By Rhys David,CEO at Credas
In recent months, regulatory bodies such as HMRC have been rapidly introducing new elements to financial legislation and in turn enforcing harsher penalties for those that do not comply.
Unfortunately, this legislative burden on FinTechs and the amount of work required to ensure compliance often outweighs the resources any business has available.
Pair that with the rapid developments in technology that we are seeing in all areas of enterprise, from AI to the Internet of Things, and it’s not surprising that we are seeing the regulatory technology (RegTech) space advancing at an exponential rate.
Everything from facial recognition technology to NFC passport chip reading is aiding FinTech businesses in their quest for compliance, bolstered by the added security that assets like cloud technology bring when it comes to data storage.
Yet while technological advances are certainly something to be celebrated, it’s equally important to recognise the new set of challenges that accompany them as governing bodies impose regulations and best practises that rely heavily on the use of cutting-edge tech in order to stay ahead.
This is very much the case with identity verification, where businesses who are still relying on manual processes to achieve compliance with their customer checks are falling behind and risking a serious penalty as a result.
Identity verification is a major component of some of our most significant regulations in the world of FinTech, including Anti-Money Laundering and Know Your Customer checks. Anything from carrying out age verifications to reviewing mortgage applications relies on quickly and accurately identifying a person’s identity, and yet so many businesses aren’t yet harnessing the technology available to simplify this process.
With HMRC’s 5th Anti-Money Laundering Directive (5AMLD) coming into effect on the 10th January*, and the 6th Directive approaching not far behind, FinTechs will soon be under a great deal of scrutiny when it comes to their identity checks and it’s vital that businesses are aware of the solutions that RegTech can offer.
A recent study estimated that the time taken to complete efficient identity checks took up over four business days per month, with the main barriers to completion being cited as getting hold of the correct ID documents, as well as time constraints.**
Most companies described the amount of time taken to complete checks as long and costly, made that much harder because clients are often confused by the type of identity document they need to provide.
That’s where facial recognition technology comes in. The use of facial recognition is getting its fair share of coverage in the news at the moment, but despite its controversial nature I firmly believe that we should be supporting the use of this kind of innovative technology. Its benefits are immense and facial recognition is truly changing the face of money laundering compliance due to its accuracy and speed.
Our own biometric facial recognition technology can be used to verify a person’s identity anytime, anywhere. Customers can download an app at home and simply take a selfie along with a picture of their photo ID. A unique action protocol then ensures the customer is real and present at the point of verification and the technology confirms whether they match the ID.
Outside of facial recognition, there are multiple assets within regulatory technology that FinTech businesses can harness to their advantage.
RFID chip reading offers 100% accuracy for anyone verifying government issued passports with smartphone NFC technology, document authentication software allows you to carry out comprehensive checks on individuals or companies across thousands of types of identity documents, and even Cloud technology has a part to play in complying with GDPR legislation.
In this digital day and age, there is no need to rely on filing cabinets to keep copies of personal identification documents and the General Data Protection Regulations makes it near impossible to have a valid reason to store data in this way.
Identity fraud ison the increase and businesses that look after sensitive client information need to be mindful that there are more robust storage solutions like Cloud technology out there.
Whether you’re an investment platform, a challenger bank or a digital loan provider, using identity verification technology helps to speed up and simplify processes that have increasingly absorbed employee time and company resources in FinTech. Its application removes the risk of human error when carrying out important ID checks, negates the need for physical scans and photocopies to be used, and ultimately lets financial businesses get back to what they do best.
With new security threats and therefore new regulations emerging frequently in this sector, it’s critical that innovative financial companies take all the necessary steps to protect their business interests and their customers – and with the abundance of new technology available, no business should be putting themselves at risk.
About the author:
As Chief Executive Officer of Credas, Rhys David aims to fundamentally transform and revolutionise the way businesses manage their compliance and due diligence processes, while maintaining rapid digital transformation in a sustainable way.
Credas launched in May 2017 and provides a simple, quick and secure way of verifying someone’s identity using real-time facial recognition technology. As well as confirming that the ID is real, the Credas app will also ensure that the same person is sending it. All files are then stored in a secure cloud environment so all data is secure and will help with GDPR legislation.
Its technology works in a range of sectors, including recruitment, mortgage and finance providers and any business which needs to verify ID to comply with regulations. It can help companies comply with right to work, anti-money laundering, modern slavery, know your customer and anti-fraud legislation. Credas is a partner of the Guild of Property Professionals and has been recognised as the Best StartUp at the Fintech Wales Awards 2019 and Technology Business of the Year at the Wales StartUp Awards 2019.
**Source: The study was commissioned by Credas and conducted by OnePollamong 200 people in July 2018.