Update: This article was updated on the 15 March 2019.
Organisations need to find solutions to fraud and money laundering at the same cadence as the emerging risks.
Recently, GRC Professional spoke to Andrew Davies, Vice President of Global Market Strategy in Financial Crime Risk Management at Fiserv, who addressed the challenges of meeting regulations and inculcating the new typologies when it comes to the financial crime space.
US-based Davies works from a perspective of technology effectiveness.
In Australia, vibrant discussion regarding the use of technology solutions can be found on forums and other avenues, such as ASIC’s RegTech Liaison meetings and their partnership with the RegTech Association; however, major financial institutions have still been slow to onboard RegTech solutions, even with the interest of the conduct regulator and the Australian Transactions Reports and Analysis Centre (Austrac).
The typologies are always changing, and Davies highlighted trade finance and cross-border payments as two such examples.
The discussion with Davies is timely, since it comes just after the #Accelerate Regtech forum, where discussion panels consisting of RegTech industry members, regulators and members of the financial services industry addressed the issue of ever-increasing risks and obligations.
Davies also addressed more effective international guidance from bodies like the Financial Action Taskforce (FATF).
“The overarching guidance from FATF has become more effective and much more collaborative,” Davies said.
From a technology perspective, Davies said that it is the “Best of times and the worst of times.”
Regarding the risks around crypto-currency, Davies suggested the topic possibly gets bit more credit than it deserves, considering crypto-currency transactions average around $6 billion per day, while the biggest global financial institutions are doing something more in the region of $4 trillion in transactions per day.
However, Davies’ comments coincide with two official releases from Austrac, published in tandem with Australian law enforcement. In collaboration with New South Wales Police, Austrac said digital currencies have now had sufficient time to comply with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, which was extended to include crypto currencies in April of last year.
Austrac’s second notice was made in collaboration with the Australian Federal Police (AFP), and announced the suspension of registration of two digital currencies.
Another technology risk fast-looming is the in-coming open banking regime, to be made active on 1 July of this year.
In 2018, the Know Your Customer (KYC) risk, associated with this first facet of the consumer data right (CDR), was identified as a potential risk by the GRC Institutes AML Networking group.
For Davies, new technologies highlight the need to create a delicate balance between improving customer experiences and managing the potential risk of those same customers. “We need to understand who they are today, but also who they are doing business with tomorrow.”
Ongoing due diligence continues to be a challenge for banking secrecy laws in other jurisdictions, but sometimes, the meeting of ongoing due diligence obligations can prove a challenge in its own right, especially in spaces where such records are inaccessible.
“In the US alone, there are 182 entity and ownership changes and control of companies,” Davies said.
For Davies, this where technology comes in, as it can show business how to manage a risk today that leaves the organisations able to see its own way forward tomorrow.
Andrew Davies, Vice President of Global Market Strategy in Financial Crime Risk Management at Fiserv