Retail banks have been issued a warning by the Financial Conduct Authority (FCA) about continuing weaknesses and failings surrounding their financial crime controls.

The letter, which was penned by David Geale, the Director of Retail Banking & Payments Supervision for the FCA, and sent to banking industry chiefs across the UK, was issued in May and made public via the FCA’s website hub on 29^th June.

It outlined the key issues and weaknesses surrounding retail banks’ financial crime controls and requested that each firm complete a gap analysis of each of the identified weaknesses and take prompt and reasonable steps to resolve them by 17^th September 2021.

The letter warned that the regulator is likely to request a demonstration of the steps taken after this date and, if deemed inadequate, the FCA may consider appropriate regulatory action in order to manage the financial crime risk posed.

The common control weaknesses identified and cited were in the following areas: Governance and Oversight; Risk Assessments; Due Diligence; Transaction Monitoring and Suspicious Activity Reporting (SARS).

It was highlighted that, in several cases, persistent failings have resulted in intervention, such as requiring firms to appoint a skilled person to carry out a detailed review, business restrictions and, in the most severe cases, enforcement action.

Wayne Johnson, CEO of Encompass Corporation, commented:

“Retail banking is a high-risk sector for illicit financial crime activity, particularly in today’s climate, where the increase in both online banking and remote working has made money laundering even harder to detect.

“The banks, therefore, must work proactively and collaboratively with the FCA and other regulatory bodies to ensure they are onboarding customers, reporting information and complying accurately with current existing regulations and industry recommendations.

“Combatting the rising financial crime threat demands said banks to equip themselves with sophisticated regulation technology that automates compliance processes – making them more efficient, secure and cost effective. Implementing or upgrading software and bolstering processes will also be key to demonstrating to the FCA that they are taking the threat seriously, and executing the necessary steps to help address the evident weaknesses in the fight against financial crime.”

• 182m securitised derivatives traded in Q2 2021 compared to 98m in Q2 2020
• First half volumes increased 146% year-on-year
• Most traded underlyings were OMX 30, DAX 30 and S&P 500

Spectrum Markets, the pan-European trading venue for securitised derivatives, has released its latest Quarterly Business Update, revealing continued positive momentum as its business matures.

Second-quarter trading volume grew by 86% year-on-year. 182 million securitised derivatives were traded on the exchange from April to June, compared to 98 million during the same period last year, underlining the firm’s continued strong growth. 

Looking at the first half of this year presents an even stronger contrast when compared to 2020, with trading volume increasing 146% year-on-year.

“Achieving strong and sustained organic growth continues to be one of our top priorities, so it’s great to see how far we’ve come since this time last year,” said Nicky Maan, CEO of Spectrum Markets. “Our 24/5 pan-European trading proposition has proved tremendously popular as the European retail investor community grows in size and sophistication, and we have a number of exciting new developments lined up for the months ahead.”

During Q2 2021, 34.2% of individual trades took place outside of traditional hours (i.e. between 17:30 and 9:00 CET). 85.1% of this activity was on indices, 8.9% on currency pairs, and 6% on commodities, with the top three traded underlying markets being OMX 30 (28%), DAX 30 (23.6%) and S&P 500 (11.4%).

Alfa Capital, one of the largest asset management companies in Russia, a member of the Alfa Group Consortium, selected an AI-based solution from Smart Engines for scanning new clients’ IDs to boost its remote service. Smart ID Engine software product enables Alfa Capital to significantly simplify data entry in their mobile app. This makes customer onboarding more convenient and secure.

The mobile application for asset management has become one of the key tools for developing remote services and increasing Alfa Capital’s online sales in 2021. With embedded Smart ID Engine, the app allows thousands of new investors every month to sign up comfortably and securely, without wasting time on manual data entry.

Smart ID Engine automatically extracts data from IDs, presented by a client, and immediately inputs it into the registration form fields. It detects the location and document type under low or excessive lighting conditions, and conditions of complex scene geometry. The recognition process is highly protected because all the data is processed on the user’s device without transferring images or text to third-party sources.

“Alfa Capital uses the most innovative technologies to improve its customer service. Implementing Smart ID Engine software product in the mobile application, we aim at providing our customers with a comfortable beginning of working with our financial services in compliance with all security requirements. It is especially valuable for us that Smart Engines fully meet the requirements of personal data processing standards,” says Anton Graborov, Chief of the Digital Business department at Alfa Capital.

“We are proud that our state-of-the-art technologies are getting to be more and more used in various industries. The increased demand for Smart Engines software products is formed due to the guaranteed reliability, accuracy and speed of recognition. The company's extensive experience in the field of AI and computer vision paved the way for digitizing such processes as onboarding, payment purchase, check-in, and others,” states Nikita Arlazarov, Chief Financial Officer at Smart Engines.

Alfa Capital and Smart Engines adhere to the idea of implementing "green” projects. In 2019, Alfa Capital launched the “Alfa Green Investments” trust management strategy, the main idea of which is to invest consciously. The scientific company Smart Engines in 2020 presented an unrivalled development in the field of energy-efficient AI, GreenOCR® technology, which reduces carbon footprint, and joined the UN Global Compact.

• 70% of fintechs are using AI today, and the technology is predicted to dominate the market by 2025
• 90% of fintechs use APIs and they are currently the most widely used emerging technology
• “Fintech Five by Five” explores five core technologies that will have the biggest impact on the sector in the next five years

Tribe Payments, a payment technology company, today reveals that 67% of fintechs believe AI is the technology that will have the biggest impact on the sector over the next five years. The finding, part of the new “Fintech Five by Five'' report, examines which five emerging technologies are having the biggest impact today, tomorrow and on the long term future, and exactly what changes we can expect to see as a result. The report is based on a survey of 80 fintech executives and features contributions from leading technology providers including Canonical, FintechOS, Microsoft, R3 and TrueLayer.

Key findings from the report:

Emerging technology use today

• 90% of fintechs use APIs and they are the most widely used emerging technology today, primarily driven by the success of Open Banking.
• Remarkably, 70% of fintechs are already using AI despite it generally being perceived as a future technology.
• 20% of fintechs are using blockchain technology, demonstrating that it has moved beyond the hype and is now being implemented more widely.
• Low-code is being used by 16% of fintechs, as firms seek to increase the pace of development and refocus developer time on high value projects.
• 10% of fintechs are using edge computing, a surprisingly high adoption rate given the technology is less hyped than the others. 

Impact of emerging technologies tomorrow and in the next five years

• AI may still be seen by many as a “future technology”, forever several years away, but fintechs are implementing AI today, and the reputation as all hype and no substance is no longer deserved.
• Blockchain will be used more and more in smart contracts, and for privacy and confidentiality. Its success doesn’t hinge on crypto.
• APIs are already a mainstream technology, driven mostly by regulation in financial services. They will continue to be mainstream and will make integration of services simple.
• Low-code is the dark horse of these technologies. To make the most of it, there will have to be an attitude shift in how fintechs approach development.
• Edge computing is still to gain the buzz that it should, perhaps as it’s a little bit “inside baseball”—the implications are mainly understood by those closest to the technology.

“Fintech may be seen by some as a revolution made possible by technology, but it’s just as much a shift of attitude—an ongoing change where openness to, and understanding of new technology is vital,” said Alex Reddish, Chief Commercial Officer at Tribe Payments. “This report not only offers insight into the technologies from those closest to them, it suggests next steps for fintechs who don’t want to be left behind.”

The report “Fintech Five by Five”: Five technologies and their impact over the next five years can be downloaded here.

Engineered by SETL, Verafide allows organisations, networks and individual users to simply and securely issue, hold, verify and share digital ID and credentials 

Verafide, a verifiable credentials technology provider for issuers, holders and verifiers of digital credentials and ID, today announced the launch of their platform on the SETL enterprise blockchain.  The open source solution enables any community, network or organisation to set up and maintain a digital credentials ecosystem.

Verafide offers a comprehensive tool set to issue, hold and verify digital credentials – a personal, secure digital certificate that proves a fact, a right or a qualification – combined with an integrated payment solution to allow organisations to commercialise their issuance. Use cases include a variety of scenarios from KYC and legal documentation for financial services firms, to proof of identity or age, to digital credentials to evidence of vaccinations or professional qualifications. 

The computer code Verafide developed to issue, present and verify the digital credentials has been open -sourced in compliance with Government best-practice policy for public sector use.  The high performance SETL blockchain maintains issuer's identities and public keys as well as other information that allows verification of the digital certificates. 

The Covid-19 pandemic has significantly accelerated the need for and development of verifiable credentials. As governments across the world debate vaccination passports, the NHS has created a digital credential to prove an individual’s vaccination status.  Currently only available in the NHS app, Verafide sees this as one of many digital certificates that citizens will want to hold in their wallets.  

In February of this year, the UK Government announced its ‘digital identity and attributes trust framework’ to further the development of a national digital ID.  Its next iteration is due by the end of the summer, with legislation being considered later in the year.  Elsewhere, in June the European Union announced proposals for its own  “trusted and secure digital ID”, inviting Member States to establish a “common toolbox” by September 2022.   

Verafide’s aim is to bring together digital identity and verified credentials into one digital wallet which puts the owner in full control of what happens with their personal information. Portable certificates can be passed between the holder and verifier like a digital passport, without the need to share details of interactions or transactions with the original ‘issuer’ of IDs, so personal information remains protected. What’s more, the enterprise version benefits from a built-in payments functionality that allows organisations or companies to commercialise and scale the issuance of certifications, from ID cards to driving licenses or travel documentation. 

Joshua Daniel, Chief Engineer, Verafide, said: "Last summer we won a competition launched by Innovate UK, the UK's innovation agency, and were awarded funding to realise our ambition to solve the issues around existing verifiable credentials data. Since then, we have been working tirelessly to build digital trust and resolve the inefficiencies in how credentials are created, shared and verified. Our aim is to work with natural trust infrastructures where issuers and holders of credentials will benefit from digitisation.” 

Daniel added: “Covid has put the need for digital IDs firmly into the mainstream. We wanted to use our funding and technology not only commercially, but also to ‘give something back’ and help our country return to some sort of normality as soon as possible. This is why we have made our solution completely open source and one of our first projects is to work on digital credentials for Covid testing.”  

Verafide is enjoying early interest and adoption and is already working with: 

• The Linux Foundation Public Health and the Covid 19 Credentials Initiative - both developed to help public health authorities combat COVID-19 and future epidemics
• Pyser Testing - a UKAS and CQC accredited testing provider that carries out PCR and lateral flow tests. The company is an approved UK provider of Fit to Fly, Day 2, Day 5 and Day 8 testing services. 
• The Modular Open Source Identity Platform (MOSIP),  an open source platform for Foundational ID systems developed in India , with deployments in countries such as the Philippines and Morocco, and backed by the Bill and Melinda Gates Foundation.  

Anthony Culligan, Verafide Advisor and Chief Engineer at SETL, said: “We have received a lot of interest from business and government organisations. Secure, digital credentials are not just a novelty making the administrative parts of our lives easier, they are now absolutely vital to getting people back to work, back to travelling - be that for work or family reasons, all whilst protecting their privacy."

Culligan added: “As with the evolution of money from paper to digital, identity and credentials will follow. We are proud to be at the forefront of innovation for verifiable credentials and actively involved in developing common industry standards. With a multitude of digital wallets and credentials offerings expected to come to market, ensuring interoperability across systems and the ability to integrate into existing infrastructures is more important than ever.”

Verafide's core functionality is open -source.  Verafide offers an open -source SDK for the developer community, and is compliant with the global W3C Verifiable Credentials Standard. Its enterprise solution is delivered as SaaS and includes a ‘payment-for-credential’ functionality. The Verafide App can be downloaded from the iTunes and Google app stores. 

Culligan concluded: “We are delighted to have created the core software for Verafide and excited to be one of the key shareholders in this new venture.”

Verafide is engineered by SETL and hosted on SETL’s enterprise blockchain technology. SETL has a proven track record in delivering distributed ledger technology (DLT) based solutions for financial markets, asset management and payments. SETL’s DLT technology powers regulated financial market infrastructures that are active and operational, including the Central Securities Depository ID2S and the fund distribution platform IZNES. Most recently, SETL has successfully completed the world’s first Central Bank Digital Currency (CBDC) live fund transaction in collaboration with Banque de France, using the SETL blockchain that powers the IZNES fund distribution platform. 

Fashion tech start-up closes Series C to consolidate leadership positions across Europe

Perwyn, a family-backed private equity and growth capital investor, is pleased to have led a $30m Series C funding round in Lookiero, the online personal shopping service.  

Founded in 2015 by Oier Urrutia, Lookiero combines the expertise of personal shoppers and a deep understanding of its customers with in-house recommendation algorithms to provide a fully personalized style experience to customers.  By employing a customer’s style profile, Lookiero delivers a carefully curated selection of five pieces of clothing and accessories to fit a customer’s individual size, style, and preferences.  Customers then decide which items to keep or return (at no additional cost), enabling Lookiero’s technology and personal shoppers to learn through feedback and improve future selections. 

With a team of over 400 people, Lookiero currently has over three million registered users and has grown revenue by over 50% in the first half of 2021 year-on-year. Furthermore, Lookiero has increased the number of items that customers keep in each box by nearly 50% in the last 3 years, improving margins significantly.

Since its Series B funding round in 2019, Lookiero has taken significant steps towards further improving its service and customer experience. The company significantly broadened its stock and conducted a full rebrand in 2020, redefining the company mission and visual identity.  Most recently, the company launched new mobile apps with new features and games that allow the company to learn more about its customers.

Technology enabled services is a core specialism for Perwyn and it has several other market-leading companies in its investment portfolio.  Lookiero’s existing investors MMC Ventures, All Iron Ventures and Bonsai Partners followed on in the round.

Perwyn was advised by Squire Patton Boggs (legal), Omnicommerce (financial), Grant Thornton (tax) and Diligize International (technology).  Lookiero was advised by Cuatrecasas.

Oier Urrutia, Founder and CEO of Lookiero, said that:  

“This funding round will allow us to continue our expansion in Europe, with the launch in Germany this year. Furthermore, we are working on exciting new projects that will enhance our current proposition of offering new ways for our clients to define their style and discover the clothes they love in a personalised and thoughtful way.  We are excited to partner with Perwyn on our next phase of growth.”

Andrew Wynn, Founder and Managing Partner of Perwyn, added:

“Lookiero is set for its next phase of international build-out in Germany, Western Europe’s biggest market.  In harnessing technological developments and combining them with fresh thinking and a clear business strategy, Oier and his team have demonstrated their skill in creating a business that continuously improves and builds on its effectiveness from both a consumer facing and revenue generating point of view.” 

Leading AI-powered credit decision platform provider, Scienaptic, announced that American Cycle Finance (ACF) has successfully deployed its platform. The implementation empowers ACF to assist its partner motorcycle dealers in selling more vehicles to customers with limited or no credit history through sharper, AI-driven credit decisions.

With a network of more than 450 motorcycle retailers across 24 states, ACF's program equips dealers with fast, easy application processing and loan servicing for their motorcycle sales transactions. With Scienaptic's AI-powered credit decisioning platform, ACF is positioned to offer enhanced, automated credit decisions to help increase credit availability for its customers.

“Deploying Scienaptic's AI-powered credit decisioning platform has resulted in significantly higher automation and credit approvals across portfolios. In one portfolio we are seeing 2X incremental approvals without any increase in risk,” said Ben Donnarumma, President of American Cycle Finance. “As we continue to use Scienaptic’s platform, we look forward to increased approvals and faster decisioning cycles for our customers.”

“ACF is enhancing the buying experience by helping its partners reach more customers, overcoming existing or past credit challenges and get a second chance to finance the motorcycle of their dreams,” said Pankaj Jain, President of Scienaptic. “With Scienaptic’s AI-powered credit decisioning platform, ACF can offer more credit approvals to customers who previously experienced credit turndowns or declines, despite their credit score. We are pleased to help ACF get more motorcycle enthusiasts on the road.”