Regtech, compliance culture can help remove the country from global watchdog’s ‘grey list’
LexisNexis Risk Solutions Managing Director in the Asia Pacific Bharath Vellore expounds on the True Costs of Fraud and Financial Crime Compliance in the Philippines with Amor Maclang, Co-Founder of GeiserMaclang and Convenor of Digital Pilipinas, who called for a culture of compliance alongside innovations and the “Teching-Up” of the country during the Risky Business Luncheon Series launch with industry leaders from insurance, fintech, and banking.
The cost of fraud across the Asia Pacific (APAC) region last year rose to 3.51 and 3.87 times the amount of actual lost transaction values due to the rise of fraudulent transactions. These figures, which came from the LexisNexis® True Cost of Fraud Study from LexisNexis® Risk Solutions for the Philippines in 2020, show a significant increase from 2019’s regional average of 3.40.
The trend prompted industries such as insurance, banking, and financial technology (fintech) to upgrade financial crime compliance technology. LexisNexis Risk Solutions managing director for APAC Bharath Vellore explained the urgency, saying, “Last year alone, the total projected cost of financial crime compliance across all financial firms in the Philippines was $690M or an estimated Php35B. This translates to an average total rise of 44% on the projected cost of financial crime compliance across all financial institutions.”
Discussions on how technology can protect the finance industry from cybercriminals, money launderers, and terrorism financiers were the highlight of the launch of the three-part Risky Business Luncheon series. This series’ pilot event, which zeroed in on the insurance industry, was attended by the country’s top insurance companies’ chief executive officers and chief compliance officers, together with the officers of the Philippine Insurers and Reinsurers Association (PIRA) and Philippine Life Insurance Association, Inc. (PLIA)). It was hosted by LexisNexis Risk Solutions in partnership with the FinTech Philippines Association (FPH), and GeiserMaclang Marketing Communications Inc., the convenor of Digital Pilipinas and World Fintech Festival-Philippines 2021.
LexisNexis Risk Solutions is a global leader in combining advanced analytics and global identity intelligence technology with innovative financial crime technologies like machine learning, artificial intelligence (AI), and robotic process automation (RPA). These solutions enable precise risk perspective during the customer lifecycle, allowing customers to make timely and correct decisions and address financial crime risk.
The first Risky Business Luncheon, themed “Teching Up Insurance,” aims to promote regulatory compliance, collaboration, and an environment of innovation, using cutting-edge regulatory technology (regtech). It comes as a timely response to a call to remove the country from its return to the global “grey list” of financial crime hotspots marked by the Financial Action Task Force (FATF). The Philippines is among the only three Southeast Asian nations, along with Cambodia and Myanmar, out of 22 countries assessed by this international watchdog in 2021 as deficient in combatting money laundering, terrorist financing, and other financial crimes.
Jonathan Rogerson, LexisNexis Risk Solutions senior director for APAC, further emphasized that industry players must be more vigilant of criminals who are always looking to move one step ahead. “While effectiveness, efficiency and explainability are all key pillars of financial crime compliance, priority for these vary depending on the stage or maturity of your business,” Rogerson said. “There has to be a balance to understand and detect risks through a combination of people, processes and technology.”
LexisNexis Risk Solutions Philippines country manager Vishal Taneja encouraged dialogue on regtech within the insurance industry, pointing out that “for businesses to raise the bar in financial crime compliance, the 3 E’s (effectiveness, efficiency and explainability) of the Money Laundering and the Terrorism Financing Prevention Programme should be considered.”
LexisNexis Risk Solutions director of financial crime compliance strategy Douglas Wolfson delved into how efficiency enables effective compliance in a cost-effective manner. “You’re looking for a specific needle in a pile of needles, and to do it we need to have good tech. Robotic process automation is valuable because that means the manual tasks that take time to perform can be done by machines. The real value is not implementing tech to get rid of people. Rather, the tech allows companies to upskill their staff to do more value-added work.”
Among the 3 E’s, most insurance panel discussion leaders favored effectiveness, citing it as crucial for expansion and upgrading systems. It was also mentioned that initiative and encouragement from top executives were crucial in enforcing compliance.
Julie Hsiao, Southeast Asia head of sales at LexisNexis Risk Solutions, then asked the participants what they thought were the challenges in creating an environment of compliance. She cited Bangko Sentral ng Pilipinas Governor Benjamin Diokno’s assessment that the Philippines will be delisted from the grey list by 2023 if all action plans for compliance are followed.
PLIA president Benedicto Sison named one challenge: “How to move faster and how to accelerate our adoption response. It is high time to reinvent our business, to reimagine, to be in sync with operating landscapes in shifting tech and changing client expectations. This experience is a call to action in the whole life insurance industry.”
PIRA chairman Allan Santos then identified three areas in which insurance can step up with technology and innovation. “One area is in data gathering and processing, but companies struggle to provide this, due to confidentiality and capability. The second area is in digital sales and servicing because with tech, there is an opportunity and possibility to reach unserved Filipinos. And the third is in claims processing and payments,” he said.
FWD Life Philippines general counsel Atty. Teroy Roman remarked that there has to be a standard for due diligence for regulators because currently industries are left to their discretion. He admitted that the Philippines is just beginning to explore using AI for compliance when compared to developed countries. Part of the learning is to “wait and see and monitor globally how AI is used by our counterparts.”
Etiqa Philippines president and CEO Rico Bautista said that with more Filipinos working from home, companies need to invest in tech like IP security. “Innovation in the industry will continue to flourish without having to sacrifice anything. Certain technology solutions may be put into place like automation and sanction lists. Compliance and innovation are not two opposing forces. It’s a matter of knowing the opportunities at hand and which technologies to use to seize those opportunities,” he added.
Amor Maclang, co-founder of GeiserMaclang and convenor of Digital Pilipinas, affirmed that the country must utilize technology to reverse the country’s position as part of the FATF grey list while improving the insurance industry’s services and capabilities. “Where others see crises and challenges, we choose to see opportunities in technology such as regtech, Robotic Process Automation (RPA), machine learning, Artificial Intelligence (AI), Big Data Management and cybersecurity as a means to strengthen industry and government regulatory compliance. Technology can also spark innovation, make companies globally competitive, and upskill Filipinos. It can ensure that no one in the industry workforce, such as agents, gets left behind. It is only when we have a culture of compliance that innovation can truly prosper.”
Innovations like regtech can become part of mainstream industry operations as their leaders realize the extent of the damage that can be caused by complicity with the perpetrators of financial crime, no matter how unwitting or unintentional. As Maclang stressed, “The role of governance has never been so important. It’s now no longer just the responsibility of a CTO. This is now an enterprise objective and an enterprise task.”
