RegTech Readiness for Financial Institutions in the AI Governance era: Emerging technology risk, internal control, and inclusive compliance modernization

Financial institutions increasingly rely on regulatory technology (RegTech), artificial intelligence (AI), machine learning, digital identity systems, workflow automation, and continuous auditing to satisfy anti-money laundering obligations, customer due diligence requirements, cybersecurity expectations, consumer protection duties, market conduct rules, and internal control documentation standards. These tools can improve the speed and consistency of compliance work, but their value depends on institutional readiness rather than technological capability alone. This conceptual review updates an earlier 2024 readiness analysis by incorporating recent scholarly and regulatory sources. It also situates the discussion within the authorial research trajectory on regulatory compliance, trade policy, technology-enabled supply chains, and AI-related legal, privacy, and cybersecurity risks. The review finds that RegTech can strengthen monitoring, regulatory reporting, audit documentation, fraud detection, and financial inclusion when it is implemented with reliable data, clear control ownership, explainable decision logic, vendor accountability, cybersecurity safeguards, and human oversight. However, the same technologies can amplify weak controls, obscure accountability, increase third-party dependence, and raise fixed costs for smaller institutions. The burden is particularly acute for community banks, credit unions, minority depository institutions, small investment firms, and banks serving underserved areas, which often face complex compliance expectations with limited staffing and technical capacity. The paper proposes an updated RegTech Readiness Pathway organized around nine dimensions: regulatory-to-control mapping, data governance, control ownership, automation fit, explainability and model governance, cybersecurity and privacy-by-design, third-party oversight, continuous audit evidence, and inclusion-oriented proportionality. The article contributes to compliance and governance scholarship by treating RegTech adoption as an internal-control transformation rather than a software procurement exercise.