Unveiling Insights: A Masterclass in Risk & Compliance Management

In today’s rapidly evolving business landscape, navigating the intricacies of risk and compliance management requires a nuanced understanding of regulatory frameworks, coupled with strategic foresight. 

We recently hosted a webinar, delving deep into the multifaceted realm of risk and compliance. With a lineup of esteemed speakers and engaging discussions, the event provided a comprehensive exploration of key trends, challenges, and innovative solutions shaping the industry. 

Illuminating the Path: Insights from Expert Speakers

Session 1:  Handling Complexity in Compliance: A Human Approach to Risk

Led by Metodi Pachev, our Head of Risk & Compliance Operations, the first session served as an exploration of the complexities inherent in risk management. Metodi, drawing from his extensive experience and expertise, offered insights into emerging trends and challenges reshaping the compliance landscape. Through compelling anecdotes and practical examples, attendees gained a deeper understanding of the evolving regulatory environment and the importance of adopting a human-centric approach to compliance.

Session 2 : Practical Industry Case Studies – Diane Shepherd 

Diane Shepherd, our Director of Strategy & Business Development, took center stage in the second session, bringing theory to life through a series of insightful industry case studies. With a keen focus on real-world scenarios and tangible solutions, Diane showcased our product offerings in addressing compliance challenges across various sectors and regions. Attendees were treated to a wealth of actionable strategies and best practices, empowering them to navigate regulatory complexities with confidence and precision.

Engaging with Experts: A Dynamic Q&A Session

The webinar culminated in a dynamic Q&A session, providing attendees with an opportunity to engage directly with our speakers, Metodi Pachev and Diane Shepherd. From probing questions on decentralized finance to inquiries about the future of compliance technology, the session was marked by lively discourse and illuminating insights. Metodi and Diane, drawing from their wealth of knowledge and experience, offered nuanced perspectives and practical advice, further enriching the webinar experience for participants.

Question 1: Decentralized Finance (DeFi) Demystified

Q: Could you kindly elaborate on what is meant by Decentralized Finance (DeFi)? Do you mean BaaS?

A : During our webinar, we referenced the U.S. Department of the Treasury’s 2023 Illicit Finance Risk Assessment of Decentralized Finance report, which highlights the absence of a universally accepted definition or understanding of DeFi. However, the report adopts the definition of DeFi as “virtual asset protocols and services that purport to allow for some form of automated peer-to-peer transactions, often through the use of self-executing code known as smart contracts based on blockchain technology.”

In simpler terms, DeFi encompasses systems facilitating the creation, management, and peer-to-peer exchange of virtual assets through programmable contracts that execute automatically based on predefined conditions, utilizing blockchain technology. One example of such systems is decentralized lending platforms, where users can earn interest on their deposits (e.g., cryptocurrency) and borrow funds without involving traditional financial institutions.

Despite its growth, DeFi is susceptible to money laundering due to the lack of enforced KYC procedures. This vulnerability underscores the importance of discussing DeFi in our webinar, considering its significant impact on the financial landscape in recent years.

Question 2: Justification of Increased Difficulty in Identifying UBOs

Q: Is the increased difficulty in identifying UBOs, due to privacy regulations justified in your opinion? On one side, exposing business owners information publicly presents as a risk for them. With that in mind, they are fully able to take action to mitigate this risk. On the other side, bad actors can take full advantage of these regulations to cover their history. – We cannot mitigate this risk, unless we prove that we have “interest” In knowing the information.

A: We acknowledge the challenges in establishing legitimate interest for accessing UBO information, particularly following the recent ruling by the Court of Justice of the European Union. In the absence of clear guidelines on what constitutes legitimate interest, transparency becomes even more vital for a well-functioning economy, where accountability is paramount. Without transparency regarding UBOs, effective sanction programs and risk management become difficult to implement.

However, it’s essential to recognize that even seemingly transparent systems may conceal the true beneficiaries. Therefore, we advocate for an analytical approach that connects various actors and sheds light on stakeholders who may operate in the shadows. Central to this approach is a critical review of the facts, and asking questions such as: 

  • Does this align logically? 
  • Does the stated purpose of an undertaking or transaction match its actual outcome?
  • Who stands to gain the most from this arrangement? 

This method enables a deeper understanding of complex financial structures and helps identify potential discrepancies or irregularities.

Question 3: Benefits of On-Site Visits in a Digital World

Q:  Do you believe that on site visits are beneficial for overall risk assessments of a subject in an increasingly digital world?

A: Site visits have become even more beneficial in this increasingly digital world than they were before. The acceleration of the internet’s prominence in businesses’ day-to-day operations has made companies overly reliant on online sources when it comes to administrative tasks, including verifying information. This may have created a false sense of security, of which we should beware of. 

Information has indeed become more accessible and exhaustive through digitalization: online registries, online information request forms, videos, etc. The range of possibilities has expanded thanks to technological progress. However, this same progress has also enabled the development of sophisticated ways to trick the systems in place, to fake the information, or to sidetrack its access.

On-site visits and inspections remain unaffected by this downside, thus being a great way to verify information in an indisputable manner. Agents physically going to a location to confirm that a business is indeed operating from there and providing evidence gathered in situ is the key to remaining impervious to deceiving online tactics that might be used by third parties (customers, vendors, etc.) when engaging in a contractual relationship.

Companies are still required to have a physical address, so on-site visits remain a key means of verifying if a business is real and operating (for a comprehensive risk assessment).

Key Documents Referenced

Empowering Compliance in a Transformative Era

As we reflect on the insights shared and lessons learned, it becomes evident that effective risk and compliance management are indispensable components of organizational success in today’s dynamic business landscape.

Our  masterclass webinar not only provided attendees with  knowledge and practical strategies but also underscored the importance of collaboration, innovation, and a human-centric approach in navigating regulatory complexities. As we continue our journey towards a safer, more secure future, let us remain steadfast in our commitment to embracing these principles and driving positive change within our organizations and beyond.

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Secure Your Spot for Our Exclusive Risk & Compliance Masterclass!

Don’t let this opportunity pass you by!

Join us on February 29, 2024, at 11 AM CET for a deep dive into Risk & Compliance Management. Our expert-led webinar will provide you with the essential knowledge and tools to conquer compliance challenges confidently.