Perilous Times: How to Better Prepare Your Company for More Stringent Data Verification Regulations

Dec 2022
Posted by -
Umazi Team
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~7 min

Across the EU, steps are underway to enforce compliance data management procedures more strictly.

Here’s why you should stay ahead of the changes. 

Is your company prepared for digital identity regulations to be enforced more strictly at both local and international level?  

Enforcement agencies are currently proposing measures to monitor the implementation of existing data verification regulations more diligently. For many companies, this means that the issue of more stringently verified digital identity will need to be addressed with increasing urgency. 

Why is this important? Because quite simply, if this is not a corporate priority, you may run the risk of non-compliance as privacy laws and money laundering prevention measures come under more rigorous scrutiny. 

With proposals currently being tabled by the European Parliament and European Council for the establishment of a new Anti-Money Laundering Authority and CTF (Countering the Financing of Terrorism) regulations, the monitoring and enforcing of legislation looks set to be applied more strictly. These proposals are intended to create shared systems that enable fast and accurate cross-border policing of financial crime, and the ability to penalise non-adherent companies more consistently across jurisdictions. The proposed establishment of a single EU rule book regarding AML / CTF issues, and the improved sharing of information, will also serve to facilitate better access to cross-border data.  These initiatives are not solely focused on financial crime, either. Their adoption also impacts lawmakers’ ability to combat serious crimes like human trafficking and narcotics smuggling more effectively. 

How to Future Proof Your Company Against More Stringently Applied Enforcement of Identity Verification Regulations

Does your company have a digital identity that allows for instantaneous, verified updates and responses across all partner networks?  

Regulatory agencies in countries across the EU and around the world are beginning to collectively emphasise the practicality of secure shared platforms and standardised formatting as a means of ensuring more accurate and trustworthy data verification. There is virtually universal agreement that the most trustworthy and pragmatic solution is to implement blockchain-based platforms, because these offer regular shared verification of changes and updates across all touch points. From a global perspective, this also makes sense, because it reduces interface complexity – with the additional benefit of saving enormous amounts of time and money. 

A European Union report on digital ID issues has described the current digital identity landscape as ‘fragmented’,‘insecure’, and ‘lacking in interoperability’. Due to increasing divergence, concern is growing that current standards of corporate and personal identity verification are becoming less and less tenable. This applies not only to companies and governmental organisations, but to individuals too. Digital identity, the report points out, is the key to trust, and for companies that still rely on traditional information exchange, an elevated risk profile may quickly become a business liability.

Secure Digital Identity is The Future of Smart Business

Here are just a few examples which illustrate why enhanced digital identity verification and supervisory scrutiny should be a priority:  

·      The typical on-boarding process for clients or business partners requires exhaustive due diligence and trustworthy identity verification – and depends on access to available data which may not be entirely reliable. KYC protocols can also fail due to errors ranging from incorrect documentation being submitted to unnoticed information mismatches.

·      Statistically, despite best efforts, there are still a significantly high number of identity verification failures related to financial crime. Between 2015 and 2020 alone, more than 300 notable global AML failures were recorded, which included due diligence shortfalls, failed suspicious transaction monitoring, and poor compliance monitoring.

·      Identity verification failures can carry serious consequences – from loss of customers and eroded industry trust to lengthy investigations, legal consequences, and massive fines. In one such case in 2020, Sweden’s second-largest bank was fined $107.3 million for failures to comply with existing AML policies.

With so much at stake, it makes sense for companies and other entities to embrace the adoption of a collaborative data network where shared, asynchronous updates can be accessed more reliably and securely.  

The ECB’s Investment in the Future of Financial Regulatory Supervision

The European Central Bank (ECB) has also committed to significant investment in SupTech – technology for supervisory agencies – with a projected spend of £200m (US$276m) on the table. 

Over the past several years, the ECB has been expanding its in-house SupTech capacity. Its goal has been to evolve from traditional banking supervisory models to the use of emerging technologies that will benefit the more than 6,500 users of its supervisory IT platform. One such development is Virtual Lab, a cloud-based SupTech platform that enables remote collaboration across the Single Supervisory Mechanism. 

Developments like these are not unique to the EU bloc, either. Similar initiatives around the globe also point toward the desirability of shared regulatory reporting. A striking example of this is the international TechSprint hackathon hosted in the Middle East, where competitors displayed the viability – and versatility – of Dynamic InformationSharing and real-time analytics applied to SupTech. Significantly, theTechSprint hackathon was held under the auspices of the G20 Presidencies and the Bank for International Settlements Innovation Hub – underscoring the drive toward the development of more effective SupTech.    

Why is This Important to Your Business?

The goal here is to ensure you retain secure ownership of your company’s data, while facilitating a borderless, decentralised digital identity. This also means that the validity of verification-critical data is increased with every non-fungible update, resulting in far more trustworthy data authentication. 

In addition, companies that are early adopters of blockchain-based digital identity platforms are also aligning with similar technology that will be relevant to other compliance standards, too. Examples include the monitoring of ESG standards, and digital transactions that can be assessed more quickly and accurately, with greatly reduced risk of fraud.  

At Umazi, we specialise in the creation of virtual identities of all parties involved in a transaction. This also applies to parties that may not be using the platform themselves – and by connecting to user-provided data as well as commercial and open-source third-party databases, isolated sources of information are integrated into a robust, joint due diligence process. Our blockchain-based platform prevents data tampering and is cryptographically secured.  

With more than 30 years of collective industry experience in the financial sector and featured in BusinessCloud’s prestigious RegTech 50 rankings, Umazi is positioned to expertly facilitate the adoption of a highly secure digital identity for your company.   

The benefits? Cross-border due diligence is no longer laborious and fraught with risk. The exchange of verified information is far easier, and trusted business relationships are reinforced. This is particularly relevant when you consider that almost all participants in a physical goods supply chain – consignees, shipping companies and ship owners, brokers, insurers, and financial institutions – are financially regulated, and are required to follow proper due diligence procedures.

Early Adoption: The Key to Keeping Pace With Change

Maintaining your company’s digital identity and data records is an ongoing process.

Adopting and implementing the required technology can be relatively seamless, but this is just the entry point. Data reliability necessarily involves a continued process of verification, updates, and content moderation in order to build trustworthy digital profiles or data relationships.  

This takes time, and the earlier you start, the further ahead you are – which offers you an operational advantage over competitors, along with lessened risk of non-compliance as regulatory changes come into effect. Bear in mind that the ability to integrate information from multiple sources also improves corporate reaction time in the face of sudden event changes.  

Rather than doing a massive corporate overhaul, it is far easier - and far less costly - to have the digital infrastructure in place to enable a phased approach. 

Future-Proof Your Company

Strategically, it makes good business sense to anticipate and prepare for changes to statutory requirements and commonly accepted business practices. As increasing numbers of companies adopt a digital identity and deal with clients or partners who expect the same, those who do not will have to play catch-up, at greater expense while risking non-compliance with changes transpiring progressively more quickly.  

At Umazi, we offer solutions designed to match the unique requirements of your business. Our hands-on implementation process is designed to help you migrate your data seamlessly and comprehensively to our secure digital platform, with minimal disruption and absolute security.  

To find out more, or to arrange a consultation, simply contact us.  

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