Where is The Fighting Ground of All Fintechs?


Rarzack Olaegbe

In Nigeria, the CBN has mandated the banks and fintechs to maintain a level of KYC due diligence for all of its customers. The directive allows for a three tier profiling. It gives financial institutions the ease to bank majority of Nigerians. It allows varying levels of financial literacy and buoyancy.

Ground fighting is hand-to-hand combat. It is on the ground. It is a term used in mixed martial arts. Do you remember Israel Adesanya of the Ultimate Fight Champion fame? Other combat sports use ground fighting. It is a set of grappling techniques.

It is the focus of Brazilian Jiu-Jitsu. It comes in varying degrees in Catch-wrestling, judo, sambo, and shoots wrestling. It is useful in some schools of Shuai Jiao and other styles of wrestling.

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In ground fighting, the combatants fight at a very close range. This involves one or both combatants grappling the other using various grappling holds. Depending on the positioning of the combatants, the proximity can allow for biting, chokeholds, fish-hooking, eye-gouging, joint-locks, and pressure point techniques. Or various strikes.

On The One Hand

The fighting ground of all fintech and alternative banking services providers is the customer onboarding. To succeed in this fight, strict adherence to KYC measures prevails. Tension abounds. Pressure heightens. Research has uncovered that as KYC banking regulations hots up, fintech and banks are under pressure. This is because financial crime is increasing. The challenges for banks and fintech to meet their compliance obligations have also surged.

“The central pillar of KYC is validating the authenticity of a new customer during the onboarding process. For business onboarding, this involves untangling the complex business structures. And identifying the ultimate beneficial owner. This part of the KYC process in banking is online. This is due to the onboarding standard of automatic video identification,” a report by Electronic IDentification disclosed.

The RegTech firm detailed how new KYC requirements for banks are helping in the longstanding battle with the scourge of financial crime. It shared that financial service providers play a key role. This role has helped to stop the proliferation of dirty money from getting into the global financial system. As such, developing a nuanced understanding of what KYC entails in banking and fintechs is imperative for all financial service providers.

In “how KYC requirements for banks are helping to fight financial crime,” the report stated that with challenges from financial crime on the increase, regulators such as the Financial Action Task Force, (FATF) have already upped its compliance measures. It has called on firms to adopt RegTech solutions as best practice for KYC compliance.

The initial customer onboarding is the first step in KYC bank compliance. Customer due diligence should be performed regularly. Depending on the risk that was determined during onboarding, the frequency and intensity of bank KYC can increase. “The customer’s risk assessment level feeds into anti-money laundering (AML) continuous monitoring with AML rules becoming stricter for riskier customers,” it announced.

FATF is the global money laundering and terrorist financing watchdog. It has strengthened the requirements for higher risk situations. It allows member countries to act in areas where high risks remain.

The report mentioned that maintaining strict adherence to KYC compliance is necessary. Not only for the huge financial penalties, but also for avoiding the reputational damage associated with money laundering scandals.

Many KYC processes aim to triage customers according to their relative risk for banking and financial service needs. KYC documents provide banks with the proof required for identification verification. And customer’s risk assessment. The complexity of documents required has increased for banks and fintech aiming to operate globally. Now every country and each jurisdiction in a country has different document requirements with different languages.

In reality, the report claims, to screen thousands of documents in hundreds of languages is difficult. It is beyond the capacity of a human powered KYC team. For financial institutions aiming to expand globally, an AI-powered KYC solution, qualified electronic signature, has become the ‘simplest and most cost-efficient way to maintain compliance’.

On The Other Hand

In Nigeria, the CBN has mandated the banks and fintechs to maintain a level of KYC due diligence for all of its customers. The directive allows for a three tier profiling. It gives financial institutions the ease to bank majority of Nigerians. It allows varying levels of financial literacy and buoyancy.

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Mojisola Sonde, writing in complianceinafrica.com, said KYC has one goal. To prevent the banks and fintechs from being used intentionally or unintentionally by criminals for money laundering. Or for terrorist financing, sex, human trafficking, and other related activities.

Customer’s activities are clear when banks and fintechs maintain an effective KYC system. Patterns are drawn. Behaviours emerge. This helps these institutions to flag unusual transactions. Or unexpected activities. KYC protects these entities from scam. It protects the customers from fraud and loss of funds.

From this side

Are you sure illicit funds do not pass through the banks or fintechs?

Big mummy, I do not know.

Are the fintechs’ customer identification programmes (CIP) thorough?

I do not know.

Can the banks’ CIP properly profile customers and determine their behaviours?

I do not know.

What do you mean you do not know?

It is combat.

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