Voice of the Industry

Financial crime – any sign of winning the battle?

Friday 10 September 2021 08:44 CET | Editor: Claudia Pincovski | Voice of the industry

With regulators focusing on fighting financial crime, by bringing more accountability and transparency with more stringency on KYC, Verity Snelson from Encompass shares what lessons can be learned from the past

Looking back…

Do we ever learn?

In 2016, the financial world was rocked by the Panama Papers revelations on crime and corruption. Because of this, financial crime entered popular culture and the box office. Five years on, we are still feeling the aftershock. Previously, no one outside of the financial world would have heard about shell companies… Regulators worldwide scrambled to pass new laws, or tighten existing ones, with the aim of curbing tax evasion, money laundering and increase overall transparency. As the regulatory tightening continued, it was expected that this wake-up call would have prevented similar scandals for at least a decade. But, in January 2019, a Financial Times investigation highlighted underlying problems with potentially false accounting and money laundering at Wirecard, the then darling of the fintech world. History tells us that Wirecard had been plagued with lax governance for more than a decade, but subsequent clean audits gave it a semblance of respectability. As facts continued to emerge, such as links with a Maltese Mafia-linked casino, infamous for its money laundering operation, investors, analysts, and regulators, with few exceptions, largely turned a blind eye. Fast forward to summer 2020, Wirecard was suspended by several regulators, leaving many of their customers unable to process payments, and pandemic-stricken consumers unable to access their funds. Now, Wirecard is no more, and its COO, Jan Marsalek, is now on Interpol’s most wanted list. The scandal immediately brought EU fintech regulations into sharper focus and eventually claimed the Head of Bafin, the German financial regulator in January 2021. Did we learn anything?

Where are we now?…

Forced innovation vs regulation vs financial crime

Because of the pandemic, the past eighteen months have accelerated digital transformation and innovation for both businesses and individuals, and the Wirecard story didn’t slow down the overall popularity of fintech, or digital services in general. This has also led to financial crime, and, in this relentless fight, businesses are faced with the real challenge of balancing increased digitisation with having to provide faster and seamless interactions, increased competition, risk, and regulatory requirements. With that backdrop, we have also witnessed a renewed stringency in regulatory focus on transparency and trust. But let’s not be hasty in blaming the failure of the laws for this situation: regulations aim to provide ‘responsible’ operating frameworks, and regulators themselves recognise that more stringent regulations are not effective by themselves. We must recognise the main drivers for effective risk management: accountability and transparency start at the top, and corporate culture is always to blame for regulatory failures.

Knowing me, knowing you…

The need for transparency: KYC, CDD, SDD…

As the financial world continues to focus on privacy, businesses are faced with the dual challenge of competing in an increasingly digital world whilst maintaining privacy, at the same time as ensuring that digital interactions are genuine. This brings the concept of anonymity – inevitably linked to data privacy - into question: as regulators worldwide increase focus on anonymous payment instruments of all types, a swarm of more stringent AML regulations have come into force as a result. Organisations of all types and sizes – not just financial services or payments companies - have been forced into more transparency with enhanced KYC requirements and increased due diligence. In our digital landscape, never has the importance of identity verification and authentication been more felt. As our supply chains get ever extended, so does supply chain risk. This makes due diligence a fundamental requirement for not only ensuring that individuals are who they say they are, but also being confident that business partners and suppliers are legitimate organisations.

What does success look like?

Navigating the maze

Culture and behaviours are the main drivers for risk management to be effective, and we can learn a few lessons:

  • Heed early warnings: an effective corporate risk and governance framework will highlight irregularities which must be addressed immediately, lest they come and bite you later on. If it takes a whistleblower to bring the matter to light, governance has failed.

  • Establish a governance culture: For example, taking senior executive reports at face-value, without appropriate checks, can only lead to failure. When failing controls are identified, the resulting risks must be addressed appropriately and in a timely manner, but this can only be achieved with a conducive risk and compliance culture. Board commitment and accountability are essential, lest a toxic corporate culture takes hold which no amount of technology can fix.

  • Automate where necessary: Our current landscape not only presents an ever-growing attack surface, but also an increasingly complex regulatory maze. This complexity has generated the need for more and more automation, which itself has engendered an increased focus on the technologies which deliver that automation (e.g. AI, intelligent process automation, entity resolution). Deploying a layered approach, where automation is used where the processes lend themselves to it, will free staff to concentrate on complex cases or reviews and value-adding activities.

Businesses must take financial crime seriously, not only because it presents increased regulatory risk, but to enable innovation to thrive and consumers to feel safe. Managing the extended supply chain, especially with the proliferation of cloud services, is now crucial, as well as understanding how new technologies and specifically regtech and automation can streamline operations (after all, criminals use technology too…). Let’s learn from the past.

About Verity Snelson

Verity is a Product Manager at Encompass Corporation, focusing specifically on our offering within the global banking space. An experienced industry professional, she has previously worked at Refinitiv, where she managed the product proposition for World-Check & Qual ID and led list management at global institutions including HSBC and Barclays.



About Encompass

Encompass transforms regulatory compliance and customer onboarding with Know Your Customer (KYC) automation. Our advanced technology, unrivalled data coverage and industry expertise help clients grow their businesses and fight financial crime. The Encompass platform reduces the cost of KYC with KYC due diligence on demand, powered by intelligent process automation.


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Keywords: KYC, financial crime, regulation, money laundering, fintech
Categories: Securing Transactions | Digital Identity, Security & Online Fraud
Countries: World
This article is part of category

Securing Transactions