Connecting the dots to fight financial crime and identify risks

After RiskConnect Virtual 2020, The Paypers interviewed Christian A. Chmiel, CEO and founder, Web Shield, to find out what where his event’s takeaways, with a focus on fighting financial crime

Organised by Web Shield, RiskConnect is the conference for the unsung heroes of payments: risk professionals, compliance officers and anti-fraud experts. As the current pandemic has forced many events to go virtual, this year’s conference took place online, on the 19th of November 2020. Nevertheless, for those interested in the topics addressed, all content is available on-demand throughout the year.

Voices from the payments industry gathered to discuss topics such as spotting and fighting fraud, scams, KYC, money laundering, shell companies, deceptive marketing, and of course the challenges and opportunities for the payment ecosystem brought by COVID-19.

Hi Christian, happy to reconnect. I remember last year we met in cold Warsaw and now we get to talk online. What did the switch to a virtual environment mean for RiskConnect organisers?

It was challenging to set up a whole, new online platform to host the conference. The amount of coordination required to deliver a top-quality virtual conference is about the same as for a real-world conference.

We’ve had to adapt, for example by publishing the RiskConnect Magazine electronically. And launching the next in our Fundamentals of Card-Not-Present Merchant Acceptance series as an e-book. Yet adapting and evolving is what risk professionals do quite well! Risk management is dynamic by nature — as are risk professionals.

Most of RiskConnect Virtual’s content will be available for a year online. Registrations are free until the end of 2020.

Could you please share with our readers, what were this year’s highlights? What did you enjoy the most?

We made money laundering and deceptive practices the themes of RiskConnect Virtual 2020. Licit and illicit trade have existed side by side for centuries. Fraudsters, money launderers, and criminals in general have long abused the infrastructure of the legitimate economy to make their illegitimate activities pay.

We looked at recent trends and policy responses to financial crime with Anton Moiseienko from the UK-based think tank, RUSI. Holger Pauco-Dirscherl, co-founder of the ACAMS Germany chapter, lifted the lid on how shell companies can be misused to provide anonymity, conceal ultimate beneficial ownership (UBO) and disguise the origin and trail of funds. We also discussed how know-your-business (KYB) checks must evolve to meet new challenges.

Presenter and broadcaster of BBC TV’s The Real Hustle Alexis Conran examined the psychology of scams to help prevent delegates becoming victims. Oxford University academic Jonathan Lusthaus considered how cybercriminals cooperate effectively when deception is the norm. We examined current deceptive marketing trends impacting consumers, but also potentially exposing payment providers to clawbacks, fines, and reputational harm.

What has the global financial system learned from the recent FinCEN leak?

The FinCEN leak contained more than 2,000 suspicious activity reports filed to the US Treasury Department’s intelligence unit, the Financial Crimes Enforcement Network, known as FinCEN. It showed that some of the world’s largest banks helped move more than USD 2 trillion in payments they believed were suspicious over 18 years.

The leak underlined the need for strong customer due diligence, ongoing monitoring, and understanding the purpose and intended nature of the customer’s relationship with a firm. It also confirmed that criminals are exploiting opaque corporate structures in high-risk jurisdictions to illicitly move funds around the world.

What makes it so difficult for banks and regulated entities in general to fight money laundering and prevent financial crime?

The explosion in the volume of anti-financial crime regulation makes it hard for regulated entities to keep up. The nature and level of checks required on clients is expanding. For example, the fourth EU AML Directive included requirements around UBOs and politically exposed persons (PEPs). And the fifth EU AML Directive outlined countries where enhanced due diligence is required.

The regulated sector itself is also expanding. Lawyers, notaries, accountants, and real-estate agents, who may have no previous experience of doing in-depth KYC checks, are now subject to much greater AML supervision and scrutiny.

The challenge for many firms is creating a compliance infrastructure that enables them to on-board customers in accordance with AML requirements. And without this costing too much, taking too long, annoying their customers or over-burdening their staff.

How can automating KYC and KYB processes support this fight?

Automation can help gather and analyse a lot of information quickly. It can identify links between companies and individuals more easily, leading to more holistic risk assessments and better decision-making.

It’s true that only a human can determine whether something is suspicious rather than merely unusual. Yet manual-only reviews may no longer be tenable, particularly at scale. The time spent conducting these checks translates into lost productivity and ultimate lost revenue.

Manual reviews invariably take a long time to complete, which may be off-putting for a new client. Manual checks may miss important information, putting firms at risk of regulatory sanction. So, automation of KYC/KYB processes can definitely help as part of a firm’s response to fighting financial crime.

For sure, the technology resources need to be couple with the human factor to be able to spot the ‘bad guys’. That’s why compliance experts need to learn and keep up to date with what is happening in the fraud prevention space.

During RiskConnect Virtual 2020, you launched Web Shield Academy online. What is this, who can join and how?

Over the last six years, more than 600 risk professionals have graduated from the Web Shield Academy. In addition to our popular, in-person courses, we are now bringing the Academy to students, wherever they are, with a range of new online courses.

Designed to be memorable, easy to digest and on-demand, each course has a professional voiceover talking students through the lessons, eye-catching visuals to make the content stick, and quizzes to test learnings.

The courses are devised by risk professionals for risk professionals, working in underwriting, compliance or investigation roles within acquirers, payment service providers or banks. Three online courses are available now with more than a dozen planned by the end of 2021, including an AML course coming soon.

About Christian Chmiel

Christian A. Chmiel, CEO and founder, Web Shield is responsible for the development and implementation of investigation techniques to identify fraudulent or brand-damaging online merchants. He is also a lecturer at the Web Shield Academy and has published several books about fraud, investigations, and accounting.

About Web Shield

Web Shield has been equipping the payments industry with tools to protect businesses from merchants involved in illegal or non-compliant activities since 2010. Our highly precise solutions enable acquirers, PSPs, and other financial organisations to evaluate new merchants and monitor existing ones, thereby saving both time and money.