The Connector Podcast - SFF 2022 - Know Your Customer

Join the conversation with Claus Christensen from Know Your Customer about the latest KYC trends during the Singapore Fintech Festival (SFF 2022). Recorded live at SFF 2022.

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Koen Vanderhoydonk
koen.vanderhoydonk@jointheconnector.com

#FinTech #RegTech #Scaleup #WealthTech

Transcript

Introduction  0:01  
Welcome to the connector podcast, an ongoing conversation connecting fintechs banks and regulators worldwide. Join CEO and founder toe and Vander Heiden as you learn more about the latest available trends and solutions in the markets.

Koen Vanderhoydonk  0:20  
Welcome, ladies and gentlemen, last podcast live from the Singapore FinTech festival. And by coincidence, and miracles do happen. I've got class with me from KYC Klaus, welcome to a podcast. Can you explain your spirit about yourself and your company?

Claus Christensen  0:37  
Thank you very much Cohen for having me here on the podcast. Ad Hoc KYC was founded in 2015, between an Irish co founder and myself, I'm originally from Germany, with the idea that we would automate the corporate onboarding for anti money laundering purposes. And we took about two years to build the technology a bit longer than we thought and started out to work there, the Irish UK, European banks and financial institutions. But immediately when we found 2017, the first Singapore FinTech festival, decided, Asia is actually much bigger, and a lot more happening. And so we came to Singapore in Hong Kong in 2018. And I made it my home actually, during 2018 19. And by now KYC, arrived at a good stage where we have tier one banks, and global financial institutions on our books as customers.

Koen Vanderhoydonk  1:35  
Wow, brilliant, amazing, and congratulations with this success story. What is interesting to hear about this story is that you are a European you came to Asia. So what are the differences if we talk about the trades KYC.

Claus Christensen  1:51  
For KYC, the important point our regulations obviously, and regulations are both different and similar. Actually, an interesting point about anti money laundering regulation is the emphasis that regulators plays on the availability of corporate ownership data, there is an important global dichotomy between how ownership of companies is viewed in the US in Japan, for example, the view is ownership of a corporation is none of your business, except if it's your company. In Europe, we adopted this, I would call it a Scandinavian model. Transparency is the most important. Transparency helps everybody. And it's certainly good for anti money laundering purposes. So company registries under anti money laundering regulations in Europe, after AML, D four, and five, the directors from the EU are obligated to hold beneficial ownership information. So that's a cultural difference where in Europe, we would view this as a public information, and therefore it's open for solutions like ours about access misinformation. In Asia, they followed more and more of a European model. Both Singapore and Hong Kong, even Mainland China have very open data about corporations, and the ownership is not private. So that is a similarity. Where we see differences is how open regulators are for automation for RegTech regulatory technology, which is what we do. And we see the advantage really here in Asia, both M S and the HKMA extremely active HKMA has a 2025 plan for RegTech. And mes has a whole series of initiatives to push RegTech and use more RegTech in financial institutions around here. So that's a big important difference. And it's also what makes this markets these markets very interesting for

Koen Vanderhoydonk  4:03  
us. Well, I can only agree with you because in many RegTech Doc's than mis is taken as the example and talking about KYC. Well, they were the first one with the public KYC register here in Singapore, but obviously not on the corporate side. Is that something that think about? Is that Is that something that's been discussed in the market?

Claus Christensen  4:25  
Certainly KYC utilities are always a big question, can you not get together multiple companies, big banks and share information with each other? In theory, that's always a good idea. Often it's in practice, harder to implement, and the motivations of the individual players vastly, vastly different. For example, in every market that would be a few bigger players that have 80% or so of market those and KYC information obviously they have a 80% of the customers donation. Yeah, they are not incentivized to share that information so much with all the smaller players, the smaller players would be really interested in getting a share of that. But they don't have anything to trade with. So utilities have that kind of problem, the government can step in, and MHS did that pay? Well, both the company registry here is extremely well organized. So it has information is available. And there's resellers and people like us who make it really accessible. And for individuals, they build in very interesting model. Individual ID and phone verification usually works in one of three ways. In the US, for example, you would rely on databases of previous instances where people have shown themselves to a bank and verify them on the basis that their social security number and their name and their address matches each other. That's very weak validation of a person. In Europe, you would normally base it on a document like a photo ID, passport, driving license ID cards. And the utility model here in Singapore is interesting. It has, it's called my info, and it has information about person, but you cannot access it directly from the bank, you ask the end customer to log in and share that information with you. But you get that shared information with the stamp of approval of the government. So you have name, ID card, nationality, date of birth, and so on. All these absolutely secured. I think that is a very good model, if you can secure it itself self sovereign identity, actually, it's almost that sounds like it at least, it's not totally self because the government is involved and has a stamp of approval on. But it is similar to that. That is the self sovereign identity is like a fourth type where you are completely free of any authority. And you just own your data on a blockchain or in some way, verified. Very interesting concept very difficult to secure as well.

Koen Vanderhoydonk  7:15  
Yeah, but also very early days. I mean, Europe has made like an ambition to move into this. But as many things in Europe, it's not easy, because there are many countries that need to come together and agree, when it's a good thing that it's done together. And but we'll see how that goes. It's obviously true. On the same token, it has been European legislation that ultimate beneficial owner, registers have to be public. And that's not the case at all, for many countries. That is right. So that's something that you have to deal with that, I suppose

Claus Christensen  7:50  
fortunately, what is public, often in many jurisdictions is company filing documents, they are usually required to have something like an annual return with a list of shareholders in the registry. Now, these have differing formats everywhere, even in some jurisdictions, there's multiple formats for different company types, entity types. But these are readable if you put into work. And that is one thing that our solution does. You can read the shareholders and then you can follow through. If you have a shareholder from Singapore and company, and that's maybe a Hong Kong company, then you go to Hong Kong and repeat the process and the follow through to the uveal. That is an alternative method to getting UBS from having a straight up UBL register that you just leave

Koen Vanderhoydonk  8:37  
class we talking a lot about an early start of a process where you identify a customer but and I know a lot of banks are struggling with this. But what what do you see as the next step to this?

Claus Christensen  8:52  
We're talking about perpetual KYC as a goal. And I have to say many banks struggle with the predecessor of that, that would be repetitive KYC usually have KYC on a timer, meaning for low risk, medium risk, high risk cases, you usually have a schedule of five years, three years, one year maybe, exactly depending on on rescue, you do these, and you have to repeat the KYC information from the customer. If you have a manual process like many banks would have at the moment. That is really difficult. And I remember there is a case of an unnamed Australian bank that came to us, but had this problem 72,000 company entities that have not been re KYC it for more than 10 years. And the regulator was tapping them for that. They were thinking of off boarding customers firing customers because they would not be able in a reasonable time to manually recertify that KYC it's just a

Koen Vanderhoydonk  9:58  
famous remediation In programs that

Claus Christensen  10:01  
is exactly remediation is a huge problem just now. So we're far away in many cases from perpetual KYC, where the information is kept current all the time. But with RegTech, that vision can be made a reality. And that is exactly what our tool does as well. Kirkpatrick KYC, is often seen as we have access to a database of company entities. And when the database changes, that is our signal, when we want to update the company information for our customer. We believe that's actually not quite enough, that is perpetual KYC, just on on a schedule that you don't know, because it's the schedule of the database refresh of the commercial database that you're using. I think our customers think that you can go further. And that is you can have Petro KYC, straight from the company registry information. Now that it's not that easy, you do have to repeatedly go over, there's limited availability of when things are refreshed, and so on. But when you crack that with a tool like ours, you get de current updates, a new director just came up for this company. Now we stopped scanning for the old director in screening databases, and we start for the new director. And we flagged that to the compliance team. And that level of compliance and perpetual KYC. I think that's where things are, that's where we're heading out. Thank you for having us. I have to say just one last thing, please, something really bad. I just wanted to share something really nice happened last night. Mes and SFA have his series of awards for to give out they are really prestigious, because you cannot buy one, you cannot invest in a table at a dinner and get one. It's one of these things where we really evaluate company, we won second place in the ASEAN category. And that's, that's a big deal for us. I think we we properly arrived here and made

Koen Vanderhoydonk  12:15  
our mark. It should have started with this. I know I don't think congratulations to you. I'm

Claus Christensen  12:20  
a guy. I like to share knowledge actually.

Koen Vanderhoydonk  12:25  
I think that makes that makes reg tech so different than than the FinTech perhaps. But that's yet for another discussion. Thank you so much, again, close for ad hoc being with me in this podcast. I liked the way you shared your insights in the world of KYC. So thank you very much. Thank you also to our audience for tuning in. And please stay tuned. This was the last one from the Singapore FinTech festival. But there's many many more news that will come on this channel. Thank you so much.

Introduction  12:53  
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