For those who may not be familiar with the AML and KYC regulations, could you provide some background on this particular global regulatory environment and the latest updates?
Of late, there have been many changes within the global regulatory environment – particularly in regards to AML.
In the past year alone, we have witnessed the arrival of numerous AML and KYC regulations, such as FinCEN’s Customer Due Diligence (CDD) Final Rule, which came into effect in the United States on May 11, 2018. This rule was brought in to strengthen AML procedures to include the collection of beneficial ownership information.
We have also seen updates made to existing regulatory compliance requirements. In June of last year, the 4th Anti-Money Laundering Directive (4AMLD) came into effect in the European Union (EU) – another regulation centered around beneficial ownership. Similar to FinCEN’s Final CDD Rule, 4AMLD removed much of its previous iteration’s (3AMLD) ambiguity around required CDD processes, which in turn created a significantly more robust and effective regulatory framework.
Another regulation that was recently updated in Europe – the Revised Payment Services Directive (otherwise known as PSD2) – introduced the dawn of open banking. When authorized by the individual, open banking allows a wide-range of new third-party financial applications and technologies to access previously unavailable customer bank account data. This means that customers will reap the benefit of choice, while also being offered more customized and relevant products and services. However, accessing this data will require additional security measures as defined by Strong Customer Authentication (SCA). As of September 2019, SCA will require third party providers to apply two out of three authentication methods: knowledge (e.g. something only a user can know like an account password), possession (e.g. something the user possesses such as a mobile phone, or other form of physical ID) or inherence (e.g. something the user is, for example capturing a thumb print).
These aforementioned changes within the global regulatory environment have been driven by multiple factors.
Firstly, due to the fact there has been a noticeable increase in money laundering as referenced by the two biggest data leaks in history – the Panama and Paradise papers. These documents revealed the sheer size and complexity of global money laundering – a discovery that was naturally bound to increase society’s awareness and ultimately shape future politics.
Secondly, as a result of the rise in risk to privacy and data security. This notable increase has resulted in regulators attempting to further clamp down the nefarious activities like money laundering, terrorist financing and tax evasion.
And finally, because regulators have been working tirelessly to create a more competitive marketplace. Their overarching goal is to create an environment in which fintechs can operate on the same plane as more sustainable, traditional financial institutions.
What are the challenges of managing different levels of regulatory requirements and how does your company tackle them?
It is expected that a global solution will encounter various nuanced challenges, especially when that solution involves data, regulations, policies, and compliance obligations.
Because regulations vary depending on industry, jurisdiction and level of risk, Trulioo created its bank-grade electronic identity verification (eIDV) platform, GlobalGateway, to help clients meet a diverse range of compliance obligations and business needs. Our solution offers customizable rules engines to help mitigate risk, reduce fraud and optimize customer onboarding. It also allows our clients to layer eIDV capabilities with document verification and facial recognition technology, ensuring they have a robust, reliable and comprehensive technology stack at their disposal. As a result, they can then not only instantly verify individuals and businesses, they can maximize global coverage, customize rule sets in order to optimize risk mitigation strategies, streamline onboarding and compliance workflows, and provide a more swift and seamless customer experience.
Another regulatory hurdle our company helps to tackle is running KYC checks for clients in countries with limited traditional data sources, such as credit bureaus and government databases. In these instances, securely accessing a global marketplace of trusted data is vital. This is why GlobalGateway, in addition to government and credit, also connects customers to social data, mobile network operators, utility and consumer files and even email data. We have curated, vetted and integrated independent and reliable sources, eliminating the need for multiple contracts, vendors, data sources and resources. Not only do we save our customers time, we reduce operational costs and help to facilitate a more transparent eIDV process.
What best practices and technologies do you endorse for handling KYC burdens while preventing the risk of fraud?
Adopting a risk-based approach for customer due diligence is crucial because not all customers are of equal risk. It is important to leverage solutions with the widest coverage to reduce multiple integrations and ensure strict and consistent vetting processes across the board. Based on a customer’s risk-profile, our clients are able to select exactly which sources and technologies within our data marketplace they wish to utilize in order to verify their customer. For example, account typology, e.g. which services the individual accesses, or transaction threshold limits may change the onboarding journey so that engagement is maximized without sacrificing compliance or fraud prevention.
Can you reveal several emerging trends within the AML and KYC compliance?
Mobile innovation is the catalyst for digital transformation, especially in regards to changes within AML and KYC compliance. The number of mobile phone users in the world is expected to pass the five billion mark by 2019 and people are spending more time than ever on their phones (millennials spend an average of 223 minutes per day on their mobile device, up from 188 in 2016) – foretelling a global phenomenon.
Leveraging this trend with equally innovative identity verification technology creates a powerful relationship by combining this data with existing KYC sources. It is particularly effective for businesses with customers in emerging markets, where KYC compliance requirements and financial inclusion efforts can be challenging.
Not only does mobile provide enhanced coverage and convenience for identity matching and fraud prevention, it limits the need for clients to burden themselves with time-consuming and costly tasks associated with onboarding and expansion such as securing data vendors, negotiating pricing, vetting sources, integrating multiple times, and meeting relevant data privacy laws.
Any future plans that you can share with us for the upcoming year?
We will continue to expand GlobalGateway’s coverage with more data sources and technologies to offer the most comprehensive solution to provide an efficient and automated way to verify the entire global population. It’s about leveraging technology in order to safeguard global citizens from financial crime and fraud by facilitating a heightened level of trust and safety online.
About Zac Cohen
Zac Cohen is an experienced business leader focused on strategic planning and execution, corporate management, risk management, and operational efficiencies. With over 10 years of startup and tech experience - primarily in the compliance space - Zac has built and scaled companies by applying a proven people-systems approach of collaboration, ownership, best practices, and accountability. His passion remains technology and its ability to impact the world. Zac is currently the General Manager at Trulioo – a hyper-growth Vancouver startup solving global identity problems associated with international compliance obligations, including cross-border AML & KYC.
About Trulioo
Trulioo is a global identity and business verification company that provides secure access to reliable, independent, and trusted data sources worldwide to instantly verify consumers and business entities online. Trulioo’s bank-grade online verification platform, GlobalGateway, helps organizations comply with Anti-Money Laundering (AML) and Customer Due Diligence (CDD) requirements by automating Know Your Customer (KYC) and Know Your Business (KYB) workflows across borders through a single solution.
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