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  • Tranche 2 of Australia’s AML/CTF reforms to impact accountants, lawyers, real estate agents and other financial operators
  • Emerging fintech/regtech creates new opportunities for financial operators and institutions to reconfigure for the future
  • Identitii (ASX:ID8) is ready to meet burgeoning demand for Compliance as a Service

2022 has already been a year of dramatic change and uncertainty, and the financial sector has seen more challenges than most, with developments in Europe cascading across all markets including the Australian financial environment. But the challenges are just beginning.

A major task lies ahead for over 100,000 businesses as the Australian government looks to begin the roll-out of Tranche 2, Australia’s interpretation of the global Financial Action Task Force Anti-Money Laundering and Counter Terrorism Financing (AML/CTF) uplift recommendations.

Known as the ‘Gatekeepers’, given their role in facilitating individuals or companies entering the financial system, Tranche 2 will see lawyers, accountants and real estate professionals fall under the jurisdiction of AUSTRAC, the Australian Transaction Reports and Analysis Centre. This means new requirements to abide by the AML and CTF measures already incumbent on larger financial institutions.

In many ways this will change the landscape of financial interactions in Australia forever but first, it will mean that these types of organisations will have to make significant changes to how they identify, manage and report potential financial crime.

An entirely new way of reporting

For the vast majority of the financial and allied industry sector practitioners who will be affected by this change – accountants, lawyers, real estate agents and financial planners – the learning curve will be steep.

To date, these ‘gatekeeper’ industries have not had to comply with TTR (transaction threshold reports), SMR (suspicious matter reports) and IFTI (international funds transfer instructions) obligations, so having to suddenly report to AUSTRAC in line with AML and CTF regulations will be daunting in its complexity and depth.

New systems and processes will need to be adopted, the potential for error will be high, and the consequences of non-compliance greater than ever.

Fintech/Regtech to the rescue

One bright spot on the horizon is that emerging fintech (financial technology) and regtech (regulatory technology) offerings can provide a comprehensive, streamlined solution that should make facing this looming challenge easier.

Indeed, for many financial sector practitioners and institutions, the changes coming down the pipe offer a unique opportunity to take a quantum leap into the future of compliance management, with the added bonus of creating a highly automated, interconnected and versatile financial crime prevention regime that is robustly secure at every level.

Creating a new level of confidence in transaction reporting

Australia’s Identitii (ID8), was founded in 2014 to “bridge the gap between the increasing demand from regulators and customers for more information on financial transactions, and the legacy technology systems that make it difficult to identify and share that information.”

Today, the company is at the forefront of the push to give financial sector operators the tools they need to eliminate financial crime, maximise the ease and accuracy of compliance, and provide an entirely new level of transaction accessibility, security and oversight.

Identitii CEO John Rayment told The Market Herald that the combination of issues facing the sector in the coming years is precisely what the company has been preparing for.

“Our focus from the start has been on helping our clients meet their financial crime compliance obligations, and we have developed a platform that makes it easier for them to identify what is and isn’t reportable to regulators, automates key manual processes to alleviate some of the operational burden, and gives them more visibility and certainty that their reporting is being done correctly every time,” he said.

“For those organisations about to start reporting to AUSTRAC for the first time, there will be a significant body of work internally just to make sure things like the customer database is up to date, and the records of each and every transaction are sufficiently transparent. We’re here to help make that uplift process easier and to simplify the transition to AML/CTF compliance,” he added.

“We designed our platform to provide compliance officers and companies with a much broader and deeper visibility of their transactions, and a compliance record they can easily interrogate to see what has and has not been reported,” Mr Rayment said.

Mr Rayment also said that while the Senate Committee recently published its recommendation that Tranche 2 be rolled out, the thousands of businesses that will be affected have valuable time to get up to speed as AUSTRAC looks at how it will support them during this change. “The time to act is now,” he said. “Find a provider you can trust, who has a track record in this area, and get ahead of the curve.”

Compliance as a Service – the ultimate answer

In the same way that a huge number of companies and corporations now routinely utilise Software as a Service (SaaS), Identitii is about making Compliance as a Service (CaaS) a more commonplace solution for the financial industries.

“We connect all the existing internal payment, reporting and customer systems, we automate key compliance processes that are currently manual, and we make what is and isn’t reportable securely visible to management. We also format and submit compliance reports directly to AUSTRAC on behalf of our customers,” Mr Rayment said.

“We built this to cater to major financial institutions and the uptake has been very satisfying, but our platform is eminently suitable for smaller operators too. We’re now preparing for the deluge of smaller entities who will need to make sense of their AUSTRAC responsibilities in a very short time, and meet compliance deadlines. It’s going to be a very busy year.”

Proven technology and a rapidly expanding market

The platform and the technology are well proven, with several key milestones having been achieved in the first half of the current financial year, including that the platform has now processed over a million transactions for customers including HSBC, Novatti, Mastercard Cross-Border and Standard Chartered Bank.

With the addition of many thousands of smaller financial sector businesses to the potential market, and a product scalable to any size entity, Mr Rayment’s prediction is likely to prove accurate: it’s going to be a very busy year indeed for Identitii (ID8).

Shares in Identitii currently trade on the ASX for 7.4 cents each in a manageable $15 million market cap.

ID8 by the numbers

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