By FINTECH Books Contributor, Chye Kit Chionh
Wait a minute. Isn’t RegTech meant to help banks comply with increasing regulations? Who else needs RegTech?
In an abyssal web of anti money laundering (AML) requirements prescribed by Financial Action Task Force (FATF) famously known as the 40 Recommendations, there are 3 recommendations that affect non-financial sector participants too. This is known as Designated Non-Financial Businesses and Professions (DNFBPs). So who are DNFBPs?
Succinctly, these include casinos, real estate agents, lawyers, accountants, corporate service providers, precious metal stone dealers, trusts. It is a fairly large and diverse group. I’m sure your minds will wander into luxurious casino scenes in Las Vegas and Macau and quickly turning to real estate agents trying to sell properties or corporate service providers helping clients incorporate legal vehicles.
The point here is that standard AML requirements of performing customer due diligence, taking a risk-based approach, screening and so on that financial service industry is very familiar with have dawned upon DNFBPs in all 35 FATF Member Countries.
Like their counterparts in the financial service industry,DNFBPs have 4 options when faced with this new andherculean task to ensure AML compliance.
This is what most people would do. However therein lies the difference of which tool is being used to fight the “battle” and this is where RegTech applicability comes in. Unlike the banks with deeper pockets, DNFBPsmay not be able to purchase expensive systems or to throw bodies at the problem.
With increased compliance cost, some may choose to get out of business given it is no longer lucrative after putting in place costly compliance solutions that don’t work.
3. Pretend to Fight
There is always an option to try and cover off the minimum and surfacelevel and hope for the best. Penny wise, pound foolish.
A risky approach to simply not do anything, take the chanceand await sanction, if any, hence suicidal.