INFRASTRUCTURE: IDENTITY & VERIFICATION Challenger banks have changed the face of financial services over the past decade – renowned for their unencumbered ability to run with innovation while their incumbent counterparts have been weighed down by legacy systems and assiduous observance of risk and compliance requirements. It was, perhaps, inevitable, though, that the former would trip up. And several have done exactly that. The Financial Crime Controls At Challenger Banks report, issued by the UK’s Financial Conduct Authority (FCA) in April, gave neobanks a stern resume of what they must now do to
bring themselves in line, although it refused to single out challengers by name. The findings largely centre on the inefficiency of transaction monitoring and due diligence – increasingly hot topics in the burgeoning digital transaction space where the challengers have helped drive the dramatic shift to ‘frictionless’ online payments. It’s not all bad news, according to Edward Vaughan, head of banking for specialist data analysis regtech TruNarrative. And that’s principally because, by their nature, challenger banks are nimble enough to embed the changes they’ve been told to make, and
Joined-up thinking
still maintain their impressive stride. The report’s specific findings included the fact some challengers were not consistently applying enhanced due diligence (EDD) for assessing the risks posed by customers at onboarding and throughout the transaction life cycle, or documenting it as a formal procedure to apply in higher risk circumstances, such as managing politically exposed persons (PEPs). The FCA also discovered instances of ineffective transaction monitoring alert management – for example, using inconsistent or inadequate rationales for discounting alerts – as well as a
The acquisition of TruNarrative by global risk intelligence firm LexisNexis Risk Solutions has created a new force to help ensure tackling financial crime doesn’t come at the expense of payments innovation, says Edward Vaughan
22
ThePaytechMagazine | Issue 12
ffnews.com
