Over the last decade, innovative private sector solutions to AML/CFT regulatory compliance demands have enabled businesses to revolutionize the experience they provide to their customers. In recognition of this progress, a report by the FATF report discusses how innovations by the FinTech and RegTech industries stand to further enhance regulatory compliance for businesses, risk management, and customer experience.
A Pervasive Threat – Money Laundering and Economic Crime
Money laundering – the “cleaning” of criminal revenue to disguise its illegal source and facilitate its use in legitimate, everyday activities – has become a major concern for the vitality of our global financial system. A 2020 report by Deloitte estimated that money laundering makes up 2-5% of the global GDP (as much as $2 trillion). Pieter Alberts, senior operations manager at the Financial Intelligence Centre, estimated that South Africa is losing between $10 billion and $25 billion annually in illicit financial flows. Combating money laundering is therefore vital to secure and maintain the integrity of the global financial system.
However, the web of legislation designed to combat money laundering and financial crime has historically created new compliance challenges for businesses, while also undermining the customer experience. By recognizing and tackling the challenges facing businesses, the Fintech, Regtech and Suptech industries have driven innovation and transformed AML/CFT compliance.
Customer Satisfaction – The Utility of New Regulatory Technologies
The Financial Action Task Force (FATF) – an intergovernmental organization that is widely recognized as the global leader in anti-money laundering (AML) policy – published a report on the opportunities for new technologies to enhance the AML/CFT compliance process.
“CDD procedures are among the main sources of dissatisfaction for customers. The process of collecting and verifying information is often difficult and strenuous, filled with endless requests for documents and additional in-person periodic evidence submissions” – FATF report.
Historically, effective compliance with AML/CFT legislation has been soured by its negative impact on customer experience. Know Your Customer (KYC) requirements for the provision of identity documents and extensive paperwork were unpopular because of how time-consuming they were – the term “FICA” quickly became synonymous with bureaucratic inefficiency.
“The enhanced use of technologies, for client screening and matching, holds great potential to improve the compliance processes” – FATF report.
FICA Compliance – A Transformed Customer Experience
South Africa’s implementation of the Financial Intelligence Center Amendment Act (FICA) is a perfect example of how private sector innovation transformed AML/CFT compliance.
Initially, FICA compliance cost businesses time and money by forcing them to engage in inefficient and lengthy administration that consumed human resources. The labour-intensive process of ensuring compliance also contained many moving parts that rendered it vulnerable to non-compliance or fraud. For customers, FICA compliance entailed complex paperwork and time wasted in a bank queue.
However, in 2017, ThisIsMe transformed the South African RegTech industry by cutting FICA compliance from two weeks down to three minutes – an achievement that got the company featured as one of the Emerging 50 Rising Stars on 2018’s FINTECH100 list.
Today, FICA compliance is automated: consumers can do it from the comfort of their homes and receive near-instant verification on the necessary identification documents. Businesses have been able to streamline and automate their regulatory compliance procedures by using integrated Application Programming Interfaces (APIs), saving time and money in the process.
Enhanced Risk Assessment and Risk Management
A comprehensive risk assessment and risk management approach to customer due diligence can further enhance customer experience. By using a tailored approach to risk, businesses can reduce due diligence requirements for individuals that are identified as being low-risk.
“Innovative technology-based solutions – both digital ID and AML compliance transaction monitoring tools - can facilitate more accurate and up-to-date risk assessments at an optimised cost and provide greater confidence in the conclusions of that risk assessment, enabling greater use of simplified due diligence where appropriate” – FATF report.
Greater detail and accuracy in risk assessments save time and money by allowing businesses to conduct enhanced due diligence that is appropriate to the level of risk posed by an individual. This not only saves the business time and money but also provides a better customer experience.
Compliance Optimisation – Have Your Cake and Eat It Too
These use cases of new technology enhancing customer experience demonstrate how private sector technological innovation has created a healthier compliance environment for businesses and consumers alike.
“Increased communication and cooperation between the public and private sector… will be key to overcoming these challenges and fully realizing the promise of responsible innovation to strengthen the effectiveness of AML/CFT measures” – FATF report.
By combining public sector legislation with private sector technological innovation, South Africa has been able to actively move towards a modern economy based on transactional security. Today, businesses no longer have to choose between lower costs, improved efficiency, and world-class customer experience. When it comes to ensuring regulatory compliance and providing a superb customer experience, businesses can have their cake and eat it too.
As South Africa’s leading provider of world-class due diligence and remote-onboarding solutions, ThisIsMe is proud to be at the forefront of a trust-based and privacy-compliant digital world. To experience how our full suite of advanced due diligence services can serve your business and its customers, book a demonstration by contacting our team here.
