NorthRow – a UK-incorporated business that builds solutions to help organisations combat fraud and financial crime, and a key partner in the Open Banking initiative – has published its take on some of the compliance trends that will affect businesses in the coming year. Here are some of those trends that will be of particular interest to financial professionals working for larger corporates:
1. Beneficial owner transparency
EU Member States will be required to implement the Fifth Anti-Money Laundering Directive (5MLD) into national law by this time next year and this will introduce increased transparency in relation to company ownership and ultimate beneficial owners. Companies should start thinking about how they can incorporate new beneficial ownership checks into compliance and client onboarding processes.
2. Action on illegal crypto asset activity
There is increasing concern and awareness about the use of crypto assets for illegal activity – something the UK's financial industry reported on last year. While the Financial Conduct Authority (FCA) is investigating companies involved in the sale of cryptocurrencies, the UK government is also expected to step up its regulatory response to crypto asset fraud in 2019.
3. Sharing data to fight fraud
The future of fighting financial crime is collaboration, with the UK's Financial Action Task Force (FATF) saying that intelligence sharing is a top priority for 2019 and is a key requirement for the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) framework. The UK's Joint Money Laundering Intelligence Taskforce is an example of successful and effective sharing of data between the financial sector and law enforcement.
4. Focus on high-risk countries
There will be increased focus on due diligence in high-risk countries in the run up to 5MLD. NorthRow states: “Clients or transactions engaged in high-risk countries will be subject to enhanced due diligence when performing onboarding checks.”
5. Open Banking milestone
On 14 September 2019, the European Banking Authority’s Regulatory Technical Standards on strong customer authentication (SCA) and secure open standards of communication (SCS) will come into effect, which is a major milestone in the revised Payment Services Directive (PSD2) and Open Banking project. The implementation of these rules will regulate how banks allow third parties to access customer data and should bring in standardisation. NorthRow states: “Additionally, the new regulation should accelerate industry-wide collaboration on the standardisation of APIs and make the process easier for all parties.”
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