In our weekly roundups, the encompass team take you through all the breaking news on Know Your Customer (KYC), compliance and financial crime, keeping you informed at all times.
Unless you’ve been in Moscow this week, it’s unlikely that you will have missed the ongoing fall out from the poisoning of Russian Sergei Skripal and his daughter Yulia (in addition to a police officer who remains ill in hospital) with the nerve agent Novichok. On Wednesday, PM Theresa May announced the expulsion of 23 diplomats (spies) from the UK as well as the cutting of high-level diplomatic relations.
Following the revelations that the Russian state was the culprit behind the first use of a chemical weapon attack on European soil since the end of World War 2, there have been calls for the tightening of financial regulations on Russian money within the UK. The Magnistsky Act has already been passed by the US, and Sky News reports there has been increasing clamour for UK legislators to follow suit. The Act, named after Russian lawyer Sergei Magnistsky, who was detained and then reportedly murdered by Russian state officials while in custody (as told in the book Red Notice by Bill Browder), bans from the US those involved within the crime, and those involved with human rights abuses.
On a completely separate note, George Clooney (yes, that one) and human rights activist John Prendergrast have written in Foreign Affairs Magazine on how corruption must be countered in developing countries such as South Sudan in order to end the ongoing conflict. They note, sadly, how the ruling elites in South Sudan have siphoned off millions of dollars of cash, using natural resources such as cobalt, nickel, oil, diamonds and copper to buy property in neighbouring states, and launder their money abroad.
The rise of RegTech to combat illicit funds and hinder criminality continues to focus minds, and this week it is the turn of management consultants Grant Thornton to ask the question of whether RegTech is the future of compliance. The authors note how RegTech can be used in myriad functions across the compliance process including smart compliance, testing functionality, and managing cost.
Venturebeat has reported on the news that Sir Tim Berners-Lee, the designer of the modern internet, has called for a regulatory framework to stop monopolisation from dominant technology firms. Speaking of companies such as Facebook, Twitter and Google, Berners-Lee notes;
“The Web that many connected to years ago is not what new users will find today. What was once a rich selection of blogs and websites has been compressed under the powerful weight of a few dominant platforms. This concentration of power creates a new set of gatekeepers, allowing a handful of platforms to control which ideas and opinions are seen and shared.”
Financial crime writer and specialist Nathan Lynch from Thomson Reuters has written on LinkedIn noting comments from new chief executive of the Australian Transaction Reports and Analysis Centre (AUSTRAC), Nicole Rose, extolling the virtues of technology and innovation in the fight against financial crime and money laundering.
Lynch notes that AUSTRAC are stepping up the fight against financial crime through closer cooperation with other Financial Intelligence Units across the Asia-Pac region to collaborate on the use of technology and innovation in their joint efforts.
Blockchain is rarely far away from the front pages in 2018, and this week we have seen a number of notable entries. Data Science Central have noted the four key ways that blockchain is changing the analytics landscape, while on Medium, we read this missive on how blockchain can close the compliance gap. Trust is still one of the key components yet to be won within financial crime reporting and the author notes that blockchain could yet solve this issue for KYC practitioners. In The FinTech Times, Andrew Frost of Lawson Conner has written on the use of blockchain within RegTech technologies, observing that;
“Many regulators require structured, well-defined and complete risk data reporting. Today, firms still rely on manual and archaic partially automated processes and some regulators receiving these mandatory datasets are ill-equipped to manage them adequately. Blockchain would make the process easier for both.”
As governments and regulators continue to play catch-up in the ever-evolving field of cryptocurrencies, CNBC News has reported that Japan will urge the G20 to introduce legislation to prevent cryptocurrencies being used for money laundering. The Financial Action Task Force (FATF) is due to report to the G20 on how best to minimise money laundering within digital currencies, but given the differing outlooks of national governments, prospects for a shared agreement remain low at this time.
Finally, Silicon Republic has written on the Association of Chartered Certified Accountants (ACCA) pleas for accountants to brace themselves for book entries from companies reporting gains and losses in digital currencies. The ACCA have warned that cryptocurrencies could be used to mask suspicious activities or potential money laundering. With cryptocurrencies moving from proof of concept to scale at such pace, some have warned of the similarities with the 17th Century Dutch tulip auctions – which collapsed after becoming little more than a giant ponzi scheme.