Regulation is evolving in payments. It is strengthening and increasingly joining-up across territories, creating far greater responsibilities for companies around fraud, AI, KYC, data privacy and of course AML.
High Risks And Rapid Evolution
The topic of regulation was forefront at PAY 360 2021 with Philip Creed, Director and Co-Founder of fscom, citing recently-fined MT Global as an example of what not to do. Poor risk assessment, record keeping, polices, controls, procedures and customer due diligence checks led to the company receiving a £23.8m fine. “There are a lot more legal challenges when it comes to fighting enforcement actions” says Phillip, “what is clear is that regulators are no longer accepting excuses.”
Nick Sharp, Deputy Director of Economic Crime, Fraud Investigation Service for the HMRC underlined that businesses that fail to comply aren’t only leaving themselves, but the British Economy itself, open to attack by criminals.
The rapid pace of payment advancement has also caused some to question the stability of future financial systems without appropriate regulation. Aside from criminal liability, new payments systems have the potential to outcompete banks for profits needed to stably operate the core of payment systems and interbank settlement. If payments is to grow beyond disruption to the point of becoming a banking replacement, it must remain stable to prevent volatility and see-sawing public confidence.
Compliance Expertise: Hiring & Upskilling
Prioritising compliance departments is the best way for payment firms to get ahead of impending regulatory changes. Compliance staff don’t have enough time to build effective platforms according to Phillip, sometimes only a few months at best. He advises companies to “buy your training management plans” for optimal workflow and auditability.
Upskilling staff with regular compliance training is a great way to enhance the effectiveness of an existing team, but with the rapid growth of the industry set to continue, employers should think about not just the quality but quantity of their employees.
Appropriately skilled talent can be hard to come by in the current market, and hiring demand is already outstripping supply,so employers should be prepared to pay more to get the most qualified talent.
“We anticipate salary rates increasing in 2021, says Andrew Cook, Head of Europe, referencing Headcounts 2021 Payments and Fintech Salary Survey.“This will be driven by emerging market growth coupled with increasingly hard-line enforcement in regulated markets. All businesses will need to plan ahead to mitigate against the severe risk of under-resourced compliance, regulation and legal teams.”
To avoid bidding wars perhaps a more practical solution would be to bring in ambitious but under skilled candidates and train them up to acceptable standards. The cost of this can be mitigated through the use of partnered services that both recruit and train for the payments industry.
Whatever strategy businesses do decide on should factor in increased regulatory demand and complexity in line with the industry’s continual growth.