FACE Code of Conduct for RegTech in India (2025): Establishing a Regulatory Benchmark for Compliance Technology

Introduction

In June 2025, India formally entered a new era of regulatory oversight for compliance technology providers. The release of the FACE Code of Conduct for RegTech marks the first formal, industry-backed regulatory framework for firms offering technology-led compliance solutions. Developed by the Fintech Association for Consumer Empowerment (FACE)—a self-regulatory organization (SRO) recognized by the Reserve Bank of India—this Code is set to redefine how RegTech companies operate, innovate, and interact with financial institutions and regulators.

This article outlines the significance of this Code, the seven foundational principles it rests upon, and how it reshapes the compliance landscape for digital-first financial ecosystems in India.

What Is the FACE Code of Conduct?

The FACE Code of Conduct, published on June 30, 2025, provides a standardized framework for RegTech companies that offer software and automation tools to support compliance with Indian financial regulations. It was ratified by the FACE Board on June 19, 2025, and its provisions are binding for all FACE member firms operating in the RegTech space.

The Code’s stated objective is to instill trust in digital compliance platforms, promote ethical innovation, and establish mechanisms for accountability, especially in light of increased reliance on AI, data analytics, and cloud-native compliance infrastructure.

Why This Code Is a Significant Development?

Until now, India lacked any structured compliance framework specific to RegTech firms. Although financial institutions were subject to tight regulation from the RBI, SEBI, and IRDAI, the third-party tech platforms serving these institutions operated in a grey area.

The FACE Code fills this gap in four essential ways:

1. It formalizes expectations for how RegTech firms engage with regulators.
2. It introduces ethical standards for the development and deployment of AI/ML-based compliance tools.
3. It aligns RegTech operations with India’s evolving data protection framework, including the DPDP Act and IT Rules.
4. It creates enforcement structures and audit protocols to ensure adherence and address violations.

Overview of the Seven Pillars

1. Regulatory Engagement

RegTech companies are required to build and maintain systems that can provide full visibility to regulators during inspections. This includes maintaining audit-ready logs, structured documentation, and system access protocols.

2. Responsible Innovation

All AI or machine learning components must be designed and tested to prevent bias, maintain explainability, and remain aligned with customer compliance objectives.

3. Data Privacy and Security

The Code mandates rigorous data protection protocols, including encryption, access control, third-party risk audits, and compliance with industry standards such as ISO 27001 and SOC 2.

4. Partnership Governance

Vendors and subcontractors engaged by RegTech firms must be subject to due diligence, risk assessments, and contractual controls that ensure compliance accountability is retained.

5. Transparency and Accountability

Firms must institute internal review mechanisms, publish compliance disclosures, and report on adherence to the Code to their board of directors.

6. Employee Conduct and Training

Organizations must designate a compliance officer responsible for Code implementation, conduct staff training programs, and maintain a company-wide culture of compliance.

7. Grievance Redressal and Incident Reporting

A formal grievance redressal system must be maintained for customers and internal stakeholders to report non-compliance or security incidents.

Compliance Timeline

The Code was made effective on June 30, 2025, and member firms are required to adopt all mandatory provisions by December 31, 2025. After this period, firms must submit self-certifications of compliance, maintain audit logs, and prepare for third-party assessments.

Non-compliance may trigger actions from the FACE Enforcement Committee, including mandatory audits, public disclosure of violations, and possible suspension of SRO privileges.

Industry-Wide Impact

The release of the FACE Code of Conduct is expected to influence RegTech business models across the country. The following systemic changes are anticipated:

• Financial institutions will prioritize vendors who are FACE Code-compliant, making it a de facto standard.
• The maturity of RegTech solutions will rise, especially in risk management, reporting automation, and digital KYC tools.
• The code sets the tone for DPDP-aligned technology deployment, helping firms align faster with India’s new data protection regime.
• Startups offering RegTech-as-a-service will face structured operational expectations, improving investor confidence in the sector.

Conclusion

The 2025 FACE Code of Conduct for RegTech companies is more than a regulatory formality—it is a blueprint for trustworthy innovation in one of the most sensitive sectors of the digital economy. For a rapidly digitizing India, the establishment of standardized RegTech principles ensures that automation does not come at the cost of accountability.

Compliance service providers, financial institutions, and technology startups alike should treat this Code not only as a compliance obligation but also as a competitive differentiator in the increasingly regulated fintech and RegTech landscape. As Regulatory requirements for FinTech or RegTech  continue to evolve, aligning with such codes ensures proactive compliance, builds trust, and sets businesses apart in a complex regulatory environment.

FAQs for FACE Code of Conduct for RegTech in India

1. What is the FACE Code of Conduct for RegTech?

The FACE Code of Conduct is a regulatory framework introduced by the Fintech Association for Consumer Empowerment (FACE) to guide RegTech companies in ethical, secure, and compliant operations. It’s India’s first industry-backed code tailored specifically for technology-driven compliance providers.

2. Why was this Code introduced in 2025?

Before this Code, RegTech companies operated without clear regulatory oversight. The FACE Code fills that gap by setting standards around AI use, data security, regulatory coordination, and accountability to protect stakeholders in the financial ecosystem.

3. Who must comply with the FACE Code?

All RegTech firms that are members of FACE are required to follow the Code. It applies to companies that develop software tools or automation systems to help financial institutions meet regulatory obligations in India.

4. What is the effective date for this Code?

The Code came into effect on June 30, 2025. Companies must fully implement all mandatory provisions by December 31, 2025, and begin self-certifying their compliance starting Q1 2026.

5. What are the key themes of the Code?

The Code is built on seven principles—ranging from regulatory engagement and responsible AI innovation to data privacy, partner governance, internal accountability, staff conduct, and grievance handling.

6. Does the Code include Data Privacy Requirements?

Yes, it emphasizes strong data protection practices. Firms must follow protocols like encryption, access control, and third-party audits while aligning with India’s DPDP Act and international standards like ISO 27001.

7. How does this Code affect AI and machine learning tools?

AI/ML tools used for compliance must be tested for fairness, explainability, and reliability. The Code insists that such tools help users meet regulatory requirements without introducing bias or automation risks.

8. What kind of audits are involved?

Companies must conduct internal reviews, submit self-certification reports, and prepare for annual third-party audits to verify adherence. Non-compliance can trigger public disclosure or FACE-led investigations.

9. Is there a grievance redressal mechanism in the Code?

Yes, the Code mandates a formal process for customers and employees to report non-compliance, security breaches, or operational concerns, with designated officers responsible for timely redressal.

10. Why is this Code important for RegTech startups?

For startups, the Code offers credibility and clear operational standards, helping them gain trust from financial institutions and investors. It also acts as a guide to build scalable, compliant solutions from the start.