Navigatingthe New Era of Fintech
More articles of the Belgium Fintech Magazine
READ ALL ARTICLES
Want an exclusive paper copy?
Want to be the next expert to inspire our audience?
MORE INFO HERE
Discover one of the articles from our brand new magazine, the Belgium Fintech Magazine - #1 Dec 23
Navigating the New Era of Fintech: The Intersection of Innovation, Regulation, and Technology
An interview with Franck Manoukian, Chief Of Staff At Regsharp Audit & Consulting, & Iain Armstrong, Regulatory Affairs Practice Lead At Complyadvantage
In a constantly changing regulatory landscape, companies must strike a balance between agility and compliance. Protecting themselves and their customers from financial crime is not only a sound business practice but also a moral imperative. As fintech professionals and enthusiasts, understanding these changes is crucial, not just for compliance, but as a cornerstone of innovative and competitive strategy.
The financial services industry is grappling with the surge in global anti-money laundering fines, exceeding $2 billion in penalties in 2022 alone. The mounting volume of transactions, legacy systems, and the integration of compliance tech across existing internal systems pose exceptional challenges for businesses.
The rise of financial criminals using sophisticated techniques, the introduction of new regulations (MiCA, AML Act 2020, and the upcoming PSD3), and an ever-evolving sanctions landscape further compound these issues. However, the solutions can be found in holistic financial crime management, fostering collaboration, and adopting unified alerting and case management solutions to streamline compliance efforts. “The convergence of once-separate Fraud and AML teams into multi-skilled functions is a testament to the industry’s need to innovate in combating evolving threats and regulatory pressures.” says Iain Armstrong, Regulatory Affairs Practice Lead at ComplyAdvantage, an AI-driven financial crime and fraud risk detection company serving over 1000 organisations globally. “Monthly reporting, shared and discussed at cross-functional committees, is a critical means of disseminating compliance intelligence, facilitating adaptability to regulatory change” he adds.
The fintech sector, particularly in Europe, faces the difficult task of balancing rapid innovation with stringent regulations. Regulation in Europe is leading the world; however, the mounting volume of new normatives presents serious challenges for financial services organizations, “The principle of proportionality should guide this balance, replacing a strict cost-effective approach” notes Franck Manoukian Chief of Staff at RegSharp Audit & Consulting, french-based consultancy firm specialised in regulatory compliance programs and advisory for fintechs. “Compliance is a living program,” adds Manoukian, emphasizing the need for a mix of internal and outsourced control, regulations monitoring, and training plans.
The Role of Technology in Compliance and AML
The advent of exponential technologies presents a game-changing opportunity for financial institutions to stay ahead of Financial Crime. These technologies enable the efficient identification and resolution of suspicious behavior alerts, a critical need in an environment processing millions of transactions daily. New technologies, particularly Artificial Intelligence (AI) and Machine Learning (ML), are revolutionising the way companies approach AML and compliance. “AI, applied thoughtfully and with appropriate oversight, can be a powerful tool for combating financial crime and for helping companies stay on top of regulatory challenges.” highlights Armstrong. AI can uncover complex fraud patterns by clustering identities or analyzing financial and non-financial events with natural language processing. Similarly, ML supercharges the fight against financial crime by enabling the rapid and sophisticated analysis of vast data sets to detect patterns and anomalies indicative of fraudulent activities. “The application of these technologies has become imperative in this scenario, not as a choice, but as a necessity to stay ahead “ he adds.
Compliance as a Competitive Advantage
Historically, compliance has been viewed as a cost center. However, forward-thinking companies see an opportunity to leverage compliance as a competitive advantage. “By streamlining compliance processes and accelerating time-to-market, compliance costs transform into a communication investment” says Manoukian.
It’s also important to keep in mind that reputational damage incurred by regulatory fines can be very damaging to a company’s growth prospects and financial stability. Furthermore, “many organisations continue to grapple with legacy technology systems, siloed data sets, and inefficiencies in their compliance operations that are holding them back, increasing their costs and exposing them to risks” observes Armstrong.
But the advantages of technology are many. “Investing in efficient and scalable technology not only optimizes costs and improves precision and quality but also enhances customer experience while tackling rising financial crime. ” he adds.
Staying Ahead of Financial Crime
A recent survey conducted by ComplyAdvantage found that 61 percent of firms have seen an increase in the number of payment fraud alerts in the last year, with more than one in ten saying their alert volumes have increased by 40 percent or more. “To detect the most sophisticated fraud scenarios and anticipate the methods that will be used tomorrow by fraudsters, companies must deploy solutions that can easily adapt to the changing environment and new regulatory requirements” emphasizes Armstrong.
AI-powered technology has significantly improved the industry’s ability to fight crime and remain compliant. “In a time of worldwide financial fraud acceleration and diversification, the new technologies are rebalancing the situation in favor of compliance professionals,” says Manoukian.
But the solution cannot rely on technology alone. “Managing financial crime holistically and encouraging collaboration are key to the industry being more effective” states Armstrong. In combating financial crime and staying abreast of new regulations, industry frontrunners are tackling these ongoing challenges by deploying analytical methods, including behavioral analytics, natural language processing, and time sequencing, to identify suspicious transactions and anticipate evolving tactics. These tools scrutinize activities involving unseen counterparties, money transfers to high-risk areas, changes in behavior following suspicious events, and discrepancies in payment details.
The fintech landscape is at a pivotal juncture where agility, compliance, and technological innovation must coalesce. As Manoukian aptly puts it, “Balancing agility and compliance in a rapidly changing regulatory landscape is an art.” The road ahead for fintech is clear: embrace the new era of compliance and regulation through innovative technologies, and transform challenges into opportunities for growth and stability. “Guarding against financial crime is not just good business but also good for business”, concludes Armstrong.
By Chris Crespo / Nordic Fintech Magazine
Published and Distributed by FinTech Belgium asbl
Contact: Alessandra Guion - CEO
>> DOWNLOAD THE PDF ARTICLE