Fighting financial crime is TFT’s Wonder Woman this month, Gemma Rogers, CEO FINTRAIL. She speaks to Zoya Malik about using regulation in an innovative way to protect fintech startups from financial crime by looking at their risk appetites and implementing control measures to stay the course.
ZM: What is FINTRAIL’s objective?
GR: FINTRAIL’s objective is to work with our clients across the Fintech sector to ensure they meet regulatory expectations and can effectively manage financial crime risks. We do this by helping clients understand the financial crime and compliance risks they may face and then work with them to deploy proportionate and effective controls. I believe fintechs have an important role in society and present huge opportunities, but with that opportunity comes risk that illicit and bad actors may take advantage of the new technologies and products to further crime – we work with our clients to stop that from happening. fintechs and challenger banks are unencumbered by legacy systems, data and processes, so can have an advantage over mainstream banks, making it a really exciting area to work in for passionate anti-financial crime professionals.
ZM: How are you advising fintech clients?
GR: We are a consultancy offering expertise on anti-financial crime compliance controls to fintech companies. Our approach with our clients is based on four pillars, Build, Scale, Assure and Solve. In terms of Build we look at what financial crime risks a company may face and ensure they have the right controls to manage them. In terms of Scale, we look at how new products or expansion plans may impact a client and also how controls can and should be scaled as they grow, providing additional capacity and support where and when our clients need it. With reference to Assure, this pertains to more mature fintechs where they require a 3rd party such as ourselves to test their systems and controls and determine that procedures align with regulatory compliance. In terms of Solve, we may come in where a firm has had a bad audit report or may have incidents of internal fraud. We help investigate these issues and advise on how to prevent them recurring in the future.
ZM: What is critical for fintechs in terms of setting up crime and fraud prevention controls?
GR: So, one of the main elements we focus on with our clients is the risk assessment: what this entails is a fintech truly understanding what specific financial crime risks they are exposed to. What they are then able to do is focus the controls and preventative measures they apply on the risks that are most significant or where they have most exposure. This enables the fintechs to take a proportionate, risk-based but yet customer-friendly approach to how they fight financial crime, which can evolve as they grow their product offerings and business models.
We also think it is vital that the industry benefits from collective learning and works together to fight back against the financial criminals. That is why we set up the FinTech Fincrime Exchange (FFE), a free members’ forum where we discuss best practices for fintechs, as well as the various permutations, or typologies, of what exactly financial crime can look like. Sharing information of this sort also strengthens the Fintech community’s stance against financial crime, ensuring that this sector plays its part in the global fight against financial crime, something that we are really passionate about at FINTRAIL.
ZM: How are you advising clients on crypto assets crime prevention?
GR: We are really excited to be working in the cryptocurrency space. There is a lot written about cryptocurrencies and their utility in financial crime schemes, and while there are risks, there are effective ways to mitigate these, just as there are in other asset classes. When it comes into force, the Fifth Anti-Money Laundering Directive (5AMLD) will bring EU crypto exchanges and custodial wallets under the scope of ‘obliged entities’ for AML purposes. I believe this, and other recent regulatory developments is a really encouraging step forward, bringing crypto-assets into the mainstream and that the (hopefully proportionate) regulation will drive wider adoption and increase trust across all parties. Regulators want to see companies building controls according to their risk profile and this is precisely what they will want to see crypto related companies do. We are excited to be working with firms who are not only developing hugely innovative products and solutions but also taking a proactive approach to their financial crime risk mitigation strategies.
ZM: What will be new in terms of financial crime regulations and FINTRAIL’s business in 2019?
GR: We have recently expanded our business to the USA so we can offer fintech clients on both sides of the Atlantic access to specialist support, especially as companies are looking to expand and scale internationally. We will also be rolling out our services to Asia, in the early part of 2019.
Next year, Brexit will likely have an interesting impact on the Fintech sector across the UK and wider EU. As such, we anticipate that FINTRAIL’s activities next year will include some advisory work for clients who are looking at how Brexit may impact their business and the changes in financial crime risk and compliance that may bring.
In the EU we are also excitedly awaiting implementation of the 5AMLD, which is in my view a welcome and positive sign that regulators are aiming to keep pace with the rapid technology developments that we are seeing among fintech and more traditional banking players.
Finally, we are going to be continuing the roll-out of the FFE network across the global fintech hubs in US, Asia and Europe to further expand the network of fintech financial crime professionals who are taking the fight to the criminals.
ZM: What has led your career to financial crime prevention?
GR: Having studied Russian and German at university, I started my career in national security in the UK, before moving into banking and realising that there was a huge crossover between the analytical skills required in government, and the skills needed to fight financial crime; when organisations are taking an ever more proactive stance against financial crime, and the need to be on the front foot to predict criminals’ behaviour is paramount having the ability to examine large amounts of data and set those findings into context is crucial. Also, being able to understand the level of threat that criminals and crime types pose to different organisations is crucial when building out proportionate controls, and a prior career in national security was incredibly useful in that regard.
ZM: Do you think there is a lack of women entering this part of the industry? If so, why? What can bring them into the industry?
GR: I think the field is levelling out in anti-financial, largely because it’s such an interesting area to work in. Plus the opportunities for progression are great, particularly in the Fintech sector where companies are taking their responsibilities around anti-financial crime seriously and as such the subject is getting a good amount of board and senior management attention. Of course, more can always be done to encourage women to take up this career path: the Fintech Fincrime Exchange – a specialist industry forum for Fintechs to share and collaborate on financial crime issues – is proud to have signed up to the FinTech Parity Pledge to ensure we continue to have parity in our speakers; we already have an almost 50/50 split between male and female speakers, but we’re keen to do our bit to encourage this and promote diversity in FinTech.
ZM: What are your personal goals?
GR: Firstly, to ensure my colleagues and I at FINTRAIL are achieving our full potential whether that’s through having the right opportunities or through constructive, mutual feedback, and secondly that the Fintech community is equipped with the right skills and knowledge to fight financial crime effectively and efficiently. Tha was the goal behind the Fintech Fincrime Exchange Conference, that took place on 27 November 2018 where we aimed to provide some insightful content that disrupts traditional thinking around how to manage financial crime risks, and offered some practical skills-based sessions to add value to the ways in which Fintechs investigate and analyse financial crime issues.
ZM: Any concluding thoughts?
GR: Most importantly, we are passionate about fighting financial crime and the hugely negative impact it can have on society, customers and companies. We like to think we can have a positive impact through our work with the inspirational teams and clients we work with in the fintech sector. We won’t solve financial crime overnight but if we all work together we can start to make a difference, building trust with customers, stakeholders and regulators at the same time.