Q & A with Andres Betancourt, Senior Associate, Forensic Investigations and Advisory Services

Q & A with Andres Betancourt, Senior Associate, Forensic Investigations and Advisory Services at Grant Thornton LLP and a former senior investigator at BMO Financial Group, on the financial crime compliance outlook for 2016:

ACFCS: What compliance trends were hot in 2015 that could carry into 2016?

Andres Betancourt: Hot topics or trends that were considerably relevant in 2015 were the following:

  • Cybersecurity – Various cybersecurity incidents changed how institutions spend their budget protecting their information and strengthening their controls to prevent attacks. ( i.e. Ashley Madison, Anthem, Chipotle.) More and more IT departments see hiring increases and the move to include cybersecurity measures as parts of FI’s regulatory reviews.
  • Fintech – Emerging technologies and their products and services exploded in 2015 and at first FI’s seemed apprehensive to work or collaborate with such companies. At the end of the year, many Canadian Banks for instance have partnered and invested in Fintechs. It’s a great tool as they leverage their own strengths like larger customer bases, higher visibility, new technology products, access to young customer niches wanting more convenient banking and services.
  • Cryptocurrency – Proposed and possible licensing for virtual currency businesses and KYC enhancements and software to operations in an attempt to legitimize virtual currency and similar entities within the realm of banking services.
  • Sanctions – EU and US Sanctions Russia and the continued geopolitical risks (China, North Korea) that have a great impact on commercial clients and their multinational operations.

ACFCS: What could the new issues or challenges be in 2016 and why?

AB: Issues that will possibly have an impact on compliance trends in the 2016 are the continued heightened regulatory scrutiny of all Financial institutions as they tackle different regulatory changes, such as KYC challenges in relation to FATCA and the increased liability for wrongdoings (as it relates to the Yates Memorandum) thus regulators will most likely play a more substantial role holding Financial institutions to higher integrity and accountability standards. Development and enhancement of proper whistleblower programs to prevent unwanted reputational risks will possible become a bigger element of compliance departments. Operationally speaking, there could be increased emphasis on weighing the costs of remediation programs to ‘backfill’ customer information, specifically KYC and risk assessment and deciding if the outsourcing and offshoring of AML functions is better than spending more money expanding compliance teams.

There also could be a more prominent role for: biometric technology in KYC; Digital KYC verification as well as possible adoption of KYC via crowd-sourced, social media based, identity systems.

ACFCS: Where do you think the regulators will be focusing in 2016 and why?

AB:  The preparedness of FIs to have proper controls to identify Domestic PEPs as per proposed changes under a bill in respect to PEPs. Greater flexibility in non-face to face regulations as more and more business are moving their business operations from brick and mortar to online platform that is accessible anywhere and anytime at reduced operating costs. In Canada and UK , increased regulatory oversight on real estate transactions and proper CDD, PEP determination and EDD is performed as property market has seen considerable amounts coming from foreign investors where proper due diligence needs to be enforced to prevent illicit funds (i.e. Toronto, Vancouver and London real estate markets)Proper risk scoring models for new technologies services and products for entities providing service in medical marijuana consulting, marijuana vending machines, production of detox products, sales suppression software and production and sale of synthetic drugs.

ACFCS: Could there be any other issues affecting financial crime compliance departments, such as shrinking resources or budgets due to global economic fluctuations?

AB: Fluctuating oil prices might have an effect on shrinking resources for compliance departments as well as entities that provide e-commerce platforms and how they deal with growing levels of piracy and the counterfeiting of products. Also, Europe migrant movements and the need to provide banking services to those individuals. Also coming into play will be US and Russia relations as well as the economic effect of the upcoming US and Greek elections and possible growing disruptions in the Middle East with risk posed by Iran’s nuclear program and North Korea weapons testing.