This article is part of Kyckr’s new Future of KYC Compliance series, which interviews leading industry professionals and thought leaders to learn more about the trends that will shape the future of KYC compliance.
The following is an interview we recently had with Andreea Rainer, Founder Attorney at Law of Andreea Rainer Law Office.
What’s the current state of KYC compliance?
From my position as a business attorney at law dealing with clients/ prospective clients from various industries and different scales, I have the opportunity to notice that KYC compliance tends to become more flexible. By virtue of the 5AML Directive (i.e. Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing), the path to digitisation in the legal field is the preferred one in the era of speed. Concretely, both at the beginning of a business relationship and during the monitoring thereof, we are delighted to be able to comply with KYC regulations by means of electronic identification and electronic signature solutions. Romanian digitisation process is developing at a rather fast pace. Romanian legislators and public authorities are making progress as to paper-free legal processes and procedures, the more so as legal professionals are open to this. In recent times the first online trial in Romania took place, within which judges and lawyers met in the virtual environment to carry out the act of justice.
How has KYC compliance evolved over the past 5 years?
Technology has taken us by storm in the last 5 years. Undoubtedly, the legal framework required some time to adapt to the newly occurred realities, such as clients’ digital onboarding. The past 5 years of KYC compliance evolved from a rather grey area of the legislation, where KYC measures kept on to the beaten track, towards a slow, but certain crystallization thereof. Since the European Union made the decisive step towards addressing the contemporary challenges driven by technology, in 2015, with the adoption of the 5AML Directive, national legislator is also trying to keep pace with the developments. Against the background characterised by the Romanian legislator’s hesitation, when the latter needed some time to implement these changes, during the last 5 years, the first 3 years were almost unchanged, whilst in the last 2 years the digitisation has accelerated. If 5 years ago it was necessary for the attorney at law to meet the client and have a face-to-face conversation, now the client-lawyer relationship may be managed online in its entirety: video discussions, signing documents with qualified electronic signature, etc. I declare myself as the proud owner of a digital boutique law office, where both clients’ and lawyer’s time is highly valued, and business-oriented.
How has KYC compliance changed in the midst of COVID?
The digitally-oriented legal framework was more crystalized than ever shortly before the pandemic, and legal professionals were preoccupied with processes’ improvement. Nevertheless, it is beyond doubt that COVID19 had a strong impact on KYC compliance. The pandemic provided a boost to the clients’ digital onboarding. Non-face-to-face relationships entail high risks by themselves, and on the downside, the pandemic sharpened cybercrime. However, social distancing requirements forced the digital approach, where the lawyer requires their clients/ prospective clients identity documents in electronic form, followed by identity confirmation via video conference and discussions upon client’s business intentions, and securing digital onboarding process with client’s qualified electronic signature issued by a trust service provider duly authorized. In a nutshell, against the background of increased awareness, the effects of the COVID19 pandemic on KYC compliance turns out to have a silver lining: clients are enjoying the facilitation to legal services whilst the lawyer saves their time and decreases (if not removing) paper-based operations.
What are the top trends shaping the future of KYC compliance?
On the one side, in order to counterbalance the specific risks entailed by remote relationships, it is expected that the relevant KYC regulations to be tightened. This trend is already noticeable in the context of the adoption of the European Union 6AML Directive, i.e. Directive (EU) 2018/1673 on combating money laundering by criminal law. For the purpose of addressing increasing cybercriminal offences, the latter and related sanctions in the area of money laundering are better defined, expanded and strongly discouraged. On the other side, lawyers and clients are expected to become “more digital”. Law offices are to implement both fully digital KYC solutions and more sophisticated security systems tackling high risk business relationships. Legal services’ beneficiaries seem happy and relieved that they are able to benefit from electronic solutions within the onboarding and monitoring process. What is more, fortunately, European and Romanian authorities are embracing this technological environment, which highly contributes to polishing current KYC compliance.
What’s the future of KYC compliance?
Paraphrasing Heraclitus, it is not wrong to say that change is the only constant in life. Undoubtedly, technology will constantly develop, and along with it, KYC operations. Nevertheless, on what concerns the future of KYC compliance, we find ourselves in one of those rare hypotheses in which we may declare that the future is predictable to some degree: digitisation is the defining feature thereof. Amongst the previous burdens in the field were the volume of physical documentation, storage space, costs and time required to handle the heavy mandatory paper work for the purpose to comply with relevant KYC regulations. From my perspective as a tech savvy attorney at law, KYC processes will continue to be carried out mainly in the online environment. Note should be taken that whilst clients expect smooth onboarding and monitoring requirements, lawyers are looking for operational cost-reducing and efficient KYC compliance tools to address the new realities.