In an era marked by new technologies, the compliance officer must go beyond compliance with legal and regulatory aspects and focus efforts on becoming a trusted advisor and strategic partner for the organization. Specifically, in the Fintech industry (financial technologies) the compliance officer is required to take advantage of technologies derived from Artificial Intelligence to segment and monitor the transactions of anti-money laundering systems (AML); It is about carrying out an objective and technical evaluation that allows mitigating emerging risks within each process and financial product impacted or associated with money laundering and the financing of crimes.
Today the compliance function needs to respond to
- continuous analysis and monitoring of processes
- risks and controls
- modernization of the governance and data analysis model
- analysis of transactional data with more coverage and security and in less execution time
- identification of suspicious or fraudulent trends or transactions that go outside the demographic and transactional profile of customers, not only based on automated parameters, but also based on defined artificial intelligence criteria
The changing environment and the dynamic transformation of financial sector entities towards digital and multi-channel banking, requires anti-money laundering (AML) professionals and especially the Compliance Officer to be able to respond and be up to the demands of a world in constant transformation. The compliance management function is more demanding every day due to state regulations – local and external – and expectations of the Board of Directors, so it is vitally important to find a way to increase its efficiency and effectiveness in the face of the challenges brought by new technology trends. disruptions that support businesses that are increasingly critical and competitive and that impact the risks to be considered in the development of the AML compliance plans and program.
Managing Emerging Risks
The advances of digital banking derived from financial technologies (Fintech) in the global financial market have established a wide variety of products and services, which help manage different and complex types of risks. The financial industry has not fully understood and managed some of the new risks on the market and they are leaving important pending tasks of identification and analysis regarding the treatment of risk that they must evaluate and complete within their organizations. Then “new risks and opportunities” open up both for clients, the financial system, obligated subjects as well as for supervisors.
New disruptive technological trends must necessarily be accompanied by the Compliance function to carry out an objective and technical assessment to mitigate the various emerging risks of this era of Fintech within each process and financial product impacted associated with money laundering and financing of crimes.
The Fintech-based services that are a reality today have the potential to change the business models, structures and operations of the traditional financial and banking industry, requiring new skills and competencies for the Compliance Officer who Apart from their expertise in the prevention of money laundering and financing of terrorism, they require technological support and knowledge and general management of economic, financial, accounting, tax, audit (financial, operational and forensic), AML prevention, legal issues. and regulatory, administrative, logistics, Information Technology (IT) systems and, above all, new trends in disruptive technology, among others.
The Impact of Fintech
This innovative Fintech trend has a notable impact on the competitiveness of the service and the well-being of the client and poses a challenge for regulators and operators, it is also advisable to measure its impact on financial results, level of customer satisfaction, as well as the level compliance with the applicable regulations, since not all the laws of the countries contemplate and regulate in whole or in part the broad spectrum of these financial services innovations that are already a reality and are available to customers and users.
The main business areas where the concept of Fintech is embodied are: payments and transactions, personal finance, consulting and marketing for investments and financing alternatives between individuals and companies; which include activities such as: mobile banking, big data and predictive models, AML compliance, crowdfunding, crowdlending (financing by various investors), cryptocurrencies and alternative currencies, foreign exchange market, automated process management and digitization, payments and transfers, p2p loans (online loans between individuals), security and privacy, financial advisory services, trading or marketing of crypto assets, among others. As can be seen, a large part of the financial activities related to Fintech are services provided by private banks and other financial entities,
In this context, it is important to train all the officials in charge of these activities within the financial institution about the risks associated with Fintech and the prevention of money laundering, to also ensure that they are included in the monitoring and training program. Compliance managers must ensure that they know how to use the latest tools if they want to stay competitive in their careers.
Large enterprises have a lot of experience in dealing with regulatory bodies, but smaller businesses often find themselves at a disadvantage. Complex technology can help smaller businesses quickly close the gap and become better at ensuring regulatory compliance. One of the most underrated aspects of compliance technology is the difference it makes in the where regulatory body will assess an organization. A common misconception of small businesses is that regulatory bodies only look at the compliance performance of the organization. In reality what regulatory bodies are looking at is the preparedness of an organization.