Inability to adapt hampering banks AML efforts

John Dobson, CEO at SmartSearch, says: “The European Banking Authority (EBA) has this week highlighted a key issue in RegTech, which is the wide variability of quality and services in the market. This may well be hampering further adoption of the technology in the sector.

“We may have left the EU but of course we’re still doing business with the bloc and any moves they make towards increased regulatory standards will have to be reflected in the UK.

“The EBA has also recognised the need for greater knowledge and awareness of the solutions on the market by the regulator.

“This all goes to the heart of the challenge facing RegTech when it comes to the banking sector, which is a lack of understanding of the advances in the solutions available. Added to that an unwillingness, or inability, to change outdated methods of customer verification for AML purposes.

“Thumbing through endless copies of hard documents which are now so easily forged is not an infallible way to verify the identification of your new customer. In addition, as they race to save cost closing down thousands of their local branches they are removing the ability for customers to present their identity papers at a local branch, and this will impact the retention of existing customers and their ability to recruit new ones. Therefore, the move to electronic verification is inevitable unless they want to see churn increasing as new tech banks thrive.

“The Financial Conduct Authority should perhaps take note that the EBA is trying create an environment for greater adoption of systems which are more efficient, secure and accurate.

“There doesn’t seem to be the same willingness in the UK and in fact, in April the FCA said it’s not their place to promote the use of AML technology to financial services in the UK.

“This, despite the fact a new report by the City of London Corporation said compliance for Britain's top five banks could be cut by at least £523 million combined, through increased use of automated systems.

“Instead, what we see is that the new banks and financial services businesses coming into the market are much more alive to the benefits of RegTech when it comes to due diligence processes. As such they now have a competitive edge over the more established institutions.

“If the FCA and the banking sector are serious about addressing the huge cost of compliance it currently faces, it needs to act now to make digital solutions the standard for all AML processes.”

Published: 30 June 2021