Navigating the Maze of Financial Services Compliance Requirements

Read the Report: Discover how the right identity verification platform can help financial services organizations quickly adjust to changing global regulations.

• White Paper

Navigating

the Maze of

Financial Services

Compliance

Requirements

Shifting AML, KYC

Regulations Place

Burden on Companies

to Keep Pace

Increases in financial crime and the

rise of digital banking and fintech

services have created ideal conditions

for greater regulatory scrutiny and

expanded Anti-Money Laundering

(AML) and Know Your Customer

(KYC) requirements.

With regulators constantly dissecting business

activities and countries around the world adjusting

their financial crime laws, there’s a lot of pressure

on financial services companies to keep up.

Compliance costs are high, but noncompliance fines

are often higher.

Regulatory change won’t slow down because

innovation in financial services doesn’t stop — and

neither do fraudsters. That has led to new data

collection, verification and reporting requirements

around the world.

Introduction

Companies that need to meet identity

verification requirements as part

of AML and KYC are searching for

nimble systems that match the speed

of regulatory change without losing

operational momentum.

02

Trulioo — White Paper

Tech Adoption and

Crime Drive Continued

Regulator Interest

The U.S. Federal Trade Commission

reported a 70% increase in fraud

losses from 2020 to 2021.

Financial app installs surged between

2020 and 2022, with consumers

increasingly turning to digital options for

financial services.

While that’s mostly good news for financial businesses,

adoption has correlated with increases in fraudsters

trying to exploit new vulnerabilities in infrastructure

and take advantage of less experienced digital

financial services users.

Fraud incidences and costs have grown significantly.

The U.S. Federal Trade Commission reported a 70%

increase in fraud losses from 2020 to 2021. Cifas, a

nonprofit fraud prevention service in the U.K., reported

a 22% increase in identity fraud cases during that

same period.

As financial criminals become more sophisticated and

introduce new attack vectors, governments will likely

strengthen regulations and oversight wherever people

move money.

70%

Regulatory Spotlight:

Wealth Management

In the U.S., firms are required to identify and

verify the identity of beneficial owners of

customers, meaning wealth management

companies must identify those who

ultimately own an account opened in the

name of a trust, business or other legal entity.

That can be especially difficult for complex

or offshore ownership structures.

03

Trulioo — White Paper

Regulatory

Change With

Expanded Scope

Is on the Way

A 2022 survey of U.S. and U.K. financial services

compliance decision makers found 34% ranked

managing regulatory change as their top priority for the

next year. Among U.K. respondents, 95% said they are

at least somewhat worried about ongoing regulatory

changes due to Brexit.

Governments are already considering stronger

oversight in nontraditional, less-regulated sectors.

• The U.S. 2022 National Strategy for Combating

Terrorist and Other Illicit Financing lays out plans

to assess unregulated sectors and strengthen

beneficial ownership information reporting

• The Australian government issued a 2021 money

laundering and terrorism financing risk assessment

of the “non-bank lending and financing sector,”

finding a medium-level threat that warrants

additional regulation

• In the U.K., more than 70 fintech CEOs signed

an open letter in 2022 urging the government to

strengthen fintech regulations, calling out payments

alternatives such as crypto and blockchain as

needing particular attention

• A 2022 U.S. Department of the Treasury report

recommended more fintech regulation

• A 2022 International Monetary Fund report noted

efforts to regulate crypto assets have moved to

the top of national policy agendas, but different

countries take different approaches — from

prohibition to creating favorable crypto business

environments

Consumers may start pressing for more regulation.

A study of U.S. consumers at the end of 2022 found

86% are concerned that crypto and fintech firms

aren’t held to the same regulatory standards as

financial institutions.

Multinational companies know

regulatory change is not a

matter of if, but when.

34%

ranked managing regulatory

change as their top priority

95%

are at least somewhat worried

about ongoing regulatory

changes due to Brexit

Results of a 2022 survey of U.S. and U.K. financial

services compliance decision makers

04

Trulioo — White Paper

The Cost and

Burden of

Compliance

The technology, systems and staff

needed to implement compliance

programs are expensive, and leaders

say the costs are only going up.

According to one survey, 88% of compliance leaders

say costs have risen in the past five years. In another,

53% of CEOs say regulatory changes will significantly

affect their profitability in the next 10 years.

Another cost implication: Compliance takes

professional staff time away from value-added

activities. Consulting firm Oliver Wyman found that

nonrevenue-generating tasks such as compliance

take up approximately half of advisors’ time.

88%

88% of compliance leaders say costs have

risen in the past five years

Regulatory Spotlight:

Online Trading

• In 2022, the Hong Kong Securities and

Futures Commission clarified regulatory

guidance for online brokerages, including

around client due diligence, cross-border

solicitation, and face-to-face and remote

account opening.

• New regulations in Thailand require KYC

for crypto trading.

• South Korea will launch a Virtual

Currency Tracking System in 2023 to

establish sources of funds and combat

money laundering in crypto trading. The

regulation is ranked with gang violence

and drugs as policy priorities.

05

Trulioo — White Paper

The Stakes Are High

According to the Sanction Scanner, the $140 million

fine USAA Bank received for inadequate compliance

was among the largest of 2022. The $53 million

penalty levied on Bittrex for various AML and

sanctions violations was among the highest for crypto

exchanges.

New regulations aren’t just boosting costs; they’re

expanding liability. In the EU, criminal offenses defined

in the Sixth Anti-Money Laundering Directive now

include entities or people failing to take action against

a criminal activity. Similarly, the U.K. has introduced

“failure to prevent” as a corporate criminal offense as

part of its AML regulations.

Regulatory Spotlight:

Foreign Exchange

• Foreign exchange (Forex) platforms

are often regulated by a country’s

securities watchdog. In Australia, it’s

the Australian Securities & Investments

Commission. In the U.S., it’s the National

Futures Association and others, while

U.K. forex brokers answer to the U.K.

Financial Services Authority. The rules

are consistent with KYC and AML

requirements for financial institutions.

• In Japan, Forex brokers are regulated

under the Act of Prevention of Transfer

on Criminal Proceeds, which requires risk

assessment, KYC data and document

collection, and customer due diligence.

The financial cost of compliance

violations is significant.

06

Trulioo — White Paper

Regulatory Spotlight:

Banking

• According to a 2022 Kroll survey, 71% of

compliance leaders in Brazil and Mexico

are concerned about stricter KYC and

AML regulations. The Central Bank of

Brazil updated its AML guidance for

financial institutions to require more in-

depth customer risk profiles, source of

funds review, politically exposed person

updates and ongoing monitoring.

• Nearly half (46%) of U.S. compliance

leaders at financial services firms in 2022

said they have significant challenges

complying with the Anti-Money Laundering

Act of 2020 provision requiring disclosure

of beneficial ownership.

Managing

a Changing

Regulatory

Landscape

The current pace of regulatory change

calls for flexible technology solutions

that allow multinational companies to

quickly adapt to new requirements.

Addressing IT requirements is essential to an

efficient identity verification program. However, not all

companies have those capabilities.

In one study, a third of financial services firms report

they have reasonable systems but need upgrades for

regulatory technology solutions, while 16% have no

confidence in their IT infrastructure. In other words,

nearly half of financial services companies were

uncertain about their ability to quickly implement a

solution that meets a new AML or KYC regulatory need.

New regulations change how companies verify

identity. Maybe it’s new documentation, different

reporting requirements, watchlist screening or greater

assurance based on new liability. Whatever the need,

companies with a global presence face challenges

keeping up with new compliance requirements without

losing time in market.

Technology that allows companies to adjust

verification workflows to match the needs of a new

market in real time can overcome those challenges. If

a regulatory body changes compliance requirements,

such as introducing the need for physical

documentation or new reporting, the right verification

platform can quickly adjust.

An agile identity verification platform is designed

to respond to new needs. Whatever the regulatory

change — whenever or wherever it occurs — a

global identity platform can keep financial services

companies compliant anywhere in the world.

07

Trulioo — White Paper

The world’s

identity

platform.

Trulioo is a registered trademark of Trulioo Information Services Inc. in the United States, the European Union,

Canada and other countries.

Trulioo is the world’s identity platform, trusted by leading

companies for their verification needs. The Trulioo integrated,

automated platform provides unparalleled global coverage for

business and person verification and a comprehensive suite of

in-house capabilities.

Combining its state-of-the-art technology with expert verification

knowledge across diverse markets, Trulioo enables the highest

verification assurance levels, optimizing onboarding costs and

fostering trust and security in the global digital economy.

Contact us

The Trulioo global identity platform provides

the agility financial services companies

need to keep pace with evolving AML and

KYC regulations around the world. With one

platform leveraging a global network of more

than 450 data sources and with access to

more than 12,000 verifiable ID documents,

companies can achieve high match rates,

monitor watchlists worldwide and achieve

regulatory compliance anywhere.

Not all AML, KYC and business verification

challenges are the same. The Trulioo platform

helps financial services companies meet their

regulatory needs with nimble verification

workflows, artificial intelligence and machine

learning, and deep industry expertise.

The Trulioo global identity platform helps

companies expand across borders, adjust

to changing market conditions and meet

customer expectations for security and

convenience.

1 2 3 4 5 6 7 8

Made with Publuu - flipbook maker