Holland FinTech Guest Blog – Passing the KYC torch to aid Counter-Terrorism Financing
8 November 2020
The ever-changing technological landscape of the21st century is shaping the world around us, driving innovation and outside-of-the-box thinking at unparalleled speed. However, it also increases the possibility of cyber-related attacks, data breaches, and ominous activities, pushing businesses to adhere to increasingly strict security regulations and promptly detect and act upon such. Research has unveiled that over the course of the past few years, the rise of overseas terrorist organizations and their increased operationality on a global scale have led to an increase in the number of illicit crypto-funding and information sharing through internet applications such as WhatsApp and Telegram. While this asset may not be the major terrorist financing tool to date, it poses significant challenges towards controlling the risks of unmonitored illicit behavior – keeping the identity of cryptocurrency users is pivotal for maintaining their anonymity and privacy, however, it is also pivotal for CTF investigations. This brings forth the following issue: how to keep illicit behavior under control without disrupting the privacy of users?
As governmental bodies and social groups across the globe take note, and investigations on financial institutions become increasingly more thorough, incremental progress is made toward combating these behaviors. The FATF (Financial Action Task Force) now includes online money exchange providers on its list of companies that must comply with regulations of the EU’s new, 5th Anti-Money Laundering Directive (AMLD5), requiring an enhanced level of due diligence and further contributing towards CTF (Counter-Terrorism Financing). In a similar fashion, Germany recently adopted its “Network Enforcement Act” (Netzwerkdurchsetzungsgesetz), which enforces all social media platforms to remove illegal content from the said platform once notified of its existence, bringing about a myriad positive impacts on the information disseminated through the country’s WPNs(Wild Public Networks). The UN Security Council calls for further collaboration between financial technology and social media companies to aid in the development of CTF efforts.
The misuse of communication and financial technologies for terrorist purposes has gained increased attention amongst industry experts, as the (re)implementation of regulations and directives on a constant basis continuously permutates the aspect of compliance in their field of work, forcing them to constantly be ahead of the curve and promptly adapt to the necessary changes. However, outside of this highly specialized community, a deeper understanding of cryptocurrency misuse and its implications are merely starting to develop, meaning that public attention toward the matter is still of little or no existence. Therefore, it is crucial for industry experts – whether regulators, screeners, or data providers – to adequately inform small & medium enterprises of the importance of compliance and due diligence, and the holistic socio-economic impact that comes along with following such regulations. In turn, these businesses can further convey the information towards local clients and the general public, creating a synergetic impact on AML/CTF efforts on a global scale while further aiding the never-ending, ever-elusive fight against terrorism financing.
Screening employees in your HR process?
Make screening the easiest part of onboarding