By Sandra Nebritova
This month, the Securities and Exchange Commission (CySEC) published a consultation paper on improving the facilitation of customer due diligence with innovative technologies.
This opens a completely new chapter for the obliged entities.
So, let’s break the whole consultation paper into easier terms.
The regulator is inviting their obliged entities to speak out, assess and introduce instruments that can make them more competitive, save time and make the customer experience by far better than it used to be.
CySEC is willing to allow Companies to use RegTech, to make their internal processes and legal obligations more advanced and rapid.
Moreover, they are giving the chance for the companies to understand and evaluate whether they, actually will be able to use this option and still stay compliant.
What is customer due diligence?
The companies have an obligation to know who their customer is, and they need to be able to prove that.
This normally happens by collecting identification documents such as passport copies, utility bills and so on.
This becomes tricky when you have non-face-to-face clients, as while you might receive the necessary documents, it is very difficult to assert that the person, who is actually using the services is the same as the one for whom the documents have been provided.
Traditionally, such accounts have been classified as high risk due to that reason.
As we work globally, the majority of companies are interested in accepting clients from different jurisdictions.
The fact, that Cyprus is a member of the European Union does automatically mean, that companies based on the island, do not want to limit themselves just to local clientele.
But then you have a huge amount of non-face-to-face customers which bring your total portfolio of clients being high risk.
Even though, there have been additions to directives on Anti Money-Laundering, allowing companies to classify such clients as of “less high risk” or “not necessarily high risk” – the majority of AML officers would prefer to keep to the old terms as they cannot be certain or guarantee, that one of those clients is not an identity thief or isn’t using a front person.
The innovative technologies that are being mentioned in the consultation paper are a helping hand in onboarding customers.
There is software that allows customers to register using easier methods, such as sending a document and taking a selfie or using video calls, to make it possible to match the face.
Of course, there are additional requirements for these features to work, but most of the Regtech companies that are offering such services are already aware of them and are ready to offer a compliant product.
It is understandable, that this will not fully automize the verification of the client and companies still need to have a human control over the process, but it does make an overseas client closer to your local office.
There are many companies already using these methods abroad and it is quite exciting that we might have this in Cyprus as well.
The process of onboarding is easier for the client and much faster, which will then allow Cyprus to keep up with the current global competition.
While for the time being, this is a consultation paper only and it will take time to collect all the opinions and make the necessary additional searches, this does open a new path for newly updated directives.
Frankly, it is great to see, that one of the island’s regulators is in a constant upgrade process, follows current trends and keeps track of worldwide changes.
If you are interested to read more on the subject, the consultation paper may be found at https://www.cysec.gov.cy/CMSPages/GetFile.aspx?guid=d96097ee-4085-4e8f-b053-23fe40d5ee7a
The writer is a certified AML specialist