the full picture, this week – 14 June 2019

by | Jun 14, 2019 | All Blog Posts, the full picture this week, Featured

Let us put you in the picture this week, as we round-up and react to the latest news from the financial crime compliance and technology sectors.

This time, we report on research that examines why retail banks have been slower to adopt blockchain technology.

Elsewhere, we highlight the prediction that UK firms adopting Artificial Intelligence (AI) could bolster the UK economy by more than 20 per cent within the next decade.

These issues, and more from around the globe, give us plenty to dive into for your Full Picture, This Week…

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APRA report can bring opportunities for financial institutions in Australia

In May, the Australian Prudential Regulation Authority (APRA) released its report analysing self-assessments by more than 30 of the country’s largest banks, insurers and superannuation licensees.

the full picture, this week – 14 June 2019 | Australian Prudential Regulation Authority | Tech London Advocates | encompass blogThis was in response to actions points from the regulator’s earlier examination of the Prudential Inquiry into the Commonwealth Bank of Australia.

After reviewing the self-assessments undertaken, the regulator found “material weaknesses” in governance and risk management, identified a need for institutions to improve their management of non-financial risk and “is considering applying additional capital requirements to several regulated institutions.”

This blog examines APRA’s latest findings and what they mean for the industry in Australia.

Brexit and Ireland’s financial services

With the date of Britain’s exit from the European Union (EU) on the horizon, firms across the globe are bracing themselves for the inevitable impact that this significant shift will have.

For Ireland’s financial and legal sectors, especially, there looks likely to be considerable ramifications as new companies rush to take their place within a landscape that offers great opportunity.

encompass’ Richie Beattie examined how those already established in the sector can, amid an expected influx of new companies, utilise the latest in technology to ensure time to revenue is minimised, client experience is improved and the cost of onboarding is reduced in order to step up their offerings.

Read his blog.

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understanding 5MLD

practical implications and anticipating future regulatory changes

benefits of blockchain ‘limited for retail banks’

Retail banks have been slower to adopt blockchain technology because they face more challenges if they want to truly reap the benefits.

the full picture, this week – 14 June 2019 | blockchain and retail banks | encompass blogAccording to a report from management consultant McKinsey, one of the key factors holding back greater blockchain adoption is the tough regulatory environment around consumer finance and the reputation of cryptocurrencies, such as Bitcoin, which have made the retail banking sector “nervous and cautious” about any Blockchain-related initiatives, the report’s author, Matt Higginson, said.

In contrast, the investment banking world has experimented on a large scale with blockchain and launched a number of initiatives around bond issuance, trading settlement, trade finance, private equity and fund distribution.

McKinsey suggests that making it easier to exchange conventional currency for digital assets and creating a clearer regulatory picture might help increase adoption.

Read the latest from Finextra here.

the encompass view

As regtech matures, there is increasing evidence which shows that Intelligent Process Automation (IPA) is an easily adopted means to manage regulatory risk and reduce costs of operating Know Your Customer (KYC) regimens, while increasing effectiveness and speed – all of which ultimately benefit customers.

The increasing requirement for information sharing prompts some to find a role for blockchain as the data management layer, however, blockchain’s origins are in the data foundation of the cryptocurrency Bitcoin, and in this role it was designed specifically to be capable of creating immutable records, necessary to prevent fraud, and to operate in trustless situations – a necessity for commercial activity between parties unknown to one another. However, KYC is the opposite of a trustless environment, as trust is central to relationships between customers, financial institutions and regulators.

As is shown by this article, which points to the fact that a slower rate of adoption may be down to the caution still felt by some banks when it comes to blockchain, in its current form, it raises more questions than it provides answers to, in terms of automating KYC operations and reducing costs. These questions must be answered and the regulatory requirements made clearer before we understand the potential benefits of blockchain.

the encompass view

As regtech matures, there is increasing evidence which shows that Intelligent Process Automation (IPA) is an easily adopted means to manage regulatory risk and reduce costs of operating Know Your Customer (KYC) regimens, while increasing effectiveness and speed – all of which ultimately benefit customers.

The increasing requirement for information sharing prompts some to find a role for blockchain as the data management layer, however, blockchain’s origins are in the data foundation of the cryptocurrency Bitcoin, and in this role it was designed specifically to be capable of creating immutable records, necessary to prevent fraud, and to operate in trustless situations – a necessity for commercial activity between parties unknown to one another. However, KYC is the opposite of a trustless environment, as trust is central to relationships between customers, financial institutions and regulators.

As is shown by this article, which points to the fact that a slower rate of adoption may be down to the caution still felt by some banks when it comes to blockchain, in its current form, it raises more questions than it provides answers to, in terms of automating KYC operations and reducing costs. These questions must be answered and the regulatory requirements made clearer before we understand the potential benefits of blockchain.

Mike Kearney | Product Marketing Specialist, encompass

AI boost for UK economy

UK firms adopting AI could boost the UK economy by 22 per cent by 2030, according to a report from McKinsey and data analysis from Quantumblack.

The analysis, based on simulations from McKinsey Global Institute (MGI), also suggested that firms could benefit from a 120 per cent increase in total economic value.

the full picture, this week – 14 June 2019 | Helen Mayhew, CEO, Quantumblack | encompass blogHowever, it did warn that, for the majority, it is still “early days” for AI adoption, with the picture unclear in terms of exactly how much of the UK economy stands to benefit.

On a global scale, the MGI simulation also suggested that the potential impact of AI technologies could add 16 per cent to global output by 2030.

Helen Mayhew, chief operating officer at QuantumBlack, explained:

Multiple recent studies have found that business’ economic performance are increasingly determined by making the best use of technology, and ‘winner-takes-most’ dynamics are becoming evident across sectors – some firms may use AI to gain competitive advantage, whereas others could fall victim to disruption. The gap is not likely to widen automatically, so we need to be proactive in both the development and diffusion of AI technologies. The UK is well-positioned to take advantage of these opportunities, and so the potential rewards for businesses, and society more broadly, are significant.

Read more.

confidence at an all-time high among Nordics’ fintechs

The majority of fintechs in the Nordic and Baltics think that the region can dominate the landscape in years to come – if they can establish greater access to investment capital.

This is the top line from the recent Nordic Fintech Disruptors Report, which found that confidence among fintechs in the region is at an all-time high – of 68 per cent – and up by 14 per cent from the previous year.

However, the study also found that some are well aware of the challenges, despite this confidence in what could lie ahead.

67 per cent of respondents believe that greater access to capital is needed for the region to fulfill its potential, up by a significant 24 per cent compared to 2018. Over half of those who were questioned believe that greater willingness to partner with other fintechs and incumbents will help the region to compete on a global scale.

Simon Hardie, author of the report, said:

Since we started the research in 2014, we have seen a region that has outperformed many in developing and nurturing fintech innovation but true collaboration and trust across the ecosystem remains an issue which has to be addressed if the region is to fulfill its potential as a global fintech hub.

Get the latest from Finextra.

news in brief

The European Commission (EC) has recommended Malta strengthen its Anti-Money Laundering (AML) measures. The EC points to the growth of the country’s financial and gaming sectors, as well as noting that “crypto-currency operators require an effective anti-money laundering enforcement”. Read more.

Facebook does not view itself as a payments company, and is looking to partner with banks and other players in the market as it considers the role of payments and Open Banking solutions across its family of apps. Speaking at the Money20/20 conference in Amsterdam, Paulette Rowe, Facebook’s head of payments and financial services partnerships – and previously head of Barclaycard – said growing use of Facebook as a platform for commerce, particularly in Asia, was accelerating discussions over its role as payments facilitator. FStech has more.

Switzerland has stepped up cooperation with other countries, including India, in an effort to crack down on money laundering. It comes as the country is trying to shed the long-held perception of being a safe haven for undisclosed funds, including those related to money laundering and terror financing.

A European Union (EU) official has revealed that the EC is taking a close look into past money laundering cases at EU banks to determine if current rules need to be changed. The official told Reuters that the EC is reviewing cases between 2012 and 2018 in an effort to identify how banks fell short in preventing the crimes. Read more on PYMNTS.com here.

International digital remittances will reach $525 billion by 2024, up from an estimated $332 billion in 2019, with mobile and blockchain solutions becoming increasingly popular. Juniper Research analysis predicted that the mobile channel will account for 41 per cent of international digital money transfers by volume in 2024.

meet the encompass team

On 18 June, Ed Lloyd, Executive Vice President and Global Head of Sales & Marketing at encompass, will be speaking at the Automation in AML & KYC Forum in London. This Panel Discussion will cover achieving operational excellence in KYC/AML through automation. The forum welcomes colleagues from banking, capital markets and other financial services to discuss all things automation. Find out more here.

The world of Know Your Customer (KYC), compliance and financial crime never sleeps, and if your challenges are keeping you up at night let us help. encompass intelligently automates information and news discovery for KYC requirements for onboarding, event-driven refresh and remediation.

Driven by your internal policies, our platform automatically constructs corporate ownership structures, discovers beneficial owners, and in minutes screens all relevant entities and persons for regulatory, reputational and financial risk.

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