The Benefits of One Connected Solution, Rather Than Several Points Solution

This happens too often – a financial institution mis-sells a financial product and loses its license.

This happens everywhere – in Oman, for example, the FSA recently revoked the license of a company named CSI Financial, after the latter marketed financial products it was not allowed to market.

This happens unnecessarily – as you can easily protect your business from the risks of mis-selling, as we’ve discussed plenty of times before.

However, this is not the topic of this blog post. This blog post is all about connections. In the said CSI Financial case, as reported, the mis-selling violated not only the Executive Regulations of the Capital Markets Law and the Securities Law; but also Article 34(a) of the Anti-Money Laundering and Combating the Financing of Terror Law, which obliges financial institutions to “Assess the money laundering and terrorism financing risks in their business, including risks in relation to developing new products and technologies”.

This highlights an often-overlooked aspect of compliance – it’s all connected.

Benefit 1: Allowing You to Conduct a Comprehensive, Real-Time Adapting CRA

A common example of the interconnections in compliance can be found in the Client Risk Assessment (CRA).

A correct, comprehensive CRA is imperative to the correct implementation of the “Risk-based Approach”, which is the cornerstone of financial compliance in most jurisdictions.

One cannot conduct a comprehensive CRA without bringing into account:

• the client’s category (be it retail, qualified holder, professional client, sophisticated client, accredited investor, etc. – according to the prevailing legislative systems) – a retail client would usually mean a higher level of risk, for example, than an accredited investor or a sophisticated client;
• the product the client wishes to trade – riskier products will mean a higher level of risk;
• the services the client wishes to receive – here too, advice and portfolio management would add complexity to the relationship;
• the client’s type of incorporation;
• any PEP, Sanctions, Adverse Media findings about them;
• their financial situation;
• and much, much more.

Now, imagine you use 4-5 point solutions to perform your onboarding-related compliance:

• one solution for identity verification;
• one for screening;
• another for collection of data (client application / client journey);
• another for performing the CRA itself;
• and none for classifying the client or running the required appropriateness and/or suitability assessments.

How will your CRA be accurate?

How will you be able to know if the client is indeed a normal risk client, or an EDD one?

Only a connected solution allows you to tie all these data points together, and conduct a truly complete CRA. If you use several spot solutions, you will not be able to perform in-journey decisions, moving the client from a normal CDD (Customer Due Diligence) process to an EDD (Extensive Due Diligence) one or similar. However, if you use one complete solution, you can benefit from shortening the client journey and adapting it, “on the go”, to the specific client.

Benefit 2: Consistent Compliance Across Regions and Over Time

Let’s say you use an identity verification provider for one region and another for another region; as well as a screening provider and a corporate data provider. How will you determine the gravity of the findings of each of those providers? The identity verification providers are likely to have different methodologies and different ways of presenting their findings. The other providers will also have varying data points and scores and weights.

Tying all these together into one coherent, consistent compliance program can highly challenging, especially across regions and over time.

That’s where one connected solution truly shines – it allows for a consistent, automated evaluation of all data points, not only improving compliance but also saving a lot of case handling time.

We know it very well from Muinmos – some of our clients have reported a drop of over 50% in case handling time.

Benefit 3: Scalability

86% of Muinmos clients interviewed stated Muinmos supported their global expansion efforts. This is no coincidence – having one system that manages all compliance matters holistically makes it much easier on the organization to scale to another location.

It’s not just the day-to-day that gets easier – less contracts to negotiate, less suppliers to manage, less invoices to handle – but also when you want to grow, having just one solution makes it much easier to do so.

In Conclusion

The conclusion is clear – want it or not, compliance is converging. The lines between compliance with AML legislation, Securities legislation, risk management etc. are fading. The new standard is one coherent, comprehensive, compliance solution, which not only guarantees more compliance but also gives you more flexibility and options.

Therefore, the best solution is a comprehensive one – not only assures compliance, but also provides significant benefits and flexibility.