As risks associated with the use of cryptocurrencies like money laundering and terror financing increase, compliance in the banking and financial sector has grown tremendously over the past decade. New mandates mean customers must provide data multiple times, especially when it comes to know-your-customer (KYC), anti-money laundering and terror-finance norms.
These challenges have given rise to regulatory technology (RegTech) companies, which help meet compliance norms. However, they tend to operate in silos, adding an extra layer of difficulty for customers in terms of additional time and money spent on compliance.
However, this shouldn’t slow down the industry, said Jonathan Camilleri Bowman, CEO of Sekuritance, a Dublin-based RegTech platform that helps governments, businesses and institutions to use blockchain as a regulatory solution to identify, verify and transact safely online. The introduction of RegTech solutions have made compliance services more accessible to all kinds of organisations, Bowman told Moneycontrol in an interview. Edited excerpts:
How does compliance solve activities like money laundering, terrorist financing, ransomware attackers, and darknet marketeers plaguing financial integrity?
Taking into consideration how the world is evolving, increasing regulatory enforcement has pushed for all organisations – no matter the size – to have an effective compliance programme within their business structure. Keeping things in check is an effective way of keeping away from hefty fines and reputational damage, which could be detrimental to a business. More than that, no business would like to be at a gateway for laundering dirty money.
Through the use of different services like KYC, KYB, on-chain analytic checks, and transaction monitoring, an organisation would be ensuring that its activities are not associated with or facilitating illicit activity.
Do you expect the development of blockchain tech and crypto markets to slow down due to costly and time-consuming compliance that would prove financial transactions are compliant and fraud-resistant?
The pace at which things have been developing is staggering and while it is true that the cost of traditional methods of compliance has continued to rise throughout the years and has proven to be a time-consuming matter, I don’t see how this would slow down the industry. The introduction of RegTech solutions has made compliance services more accessible to all kinds of organisations. Most companies spend a large portion of their budget on compliance and legal costs, allocating resources to build a team of compliance experts, and spending tonnes of capital for over-the-top KYC products, which many startups simply cannot afford.
Compliance should not only be available to big players but also to SMEs. We offer a one-stop-shop by providing a full-featured RegTech ecosystem from a complete range of regulatory compliance solutions, transaction and fraud monitoring, data encryption, identification, and verification of individuals and businesses, to blockchain analytics.
RegTech companies are usually known to operate in silos, thereby increasing difficulties for merchants and customers. What could be the possible solutions to improve the situation?
It is true that most of the compliance and RegTech companies are providing isolated services, which solve only part of the compliance puzzle. We at Sekuritance, on the other hand, are striving to be a one-stop-shop for all things compliance and to provide the shortest route to market for new projects. We see the solution in being able to provide the full suite of services, which means we are saving our customers valuable time and resources that they would otherwise spend searching for different providers, negotiating with each of the solution providers (some of which have really lengthy processes of defining success metrics), building different API integrations, etc.
How is Sekuritance working to improve this overlapping system of repeat data, regulations and obligations?
We are offering our individual customers the ability to seamlessly pass know-your-customer procedures with different businesses that we have partnered with. The idea is simple: if you have passed KYC with us, we can confirm your identity and upon your request, share this data with a business that needs to comply with the anti-money laundering regulations. We are like a technological bridge, using information technology to automate compliance tasks. This is beneficial for both the business and individual customers. And we are constantly expanding our suite.
Will the advancement of deanonymization technologies burn down the edifice of DeFi (decentralised finance) that is based on the premise of anonymity?
It’s too early to say, but it is a possibility… Blockchain transactions are typically pseudonymous in nature and leave tracks, which can be analysed with the help of technology in an attempt to infer someone’s identity or at least their affiliation to certain groups of people or types of activities. On the other hand, technology has certain limitations and network analysis alone might not always suffice.
It is worth noting that this presumed anonymity in DeFi projects has been on the regulators’ radar for a while – last year there was guidance by the global anti-money laundering watchdog (Financial Action Task Force) stating that owners and operators of DeFi arrangements need to implement procedures to identify their users, which basically means that DeFi users should no longer be able to stay anonymous.
Please explain how Sekur.Trace helps government agencies, banks, financial institutions, cybercrime and financial-crime authorities track scams and darknet activities.
The anonymity of crypto is fast becoming a myth, yet it is still difficult to track what people actually spend their crypto assets on. Sekur.Trace is our on-chain analysis tool that aids in tracking payments from different people and their wallets. Sekur.Trace lets you know whether a wallet or user has been involved in illicit activities like fraud, ransomware attacks, money laundering events, or darknet activities, as well as if someone has tried to obfuscate their identity through the use of tumblers, mixers, or similar technologies.
The tool has different use-cases, depending on the user. A bank could implement on-chain screening as part of their enhanced due diligence procedures, especially when the customers’ funds and overall wealth are coming from alleged trading in crypto assets.
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