-peer payments, and embedded finance, regulators increasingly expect them to implement AML-style controls as well.

RegTech systems built for this environment can monitor transaction flows across merchants, customers, and partners, detecting patterns that resemble layering, structuring, or other laundering techniques. Suspicious activity can trigger internal investigations, automated alerts, and—where required—regulatory reports.ScienceDirect

For marketplace operators, these tools also support better vendor risk management, catching sellers whose behavior indicates counterfeiting, scams, or abuse of return and refund systems.

Global Reach, Local Rules

One of the biggest challenges for eCommerce compliance is jurisdictional complexity. A platform serving customers in North America, Europe, and Asia must navigate different AML directives, KYC rules, and data protection laws.

RegTech vendors respond by encoding country-specific requirements into their platforms, allowing merchants to define policies that adapt based on where customers or sellers are located. Features like configurable data residency, localization of consent flows, and rules-based document collection help merchants stay compliant without rebuilding processes for every market.Deloitte

Data Quality and Interoperability

Just like fraud engines, RegTech systems are only as effective as the data they ingest. Poorly structured onboarding data, missing identifiers, or siloed transaction logs make it difficult to build accurate risk models or generate compliant reports.

Leading platforms stress strong data governance, standardized schemas, and integration with core commerce, payment, and CRM systems. This not only improves compliance outcomes but also creates a richer dataset for fraud analytics, enabling more precise detection of collusion, synthetic identities, and cross-border scam patterns.TechRadar

Closing Thoughts and Looking Forward

As eCommerce continues to blur the line between retail and financial services, RegTech will become a foundational component of anti-fraud strategy. The platforms that master eKYC, AML monitoring, and regulatory reporting at scale will be better positioned to expand into new markets, launch innovative products, and partner with regulated financial institutions.

By 2026, it is likely that most high-growth merchants and marketplaces will rely on RegTech stacks that tightly integrate with their fraud engines. Compliance will no longer be a box-ticking exercise; it will be a data-rich, real-time capability that strengthens defenses against fraud and financial crime.

In that world, the true competitive edge will belong to those who treat compliance data as a strategic asset—one that powers safer commerce, earns regulator trust, and gives customers confidence that the platforms they use operate under robust, transparent rules.

References

Adopting Regulatory Technology for Anti-Money Laundering – ScienceDirect – https://www.sciencedirect.com/science/article/pii/S2666188825009384 ScienceDirect

RegTech Universe 2024 – Deloitte – https://www.deloitte.com/lu/en/industries/technology/analysis/regtech-companies-compliance.html Deloitte

The Ultimate RegTech GTM Strategy in 2024 – Aventine Lab – https://aventinelab.com/the-ultimate-regtech-gtm-strategy-in-2024/ Aventinelab

4 Ways RegTech Will Transform AML/KYC Controls in 2024 – AML Watcher – https://amlwatcher.com/blog/4-ways-regtech-will-transform-aml-kyc-controls-in-2024/ AML Watcher

How Agentic AI Can Change the Way Banks Fight Financial Crime – McKinsey & Company – https://www.mckinsey.com/capabilities/risk-and-resilience/our-insights/how-agentic-ai-can-change-the-way-banks-fight-financial-crime McKinsey & Company

Author: Claire Gauthier, Author: – eCommerce Technologies, Montreal, Quebec; Peter Jonathan Wilcheck, Co-Editor, Miami, Florida.

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