The essence of your money service business (MSB) survival lies in compliance. Every passing year brings forth changes, demanding continuous vigilance to keep pace with evolving laws and regulations, ensuring sustained compliance for business operations. 

Join us in this discussion as we explore the dynamic trends shaping compliance, uncovering strategies to proactively anticipate and adapt to upcoming changes, enabling businesses to stay ahead. 

Moderator 

• Rob Ayers, Business Development, Bates Group 

Panellists: 

• Ibrahim Muhammad, Senior Payments Consultant, Finxplor 
• Nadeem Qureshi, CTO, USI Money 
• Jonathan Jensen, Global Regulatory Policy Advisor, GBG 

How has the landscape of compliance in payments and remittances changed over the years and what are the driving forces behind these changes?  

Ibraheem reflected on the earlier era in the mid-’90s when operations took precedence over compliance, with front offices catering to customers and back offices managing processes without dedicated compliance teams. However, events like 9/11 marked a turning point, prompting companies to recognise the vital role of compliance and the necessity for dedicated compliance teams. Ibraheem believes technology advancements, regulatory changes, and evolving customer expectations as the primary driving forces behind these changes. 

Jonathan also observed a heightened emphasis on a risk-based approach in recent years, noting a departure from rigid, prescriptive regulations to more flexible frameworks 

Nadeem echoed the sentiments of his fellow panellists and shed light on the pandemic-induced surge in regulatory pressure, compelling firms to prioritise operational resilience programs. Regulators increasing demand on firms to implement such programs was another noticeable shift, reflecting the evolving nature of compliance requirements in response to global challenges. 

Can you provide examples of regulatory changes which have had a significant impact on the payments and remittance industry? How have organisations adapted to comply with these changes? 

In the wake of the pandemic, there’s a growing emphasis on implementing resilience and operational strategies. There are concerns firms are unprepared for the Consumer Duty regulation that commenced in July 2023. This regulation demands higher standards for customer care, aligning products/services with customer needs, and ensuring fair pricing. Nadeem discussed essential considerations for firms, such as ensuring tailored customer services for individuals with disabilities and effectively identifying the needs of vulnerable customers. He cautioned that many firms have yet to implement these regulations in their operations, suggesting seeking advice from advisors, consultants, and relevant departments to avoid potential penalties for non-compliance. 

Jonathan also noted a recent regulatory change acknowledging the advantages of technology. He highlighted the Joint Money Laundering Steering Group’s (JMLSG) publication advocating for biometric checks to prevent fraudulent onboarding, showcasing a regulatory shift towards acknowledging and leveraging technological advancements for enhanced security and fraud prevention in the industry. 

We at RemitONE have recently collaborated with GBG to introduce the RemitONE Liveness feature™, a vital defence for our clients in today’s technology-driven world. The risk of impersonation looms large, causing considerable financial losses for companies due to fraudulent activities. Therefore, safeguarding your system with this tool is crucial to combat fraudulent onboarding effectively. 

This technology includes liveness testing, which alongside facial biometrics, detects fraudulent attempts such as deepfake images or silicone masks used during selfie submissions. This ensures that the submitted biometric data originates from a genuine person who is physically present. By equipping your systems with this tool, you can effectively prevent fraudulent onboarding, reducing the risk of severe financial losses and potential damage. Looking ahead, such advancements promise a future where companies can safeguard their operations more effectively, fostering trust and security with their customers. 

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What are the primary reasons behind financial institutions’ decisions to de-risk and how can payment providers mitigate the impact of de-risking on their operations? 

There is a growing need for stringent policies within banks to combat financial crime, highlighting the persistent challenge posed by cross-border regulatory disparities, as noted by Nadeem. Banks weigh commercial viability and transactional volume heavily, often leading to sector exits. However, with the evolving landscape, there are more available options like payment service providers and EMIs offering umbrella accounts, catering to small and medium-sized enterprises (SMEs) transfer operators.  

There are also different regional variations approaches to de-risking. Ibraheem referenced a case where a UK politician’s account closure, sparked media attention on political implications, which led the FCA to address the issue, by tightening regulation. Stakeholders should take a collaborative approach in the payment ecosystem for a more nuanced, risk-based approach rather than blanket policies. There is also a UK trend of reluctance in onboarding PEPs due to high incorporation costs, this reinforces the need for a risk assessment based on sectors and jurisdictions rather than denying access. This approach could streamline onboarding while minimising risks associated with certain customers.  

The panellists collectively agreed with the necessity for adaptive, risk-centric approaches within financial institutions to mitigate de-risking impacts on payment providers and foster a more inclusive yet secure financial landscape. 

What role does customer due diligence (CDD) play in modern compliance efforts and how can organisations balance customer experience with the need for rigorous customer due diligence requirements? 

CDD is the core of compliance, but there needs to be a balance between conducting necessary checks without disrupting the customer experience, as expressed by Jonathan. Leveraging appropriate technology to streamline processes and ensure a seamless experience for customers while effectively fulfilling CDD requirements is crucial. 

Ibraheem highlighted the varying approaches taken by companies, tailoring due diligence based on regions and types of products or services offered. He explained that transactions to high-risk jurisdictions warrant enhanced due diligence, while those to lower-risk areas could involve less stringent checks for customer convenience. Additionally, Ibraheem pointed out that different services, such as cash pick-ups versus account transfers, require varying levels of scrutiny, aligning due diligence with the nature of the service provided. 

Nadeem echoed the sentiments of Jonathan and Ibraheem, emphasizing the importance of aligning enhanced due diligence (EDD) with the commercial model, service type, and territorial risks. He underscored the benefits of applying a risk-based approach, suggesting that robust internal systems established through such an approach can yield long-term benefits for organisations in compliance efforts. 

What next?  

At RemitONE, our commitment is to provide you with cutting-edge technology, compliance solutions, and expert guidance to navigate the ever-evolving landscape of remittances. Whether you’re just starting out or looking to scale your business, we’ve got you covered. 

Want to see how RemitONE can elevate your business? Book a free consultation with our experts today!