Failure to Join FATF Will Increase Economic Pressure

Failure to Join FATF Will Increase Economic Pressure

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According to a top diplomat, Iran’s refusal to comply with the requirements of the Financial Action Task Force will result in more economic pressure on the country which is already suffering from a number of American sanctions. 

The Foreign Ministry Spokesman Abbas Mousavi said on Monday in a regular press briefing in Tehran, 

“We see the adoption of conventions that FATF has urged all countries and banks of the world [to ratify] as beneficial, not harmful.” 

FATF has urged Iran to implement legal reforms to meet its global standards and has extended its deadline numerous times. In mid-October, FATF gave Iran a final deadline to implement international reforms by February 2020 otherwise FATF would advise all its members to apply countermeasures. 

Iran has already made amendments to its counter-terrorist financing (CFT) and anti-money laundering (AML) acts. But the bills to ratify the Convention Against Transnational Organized Crime (aka Palermo) and Terrorist Financing Convention have been passed by the parliament but not yet endorsed by higher legislative authorities. 

It is crucial for Iran to maintain ties with other countries at present because its economic relations have been restricted by the sanctions imposed by the US. The sanctions were placed after the US withdrew from the 2015 nuclear agreement last year. 

The US has threatened to impose penalties on countries that conduct business with Iran. 

Under these circumstances, non-compliance with international norms will further hinder the countries’ trade with the world. 

According to Mehdi Mohtarnia, a political analyst, it is imperative for Iran to comply with FATF guidelines. 

‘Currently, North Korea has been blacklisted and Iran will be the second country if it is also blacklisted. If so, the first consequence will be an international consensus against Iran in the area of economic activities.’ 

Back in October, President Hassan Rouhani called on the Expediency Council to approve the FATF related bills. 

‘It is our pride that we fight terrorists and counter corruption, therefore we should not allow allegations of money laundering against our banking system. This hurts our country,’ the President stated. 

Ukraine Issues 14 Million Biometric Passports

Ukraine Issues 14 Million Biometric Passports

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According to Ukrinform, more than 14 million biometric passports have been issued in Ukraine so far. The Head of the State Migration Service of Ukraine, Maksym Sokoliuk, told in an interview that 14 million 200 thousand biometric passports have been issued up to date. 

According to Sokoliuk, 

‘However, one person has the right to hold two passports; pages in passports of some people also end too fast; and the children, who were issued passports in 2015, already have their passports expired. Therefore, we approximately use the coefficient that the number of holders is 25% lower than the number of issued documents.’ 

Till June, 42.6 million trips had been made to the EU countries as a result of the liberalized regime between Ukraine and the EU from 2017 as reported by Ukraine’s State Border Guard Service. Due to this regime, Ukrainians are allowed to travel to EU member states other than Ireland and the UK (for now) without a visa for up to 90 days during any 180-day period. 

In 2018, Ukraine issued more than three million biometric passports and about 75000 ID cards during the year. Earlier this month, the Cabinet of Ukraine launched a pilot project which aimed to introduce a national digital ID system for online identity verification. 

Fintech Compliance – Boogeyman for Trillion Dollar Industry?

Fintech Compliance – Boogeyman for Trillion Dollar Industry?

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Fintech industry is flexing its muscle by bringing onboard more and more customers and innovating their way to higher valuation and larger transaction volumes. Only in the US alone, the year 2018 saw $11.89 Billion funding go into Fintech ventures and more than $ 100 Billion was invested globally in Fintech Ventures. Right now there are 39 Fintech Unicorns in the world with a total estimated worth of $147.37 Billion. Digital payments through Fintech products surpassed $3.5 Trillion in 2018 and are expected to hit the benchmark of $6.6 Trillion in the next 5 years. Fintech companies have ventured into diverse business categories and financial services such as mobile payments, crowdfunding, P2P lending, online transaction platforms, and some Fintech are now even developing products for asset management as well. But this innovative brother of the conventional financial industry has had his own share of problems, with Fintech Compliance being the most prominent one among the rest.

It was recently declared on a Fintech forum that by 2030, the biggest bank of the world will be a tech company, but without properly introducing a tech-friendly regulatory landscape and investing substantial resources in regulatory compliance, this seems to be a distant dream.

The Cost of Non-Compliance

Several Fintech companies have been fined millions of dollars for one reason or another because of their inability to comply with specific user-centric regulatory guidelines. Dwolla was slapped a $100,000 fine by Consumer Financial Protection Bureau (CFPB) for misrepresenting its data security practices. Ripple Labs was made to pay $700,000 by FinCen for their inability to identify their business model as Money Service Business (MSB). One Fintech company had to pay $6 million after CFPB declared that the lending practices of the platform violated the consumer protection guidelines of the regulator. There are many other instances where Fintech companies were fined substantial penalties either for their inability to adopt consumer security compliance or because of lack of satisfactory safety net for user data protection.

Why Fintech Compliance is so complicated?

The idea behind Fintech was to use the latest technology, mobile phone leading the roost in the current decade, to create a streamlined user experience when it comes to the financial services industry. Small businesses and the common users were particularly sick of brick-and-mortar branch model and aspired for a service delivery model that was swift and efficient at the same time. Enter the Fintech products that championed the cause of “lightning fast transactions” and “minimal to no paperwork” business model.

But regulators were more concerned with the relative anonymity attached with Fintech products, transactions processed through these channels and susceptibility for these innovative solutions to be exploited by criminal elements to transfer funds for illegal activities. Money laundering and terror financing were even bigger concerns that called for strict financial technology compliance. But as one can assume, this was totally against the basic working principles of Fintech.

The Fog around Fintech Compliance

The complication of Fintech compliance is aggravated by the fact that the majority of regulators overseeing the financial service industry lack the specific guidelines to govern unique and innovative business models adopted by multiple Fintech companies. With the fluid and amorphous nature of Fintech companies, the brilliant minds behind such a booming tech industry also find it hard to pin down a single regulator that single-handedly deals with the kind of services that they have to offer.

And even when there is clarity about the regulator or the specific guidelines that a Fintech has to follow, it creates friction for user-experience. For example, if a Fintech startup is operating as a digital wallet, mobile payment system or peer-to-peer funds transfer service within US, they have to comply with Bank Secrecy Act’s (BSA) and will be designated as “Money Service Business”. As a result of this, the Fintech platform will have to develop an AML Compliance solution, perform KYC for every incoming user, report transactions beyond $10,000 and even have to file suspicious activity reports and if you are thinking that is it, then you are wrong. As a Fintech based in the USA, companies can fall under the purview of OFAC, FinCEN and SEC. For Canada, there is FinTRAC, UK has its FCA and Fintech companies Down Under have to follow the guidelines from Austrac.

But the hardest cooky of all was launched last year in the European Union, by the name of General Data Protection Regulation, a.k.a. GDPR that takes data security and user privacy to a whole new level even for the companies that are not based in EU but want to serve the clients based in its jurisdiction.

Recommended For You: 3 Reasons why RegTech is the Future of Innovation?

The Economics of Fintech Compliance

The cost of having a KYC utility or implementing an AML compliance solution can be really tricky for Fintech businesses. Not to forget the importance of a GDPR checklist for businesses to ensure that no provision of this EU data privacy law is left out in their business or service delivery practices. Now for conventional financial services companies such as banks or insurance industry, it is easy to bear the cost of compliance related expenses because of their large coffers of revenue, but for Fintech companies that are in their nascent stage of existence, it is important to scale the operations and balance their budgets accordingly. Fintech startups, like all other startups, are already limited in terms of resources and such huge regulatory fines can cripple the backbone of such early stage startups.

Another economic factor linked with Fintech compliance is that whenever a company, especially in their pre-valuation days, is fined by a regulator for non-compliance, it attracts a lot of bad press that is going to hit any future prospects of VC funding or pledge of investment from even a private equity as well.


It is not hard to guess that the future of the global financial system is dependent on Fintech products and even sovereign states and economic powers such as Germany has publicly admitted this fact in the recent G20 summit. But complying with regulatory guidelines will be crucial to sustaining the growth and trust in these products.

Regtech seems to be the right solution to counter the needs and demands of the Financial industry in general and Fintech companies in particular. There are several third-party service providers that are offering KYC services, AML compliance, and other tech products to comply with official guidelines of regulators. With a common technical background and hunger to disrupt conventional service delivery models, Fintech and Regtech can change the future of personal as well as institutional finance forever.

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Fintech Compliance

RegTech facilitates effortless AML Compliance

RegTech facilitates effortless AML Compliance

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The latest report by Research and Markets states that RegTech industry is expected to grow to USD 12.3 Billion by 2023.

RegTech is relatively a newer concept. It leverages technology to assist financial institutions and other markets in complying with global regulations. The main applications are Customer Due Diligence and Risk Management. RegTech companies develop intelligent solutions by using innovative technologies like Artificial Intelligence, Machine learning and Big Data to translate compliance rules into practical implementation.

The Financial Crisis of 2008 was the driving force behind evolution of FinTech. To address the gaps in consumer experience and efficient services, technology played a vital role. Online payments, Distributed Ledgers, Virtual Wallets are some key outcomes which are now used in day-to-day activities.

The development of FinTech led to a parallel development of RegTech. By automating and digitising traditional methods the nature of customer on-boarding drastically changed. The resulting online ecosystem demanded a robust, and new form of governing rules. As a result financial regulators introduced new set of compliances which proved to be beneficial but put a strain over businesses.

RegTech facilitating FinTech

It is to be noted that regulatory compliances can be a lot of headache when it comes to implementing systems, training legacy infrastructures or covering a global audience. Seeing financial crisis, hack attacks, scams etc; financial bodies made information collection laborious. Although with justified reasons at heart.

To handle this RegTech offers two solutions:

  1. Saving time and cost
  2. Accurate and real-time results.

It make easier for companies to quickly and efficiently adapt to new regulations. The market is not limited for application of RegTech. It sits at the heart of every interaction between a financial institute and its consumer. With the growing CDD, KYC, KYCC, AML, CFT rules, RegTech is changing the scope of customer on-boarding.

 Who creates RegTech?

Is essentially an open communication between regulatory authorities and technology experts. The concepts, ideas and rules are those which are found to be the standards and then fed into the system.

It is neither the job of RegTech solution providers, or industry advisers to create the guidelines. Although, some suggest that industry needs more consistent approach toward standard of identification and risk management. However, technology experts have an equal opportunity to understand market demands, and compliance trends to develop solutions.


Leveraging RegTech for AML Compliance

Research and Markets’ latest report state that Identity and Access Management is expected to grow to USD 37.79 Billion by 2023 while Compliance and Risk Management to USD 64.61 Billion by 2025.

ID Verification and Risk Assessment plays a pivotal role in establishing any business relation. Especially when this is taking place online. To create trust between a consumer and merchant, an established and verified identity is a must. To curb fraud and terrorist financing, and collect valid information, compliance demands to thoroughly vet a consumer’s ID documents, and remote presence. EU’s 4MLD requires all screening of potential customers against OFAC and FATF standardised AML watchlists. It is to restrict investors with a criminal or PEP status.

Admittedly, these key requirements ultimately increase the cost and labour involved to meet compliances. RegTech provides businesses an all in one effortless solution with real-time processes to verify and screen identities. With the help of Big Data, AI, and Machine Learning, RegTech solutions can easily crawl vast data banks, apply logical commands and reduce time or friction.

Each passing year brings newer regulations. This has a direct effect on the operations of businesses. It means that RegTech has become necessary. From KYC, AML to transaction monitoring, the scope of market is promising. The trends in the field evolve with the requirements. 

3 Reasons why RegTech is the Future of Innovation?

3 Reasons why RegTech is the Future of Innovation?

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Regulatory Technologies, commonly referred to as RegTech, is an innovative use case of Financial technology building on the fintech security. According to an estimate, USD 118 Billion will be spent on regulatory and compliance software by 2020. After all no matter how innovative Fintech becomes, no digital business will be interested in it unless it adheres to the regulatory compliance that the business has to follow. Simply put, a Document verification service or an identity verification solution is of no use to a European company if it does not comply with GDPR. So it is pertinent that instead of just integrating fintech solutions, businesses opt for Regtech solutions and in case you have been living under a rock for past 2 years and don’t know what is RegTech, then read the following lines carefully:

What is RegTech?

The term was coined by Deloitte and according to Investopedia it was “created to address regulatory challenges in financial services through innovative technology”. So basically it is an extension of Financial Technology that not only helps in performing complex and complicated tasks of financial service industry but also helps comply with regulatory compliance. Regulatory technology takes into account, regulatory guidelines issued by financial regulators overseeing the operations of their potential clientele. Fintech security can be enhanced by using RegTech such as a identity verification solution that follows the privacy law and data protection protocols applicable in a given territory.

Features of RegTech

Regtech industry is currently growing rapidly with solutions ranging from automated business verification to AML services being devised in various forms. But despite having applications in multiple industries, RegTech share some common features such as:

Highly Structured – RegTech Industry has been able to deliver highly structured regtech solutions that had impeccable scalability despite having multiple layers of operations and digital tasks. An online ID verification service, such as Shufti Pro, can perform identity checks not only for officially issued identity documents but can even use customized identity documents for authenticating a person’s identity.

Swift Performance – It is a given that FinTech & RegTech are quick at processing any digital procedure. It ensures not only better customer satisfaction but a smooth pipeline for interaction between a human resource and a Regtech solution as well.

Smooth Integration – Regtech Industry mostly offers solutions that are required to be integrated with pre-existing software, online systems or web-based services. It may be know your customer service or a document verification solution, but flawless integration is important for any Regulatory Technology.

Future of RegTech

RegTech industry has a huge potential of earning revenue as most of the market for RegTech is untapped. Moreover, there are new financial systems and digital platforms that are in need of innovative regtech solutions. Regtech for Blockchain and Cryptocurrency RegTech can help these new age business platforms to achieve a level of transparancy and legitimacy. This will help them curry favor with not only their regulators but their investors and potential customer base as well.

Banks are already pushing financial regulators to allow them in the adoption of improved fintech and it is high time that businesses around the globe start utilizing fintech & regtech to perform a range of digital services that fall within the purview of regulatory compliance as well. Fraud prevention can be performed with Online ID verification and a document verification service can come in handy for a remote service provider.

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