The Digital Operational Resilience Act (DORA), enacted by the EU on 16 January 2023, aims to strengthen the financial sector’s ability to manage ICT-related risks, including those highlighted by the COVID-19 pandemic and rising cyber threats. It introduces a standardized framework for operational resilience, ensuring that financial institutions and their critical third-party providers, like Google Cloud, maintain robust risk management, ongoing resilience testing, and transparent incident reporting. DORA places significant emphasis on securing digital infrastructures and minimizing service disruptions which are crucial for market stability and consumer trust. The regulation will officially apply from 17 January 2025, by which time financial institutions must comply with its rigorous standards^[1].

Building a Unified Framework for Resilience

Strengthening ICT Risk Management

DORA consolidates a broad range of existing EU regulations^[2], establishing a standardised framework for ICT risk management. It mandates financial entities to develop comprehensive ICT risk management systems including regular monitoring, incident reporting, and robust operational resilience testing. These requirements aim to ensure the stability of financial services, even under severe operational disruptions, by incorporating critical cyber threat intelligence and vulnerability monitoring into business continuity plans​.

ICT risk management framework in a nutshell^[3]:

• Identification of all sources of ICT risk
• Protection of ICT systems
• Detection of anomalous activities
• Response and recovery plans and procedures
• Continuous learning and evolving
• Crisis Communication policies and plans

Service Providers Under Scrutiny

A significant aspect of DORA is its extended oversight of critical ICT providers, including cloud service providers like Google Cloud. This new scrutiny is part of DORA’s third-party risk management rules, ensuring that cloud providers are accountable for maintaining high levels of transparency and resilience. Financial entities are required to assess the risks posed by these third-party services, report on their contracts, and ensure critical functions remain intact, even if disruptions occur. The ESAs (European Supervisory Authorities) will also oversee these providers, ensuring compliance with strict resilience and security standards.

Managing third-party risk in a nutshell:

• ICT third-party risk as an integral part of the ICT risk management framework
• Strategy on ICT third-party risk
• Register of information
• Pre-contracting analyses over ICT services
• Promotion of standard contractual clauses
• Empowerment of supervisory authorities to designate and exercise oversight over critical third-party service providers

Proactive Resilience Measures

DORA emphasizes proactive measures such as resilience testing and threat-led penetration testing^[4], particularly for financial institutions and their critical ICT systems. These tests ensure that firms can swiftly recover from disruptions while minimising the risk of significant failures. The regulation also mandates regular testing of systems and operational resilience measures to safeguard continuous service availability. For large institutions, advanced testing like TLPT (Threat-Led Penetration Testing) will be required, to ensure vulnerabilities are promptly addressed​.

Digital operational resilience testing in a nutshell:

• A digital operational resilience testing program as an integral part of the ICT risk management framework
• Advanced testing based on TLPT
• Requirements for testers for the carrying out of TLPT

Google Cloud’s Example

Google Cloud is actively preparing for the implementation of DORA^[5] by enhancing its cybersecurity, resilience testing, and third-party risk management capabilities to support European financial institutions. Recognising DORA’s potential to streamline incident reporting, strengthen operational resilience, and enable direct regulatory oversight of critical ICT providers, Google Cloud is committed to aligning with these new regulations.

Through initiatives such as the Cloud On Europe’s Terms^[6], Google Cloud ensures compliance with EU requirements for data sovereignty, security, and sustainability. Its industry-leading security infrastructure, including tools like the Security Command Center^[7], enables customers to manage and monitor incidents independently. Additionally, Google Cloud supports rigorous resilience testing, including penetration and disaster recovery tests, helping financial entities meet DORA’s requirements.

Conclusion

DORA is more than just another regulatory hurdle; it’s a bold directive reshaping the very foundation of operational resilience in Europe’s financial sector. By demanding enhanced cybersecurity, continuous testing, and tighter third-party oversight, DORA pushes financial entities to not just comply but thrive in an era of relentless digital threats. As the 2025 deadline looms, this is a call to arms for the sector: to evolve from reactive risk management to proactive, ironclad resilience. Service providers like Google Cloud are already embracing this challenge, setting the standard with advanced security infrastructures and collaborative transparency with regulators. The question now is not whether financial institutions are ready to comply, but whether they are ready to lead.

Ready to future-proof your financial institution under DORA? Discover how Luxembourg’s financial hub is preparing for the challenges and opportunities ahead. Visit LHoFT for the latest insights, resources, and support to ensure your operational resilience strategies are not only compliant but positioned for leadership in this new era of digital security.

^Footnotes:

^{Featured Images: Midjourney}

^{Images https://sosafe-awareness.com/glossary/dora/}

^{[1]    For More Information on the Draft RTS :https://www.eiopa.europa.eu/publications/set-rules-under-dora-ict-and-third-party-risk-management-and-incident-classification_en}

^{[2] McCann FitzGerald LLP (30 June 2023), “Exploring DORA: the EU Digital Operational Resilience Act” http://mccannfitzgerald.com/knowledge/finance/briefing-dora-digital- operational- resilience-act}  

^{[3]  Onur Ozdemir (12 April 2023) “DORA regulation: all your questions answered – Read about the new regulatory framework for digital risk management” https://kpmg.com/lu/en/blogs/home/posts/2023/04/dora-regulation-all-your-questions-answered.html}

^{[4] “What is Threat Led Penetration Testing and why does DORA require it” https://www.secura.com/services/integrated-approach/dora/what-is-threat-led-penetration-testing} 

^{[5] Phil Venables (June 4 2022) “Google Cloud’s preparations to address the Digital Operational Resilience Act” https://cloud.google.com/blog/products/identity-security/what-google-cloud-is-doing-to-prepare-for-dora} 

^{[6] https://cloud.google.com/blog/products/identity-security/helping-build-the-digital-future-on-europes-terms} 

^{[7] https://cloud.google.com/security/products/security-command-center}  

The State of European Tech (SOET) Report is considered to be “among the most comprehensive data-driven analysis of European technology” by the European Innovation Council. The 2021 edition was launched on December 7 and provides decision-makers with a host of insights into the evolving tech landscape.

Timing-wise, this is an interesting one: the report provides an update on the state of tech and innovation at a moment when the world economy continues to recover from COVID-induced shocks. This year’s edition of the report notably allows us to get a better sense of whether the forced, rapid societal adaptions to a new modus operandi, greatly facilitated by technological solutions, is leading to durable change, or whether we will see a “regression toward the mean”.

Let me state up front that everything points towards the former.

As Chris Grew, Partner at Orrick – one of the report’s sponsors – states:

Now is a watershed moment for the tech and venture ecosystem across Europe and around the world. Europe is attracting record levels of investment and growth, with the innovation economy positioned to take the lead in tackling today’s systemic societal challenges.

[…]

Fintech investment has led the charge, rising by 159%, with total investment of nearly $15B, while planet-positive investments are dominating the fast-growing purpose-driven space.

ESG and sustainable finance are here to stay and we at LHoFT are convinced that fintechs will have an increasingly important role to play in facilitating the data collection, validation and analytics efforts required to build sustainability into the core of everything corporates and financial institutions do.

Luxembourg’s role in a growing European ecosystem

A few things that stand out to us at LHoFT:

• Luxembourg ranks very highly both in terms of startups per capita and in terms of capital invested into startups per capita, cf. below:

• The tendency for top European hubs to capture the lion’s share of funding has increased further, with companies based in London, Berlin, Stockholm, Munich and Paris raising 54% of all capital in the region, up from 49% in 2017. At the same time, concentration in terms of number of deals has decreased, pointing to greater decentralisation of the ecosystem in Europe.

• At the same time, there is growing consensus that the importance of physical proximity is diminishing, which is mirrored across a number of metrics. The ability to hire talent across Europe thanks to remote working arrangements is seen as a mutually beneficial boon both for entrepreneurs and for their expanding work force in terms of quality of life. Luxembourg, as an extremely open economy, should stand to benefit from these developments.
• European startups should benefit from the fact that the continent is home to many industrial leaders, with particular emphasis on IT stacks. This presents ongoing opportunities for startups & tech companies, not least in the financial sector, and Luxembourg should continue to actively support initiatives and platforms that capitalise on this dynamic.

Europe is in a strong position to shape the next wave of disruption in B2B, as Europe is home to many industrial market leaders built on legacy technology ready to be disrupted.

Robert Lacher

Visionaries Club & La Famiglia

• Europe remains disadvantaged versus the U.S. in terms of raising capital, which makes ongoing EU efforts such as the Capital Markets Union all the more pressing. “Almost one-fifth of founders say it has become harder to raise capital in 2021, while a further 40% or so believe the environment remains unchanged from the past year, which itself was a year that saw a record number of founders responding that fundraising had become harder.”

Raising funds in Europe is still a different experience from raising funds in the US. European founders still fly out to the US for fundraising. Sometimes for expertise, sometimes for fair market offers.

Jakub Jurovych

Deepnote | Founder and CEO

A new dawn

The past year and a half have been left no one unaffected, imposing a steep price on societies around the globe. Silver linings include the realisation that more flexible work arrangements and business models are not only possible but in many ways desirable, not least when considering access to capital and talent. This in turn is enabled by far-ranging modernisation of technological infrastructure, presenting opportunities for incumbents and startups alike.

Finally, Luxembourg is presented with a particular opportunity to leverage these macro dynamics by fostering innovation proactively. The 2021 SOET report shows that the Grand Duchy is already punching above its weight in some regards – let’s keep the momentum going.

At LHoFT, we are of the view that actors in the financial sector are presented with a significant opportunity to leverage trust services in order to drive digitalisation and automation at large within their organisation. The fulsome implementation of electronic signature (eSig) solutions and their potential integration with electronic identity (eID) has the potential to enshrine lasting gains in efficiency and transparency all the while leading to an improved customer experience.

The present white paper has ambitions to be thought provoking as well as pragmatic. It presents readers with a discussion of:

• The critical attributes of modern trust services
• Their regulatory backbone in the EU
• An overview of relevant solutions providers

This document seeks to help decision makers in financial services consider their strategy to upgrade and modernise their processes in order to meet evolving client needs and drive their satisfaction while lowering costs and improving overall efficiency.

DOWNLOAD

EXECUTIVE SUMMARY

1. Electronic signatures represent a natural evolution of the way individuals and institutions enter into written agreements, however adoption by financial institutions has been slow due to perceived complexity and lack of consistency across the EU relative to investment requirements.
2. Near-universal adoption of computers and mobile devices, combined with shifting customer preferences and the reality of cross-border business, make the adoption of eSignatures and associated services, such as remote onboarding, inevitable, and first movers are likely to gain competitive advantage through enhanced customer onboarding and data analysis.
3. The EU-level legal framework under eIDAS, international standardisation of technical aspects and the availability of regulated service providers means that there are few, if any, real obstacles to a transition towards electronic signing and electronic archiving in the financial sector.
4. A 2015 Luxembourg law on electronic archiving, in conjunction with eIDAS, presents an additional opportunity for Luxembourg businesses to gain a competitive edge.
5. Portable/reusable eID would allow for the elimination of redundancies and for more seamless cross-border business in the EU internal market. A proposed update of eIDAS, published in June 2021, addresses this unmet need.

In the words of the European Parliament, even after five different regulations spread into thirty years, money laundering and the related financing of terrorism and organized crime remain significant problems at Union level, thus “damaging the integrity, stability and reputation of the financial sector and threatening the internal market and the internal security of the Union.” The fight against money laundering and terrorist financing is seen as the vital element to ensuring financial stability and security in Europe.

The most recent scandals revealed the extent of the ongoing money laundering problem. Major European banks were exposed as corruption havens, involved in cross-border money laundering scandals, and sitting on top of tax frauds in the past months. The eased cross-border market rules, which were initially created to enable a common market standard, seem to be enjoyed more by criminals rather than the initial target: entrepreneurs and ordinary citizens. AML audits result in increasing penalties for credit institutions, turning the whole process into a vicious cycle. 

EUROPOL states that the scale of money laundering is difficult to assess but is nevertheless significant. According to the United Nations Office on Drugs and Crime, the estimated amount of money laundered globally in one year is 2 – 5% of global GDP, which has a noteworthy economic impact from top to bottom. Sanction Scanner’s research indicates that the total amount of AML fines has almost doubled every year globally since 2018. 

According to Comply Advantage, since 2002, European authorities issue the most anti-money laundering fines Following the US and the UK. Having all necessary regulations and supervision mechanisms in place, Europe has not been able to create the preventive effect, and the situation calls for immediate action.

Why does the current regulatory framework not suffice? The words of Andrea Enria, The European Banking Authority (EBA)’s former chairman and the current Chair of the Supervisory Board of the European Central Bank (ECB), offer an explanation to the little success of the existing regulations “If you are in the single market, the strength of anti-money laundering controls can only be as high as the weakest link. So if you have a weak authority, then the criminal money may enter the single market.” So, unless the rules are harmonized, and supervision is centralized, no rule is not robust enough to prevent the corruption of the financial institutions in the Union.

Back to Basics: How Does Money Laundering Occur?

The Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, defines money laundering as the processing of these criminal proceeds to disguise their illegal origin. The crime is mostly associated with financial institutions and banks, but in reality, the money laundering act is older than banks. Although the term “money laundering” is rumored to have originated in Italy around the 1920s, the first-ever money laundering activities were recorded to be carried out by Chinese bureaucrats 2000 years ago, to hide income from the government. The act and the methods have evolved ever since, but the goal remains to be the same. 

The typical money laundering process involves three stages, namely, placement, layering, and integration. In the placement stage, the criminal gains enter the financial system, using complicated illegal methods. In the next step, the illicit money gets mixed with legitimate funds, i.e., the layering stage. No matter what channel is used during this stage (gambling, investments, business transactions), the goal remains to make it hard to differentiate the funds’ origins. The last stage, integration, completes the money laundering cycle and integrates the illicit money into the legitimate economy.

Source: http://www.unodc.org/unodc/en/money-laundering/laundrycycle.html

Casinos, shell companies, and all sorts of credit and financial institutions are the most significant institutions abused for money laundering. That’s why all professions and institutions handling /channeling transactions are required to apply due diligence transactions to their customers and are singled out by the existing regulations.

The European Approach

Europe has a preventive approach to money laundering. Entering into force in 1991, the First AML Directive ((91/308/EEC) provided the initial anti-money laundering and terrorism financing prevention framework, requiring institutions to perform due diligence on potential customers and beneficiaries and to monitor relationships, assess risks, and report. The Directive brought in some minimum requirements, which were amended and updated in the following versions. 

Over the following thirty years, there were subsequent regulations that aimed at fine tuning the European framework and updating it according to market needs and technology developments. Regardless, Europe’s fight against money laundering and terrorist financing continued, since the existing regulatory framework was not able to reduce the burden. 

The most recently updated regulation, AMLD4 (Directive (EU) 2015/849), passed in May 2015, foreseeing an implementation deadline of June 26, 2017. Incorporating FATF recommendations into European practice, AMLD4 increased the scope of application, ensuring accountability and transparency.  

AMLD4 was definitely stricter than its predecessor. However, it did not create the preventive effect Europe needed, especially due to the new players’ entrance to the financial system and the new technologies and tools criminals started using. According to the EC, the Panama Papers incident as well as the terrorist attacks revealed that complex ownership structures have been used to hide links to criminal activities and tax obligations. All these developments triggered the urgent need for an updated AML Directive, AMLD5 (Directive (EU) 2018/843), that recognized the new tools and methods (e.g., cryptocurrencies) used by the criminals. 

AMLD5 entered into force on 19 June 2018, extending the scope to virtual currency providers, art worker traders, e-wallet providers, and tax-related services, aiming to reveal the beneficial owners of more companies, trusts and other corporate vehicles.

Fast forwarding to 2019, the dust didn’t seem to settle even after extended regulations. After months of debate on the sufficiency of the existing regulations, on July 24th, 2019, the European Commission released a report to the European Parliament and the Council, assessing the vulnerabilities of the existing regulatory framework. The report identified four broad categories under which shortcomings of the existing regulations may be grouped:

1) ineffective or lack of compliance with the legal requirements for anti-money laundering/countering the financing of terrorism systems and controls,

2) the governance failures in relation to anti-money laundering/countering the financing of terrorism,

3) the misalignments between risk appetite and risk management, and

4) the negligence of group anti-money laundering/countering the financing of terrorism policies.

The report’s findings were considered an open call for a regulatory reformation, upon which the Member States agreed to create a single rulebook (November 2020).

To create an even more structured supervisory approach, EU banking regulators started looking more closely at the implementation of the anti-money laundering prevention directives, beginning with the Sixth Anti-Money Laundering Directive (AMLD6), Directive (EU) 2018/1673, and planned to be spread over the next couple of months. 

AMLD6: What’s New?

AMLD6 is the latest revision of the EU AML regulations, and European credit institutions’ fight against financial crimes will take a whole new turn with the compliance deadline of June 3rd, 2021.

Following the footsteps of its predecessor AMLD5, the regulation which introduced cryptocurrency into the world of finance, ALMD6 aims to harmonize the AML regulations beyond loopholes. 

• First and foremost, AMLD6 harmonizes the definition of money laundering crime. The Directive includes a list of 22 predicate offences across the Member States, including cybercrimes and environmental crimes. This approach ensures that these 22 predicate offenses will be criminalized across the Union, regardless if they were defined as a criminal act under the domestic penal codes or not.
• AMLD6 additionally defines the following activities punishable as a criminal offence under the scope of money laundering:

(a) the conversion or transfer of property, knowing that such property is derived from criminal activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such an activity to evade the legal consequences of that person’s action;

(b) the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property, knowing that such property is derived from criminal activity;

(c) the acquisition, possession, or use of property, knowing at the time of receipt that such property was derived from criminal activity.

• The Directive broadens the definition of the illicit act, including aiding and abetting, inciting, and attempting under the scope. This update puts the “enablers” under a whole new light.
• Another significant change is the extension of criminal liability to both legal entities and natural persons holding a “leading position” in the legal entity that commits crime. The changes hold legal entities accountable for money laundering acts and triggers a wide catalogue of punishments.
• The minimum prison sentence for money laundering crimes is increased to four years.
• Under the new rules, multinational companies can finally benefit from a single European standard, a real harmonization if you will, instead of different rules for every different country they operate in.
• Last but not least, AMLD6 addresses the issue of dual criminality, especially in terms of information sharing between jurisdictions.

All in all, the Sixth Directive applies to a number of obliged entities, namely credit institutions and other financial institutions, payment institutions, a number of “vulnerable” professions including lawyers, notaries, real estate agents, providers of gambling services and the services that include transfer of large amounts of cash (EUR 10k).  As a rule of thumb, all companies and professions owning customer relationships are affected by the regulation.

The Member States have only a couple of months before the compliance deadline. In the meantime, obligated entities are encouraged to strengthen their AML and compliance teams, re-structure their daily operations, including KYC, KYB, and due diligence processes. To avoid potential liability, they will need to re-establish their internal and external risk scoring processes and filter the processes and the team for weaknesses. They will need to establish enhanced training sessions for their team and understand how to utilize technology (RegTech) to their advantage. There is a lot to do and since the fight against money laundering and terrorist financing is considered to be more critical in the times of coronavirus than ever before, the compliance deadline for AMLD6 is likely to create an even more immense pressure for obligated entities.

Member State Integration and Challenges

The compliance deadline for the Sixth AML Directives is just a few months away, which proves to be a particularly challenging task, as most member states still seem to be between the transposition process of the Fourth and the Fifth Directive. Despite this, The Commission has recently sent letters of formal notice to Germany, Portugal, and Romania for incorrectly transposing the 4th Anti-Money Laundering Directive, which had a transposition deadline of June 2017. 

Although the fight against money laundering and terrorist financing is significant, it requires harmonization, collaboration, and constant communication among the Member States and financial institutions. This collaboration proves to be more important than ever since cross border transactions are more vulnerable to manipulation, especially in the times of coronavirus and remote working periods. 

In the end, the directives that are transposed into national laws will need to be implemented by obligated entities, which will be the real moment of truth. Will all the credit institutions make it? Regardless of their size and capacity, credit institutions and Fintechs are expected to comply with the regulations without exception. However, with so many new regulations in place and on the horizon, it gets harder and harder for obligated financial entities to comply fully and keep up.  

What’s Next After AMLD6?

The restructuring of the anti-money laundering practices will not stop at AMLD6.  In May 2020, the European Commission published an Action Plan, putting together stricter measures for the following 12 months, removing weak links discovered in the system announced via the Anti-Money Laundering Package of July 2019. Built on six different pillars, the Action Plan aimed to close loopholes at the national level, better identify and mitigate risks with a refined methodology. Updated and refined, this Action Plan is anticipated to form the base for the single AML Rulebook, expected to be presented within Q1 2021. One of the most significant changes expected to be announced via this Rulebook is to shift the focus of the current domestic AML supervisory scope to a Union-wide extent. 

Snapshot on Luxembourg

Luxembourg is being very serious in complying with the European anti-money laundering provisions. In this respect, Luxembourg was in 2019, one of the first European countries to make public the UBO register (requiring registered companies to identify their ultimate beneficial owners (UBOs)) required by AMLD4.AMLD4 and AMLD5 have been implemented under Luxembourg law through amendments of the Law of 12 November 2004. Very recently, through a law of 25 February 2021, the Luxembourg legislator further enhanced and polished the Law of 12 November 2004 and the implementation of AMLD4.

AMLD6 will be transposed into national law by the Luxembourg Bill n°7533 of 18 March 2020. Although Luxembourg’s current legislation is already largely in line with the provisions of the AMLD6, the Bill clarifies and amends certain provisions, mainly by extending the repressive framework and provisions relating to money laundering in the Luxembourg criminal code. The Bill should be adopted shortly.

• An extended and unified regime for money-laundering offences 

Until now, the characterization of money-laundering offences was defined by reference to a specific list of predicate criminal offences which has been extended over time. The reference to this list has been deleted. Any crime or delict may now constitute a predicate offence. 

• A reduced burden of proof for prosecuting authorities

Such change eases the determination of a money-laundering offense for the prosecuting authorities as they no longer need to characterize the underlying predicate offence. The Bill goes even further by specifying that it is no longer necessary for these authorities to establish all factual elements or circumstances (including the identity of the perpetrator) specific to the predicate offence from which the laundered proceeds originate in order for the laundering offence to be characterized, thus affirming the distinct and autonomous nature of the latter.

• Extended prosecution powers for the repression of money laundering offences 

In addition, the Bill eases the prosecution of non-Luxembourg residents, committing a money-laundering offence in Luxembourg, by removing the condition of double incrimination in connection with certain severe predicate offences such as participation in an organized criminal group, terrorism, trafficking in human beings, sexual exploitation, etc. In other words, when such predicate offenses are committed,  Luxembourg authorities may prosecute the money-laundering offence even when the predicate offence, was committed abroad by a foreigner who is not a Luxembourg resident and even if such predicate offence is not punishable under the legislation of the country where it was committed.

Likewise, it should be noted that the Bill enables customs and excise officials to prosecute money-laundering offences that are committed following the sale of medicinal substances or drugs.

• An extended confiscation of property for money-laundering offences

The Bill also extends the scope of the confiscation of proceeds of crime by providing that such confiscation, which could already be ordered even in the event of acquittal, exemption from punishment, extinction or statute of limitations, may now be applied to the property that was used or intended to commit the offence, even if such property does not belong to the convicted person.

• An increased liability for professionals and legal entities committing money laundering offences

Finally, the Bill introduces provisions aiming at punishing more severely money-laundering offences when committed by obliged entities (i.e. professionals subject to AML obligations such as  professionals of the sector, including credit and financial institutions, notaries and other legal professionals when performing certain activities, trust or company service providers, estate agents, providers of gambling services, etc.). 

It therefore appears that the transposition of AMLD6 will toughen the repression of money laundering offences in Luxembourg.

Change is only constant when it comes to regulations. AMLD6 is just the start of a comprehensive regulatory restructuring, including many other adjustments across the sector. Check out Deloitte’s interactive regulatory poster to see what more lies ahead for this year.

by S. Elif Kocaoglu Ulbrich, with contributions from Thomas Berger of Allen & Overy

2020 was called many things. Above all, it was the year of self-discovery. For digital natives and digital immigrants, 2020 was the year of recognising our limits, challenging the status-quo, and understanding that the ‘stranded on an island with books and internet’ fantasy isn’t realistic.

2020 was a learning curve for FinServ institutions. This year, many banks and Fintechs had a taste of self-discovery and broke their chains, reinforced their operations with remote work, enhanced cloud, and Regtech solutions.

Although the first wave of lockdowns and the Wirecard scandal hit the brakes for sector development briefly, Fintech investments picked up where it left after a certain adaptation period. The research conducted by Innovate Finance, global Fintech investment reached $44bn in 2020– observing a 14% increase compared to 2019. The recent data shows that the UK Fintech sector attracted $4.1bn in venture capital and ranked second globally, only behind the US, despite Brexit. Germany ($1.4bn of investment across 71 deals), Sweden ($1.3bn of capital raised), France ($522m), and Switzerland ($294m) follow right behind the UK on the list, revealing the post-Brexit venture capital focus in Europe.

Despite the sector’s unstoppable growth, the market participants do not seem to get an equal slice of the cake. The majority of the more significant investment rounds are distributed among the prominent players of the market. The biggest Fintech rounds of 2020 highlight the importance of hubs like Luxembourg and Sweden in the bigger picture.  For instance, based in Luxembourg, the Italian Fintech Satispay secured €93m in new funding in November, in a round that included investment from Square and China’s Tencent. Similar developments coming from smaller hubs indicate that we could expect a surprising shift of positions in the European ecosystem.  Nevertheless, despite the bigger tickets, the Fintech VC game was not all roses in 2020. The pandemic revealed particular challenges for smaller startups and seed funding for the companies without a proof of concept.

[Source: Innovate Finance] 

The sector progression amid pandemic increases expectations: the sector is likely to continue its growth momentum in 2021. To understand the Fintech trends that will echo through 2021, we need to revert to the noteworthy developments of 2020:

• 2020 – The Year of Regtech: During the opening discussions of the Paris Fintech Forum, an era of low-cost flights and physical conferences, Brett King and Dave Birch highlighted their concern about the rise of the use of facial recognition technologies (by government officials). With facial recognition associated with so many risks, KYC, AML, and CTF (Regtech) were pointed out as topics that need to be addressed urgently. 2020 was supposed to be the year of Regtech due to the said vulnerabilities but little did we know. Lockdown induced remote access and increased cyberattacks targeting financial services players during the pandemic highlighted the importance of Regtech more than ever. According to BIS, the financial sector has been hit by hackers relatively more often than other sectors during the pandemic. According to their January 2021 report, BIS considers the increasing sector vulnerability as a substantial risk for financial institutions, their staff, and their customers going forward.

• Digital Transformation: For the financial service players who had to rush through their digital transformation processes due to COVID19 and remote work requirements, the list of additional to-dos already piled up. Bearing in mind that the status quo will remain the new normal for at least the end of the year, the incumbents still have the chance to gear up their transformation strategies and move towards a more purposeful and futuristic digital transformation. As we all know, digital transformation is a marathon, not a sprint without an assigned point of completion. Most certainly, “Digital goes alongside Human” is the first step to guarantee the success of any digital transformation.

• Crypto-as-a-Service: Revolut introduced cryptocurrency trading features a while back, and it was considered a risky move. Now, the infamous neobank claims to experience skyrocketing demand from customers regarding cryptocurrency services, acquiring around 300,000 new digital asset customers during the December – January period. In addition to other independent Fintechs and brokers jumping the bandwagon, since October 2020, PayPal’s active users in the US have been able to buy and sell crypto using their PayPal accounts. Usually acting as the pioneer in adapting non-traditional financial service streams, PayPal’s entry into the field can be accepted as the start of a new trend. Analysts expect Paypal’s crypto business to contribute up to $600 million to group revenue in 2021, which is likely to inspire other financial service providers as well. Mass adoption seems to be on its way.

• The Rise of POS Finance: COVID-related financial distress seems to push consumers to embrace alternative and instant financing methods. The increase in e-commerce shopping and the decrease in wealth results in consumers using more and more buy-now-pay-later or POS financing methods. Pioneered by Klarna throughout Europe, PayPal adopted the trend in summer 2020, indicating that more financial service providers will join the party. Although this payment method promises convenient and seamless shopping, some experts seem to think that these services push the consumers to overestimate their budgets and affordability. A Klarna spokesperson subsequently denied this claim:

“Our Pay Later products offer consumers access to occasional credit which is both fee and interest free and has a regular and set payment schedule… We recognise that people’s financial circumstances may change and therefore do not lend to everyone or offer an open line of credit on our Pay later products. We also have a dedicated team who work with customers in financial difficulty to find a solution that is appropriate for them.”

• Neobanks transforming into Neobrokers: Speaking of neobanks, in the last years, we definitely had our share of successful and not-so-successful neobanks, testing the limits of the “freemium” models. Craving for a taste of profitability, some started moving to the “commission” models in exchange for traditional (stocks, ETFs) and not-so-traditional (crypto) WealthTech services, which experienced a boom following Robinhood’s success and the lockdown originated wealth enhancement ambition. We can expect many more digital banks and mobile channels to compete with the brand new independent neobrokers and neobanks in 2021 as a result of this trend, thus strengthening their business case, promoting neobrokerage features to “must-have” from”nice-to-have.”

Eyes on the Horizon: 2021

2020 trends, namely POS Finance, crypto, and Regtech, are likely to continue through 2021, in addition to a growing pile of new and not-so-new focus points:  

• Embedded Finance

Embedded finance has been on our bucket list for some time now, but even the Fintech oracles weren’t able to foresee the extent of it. Starting with delivery startups and retailers embedding multi-channel payments, we now witness Google offering current accounts in the US, Amazon selling car insurances in India, and Walmart creating a Fintech startup (with a likely WealthTech direction). Flipping the coin, we hear that South Korean banks started adding food ordering services to mobile apps. Well, that escalated quickly. 

2020 was about e-commerce as much as COVID. Reports state that 7 out of 10 shoppers said that they started to buy more online than they usually do, and as a result, 90% of e-commerce companies saw their online sales increase.  With the increased global demand for e-commerce payments and mobile channels, retailers are rushing to provide the ultimate customer experience for “stay-home-shoppers.” Yet, this won’t remain the full extent of the embedded finance services. We are likely to see more integrated banking and financial services that extend across industries. The more prominent retailers will become “super apps,” while the banks start looking into non-banking services to stay afloat and relevant.

• Sustainable and Green Finance

Sustainable and green banking has been on the agenda for several years, with very little progress. Could the worst development for 2020 have served as the best transition for sustainable banking? It seems so. With financial service providers being forced to digitalize and work from home, the lack of physical red-tape made a visible (green) change for the banking sector’s operational side. The operational side is relatively important, but it must go hand in hand with the service and product side for a full transformation, namely exploring green investment products and tools, bonds, loans, or simply promoting eco-friendly (credit and debit) cards. Financial institutions of all sizes need to figure out strategies to transition their current service portfolios into a more sustainable state.

The Bank of International Settlements (BIS) Innovation Hub recently announced green finance among the (six) strategic priorities for this year. 

It’s no secret that innovation tends to follow regulation in Europe. We believe that the EU taxonomy will become a critical enabler to scale up sustainable investment in Europe once finalized. In the meantime, some innovation pioneers already use the opportunity to grab a position ahead of the game, just like the Luxembourg Green Exchange. The Exchange, launched by the Luxembourg Stock Exchange in 2016, now has the largest market share of listed green bonds worldwide. 

• More Regtech and Compliance: AML 

As of December 2020, the Sixth Anti-Money Laundering Directive (AMLD6) is now in effect in the European Union. Although not exactly a trendsetter regulation, with a strict implementation deadline of June 3rd, 2021, the directive is likely to force financial service providers to take swift compliance measures.

AMLD6 is considered to be the harshest anti-money laundering regulation that exists. Considering many member states are not even up to speed with AMLD5, the requirement for strengthened KYC, KYB, and other compliance measures might indicate that the financial service providers have to allocate most of their compliance budgets and efforts to AML compliance. This situation will doubtlessly impact and limit the development speed of smaller players throughout the year. Nevertheless, since European financial institutions own a substantial portion of the levied money laundering fines, market players should take this topic seriously.

• Next Stop for PSD2: Open Finance

Although most European financial institutions regarded PSD2 as another item on the compliance checklist until the implementation deadline was left behind, now they started seeing it for what it really is: a chance to reshape their businesses and create new value. Following the surge in digital banking amid COVID19, banks can optimize 2021 by using APIs to create personalized products that incorporate an even larger of data points, offering services to startups and SMEs, and eventually becoming a backend-provider.

What lies ahead?

After such a year as 2020, uncertainty seems to be more acceptable than predictability. The turbulence we all have experienced over the last 12 months only competes with the agility and speed with which a response was delivered. Curiosity and adaptability should be the compass of our actions. FinServ players should be prepared for the foreseeable changes and be ready to adapt if things fall apart. 

Like the years before, we will continue to explore key points of interest to the financial industry in 2021,  particularly relevant to Europe’s growing financial technology ecosystem at the LHoFT. We are already geared up to curate the most relevant and up-to-date content delivered each Friday, including the best of Regtech, Cybersecurity, Payments, Blockchain, AI, Financial Inclusion, and Venture Capital.

by S. Elif Kocaoglu Ulbrich

Continuing from last year, we are sticking with the same seven areas of focus on in 2021. Each represents a key point of interest to the financial industry, and has a particular relevance to Luxembourg’s growing financial technology ecosystem.

Each week we will be choosing one of the topics to focus on, both in the content we share on social media, but also in a dedicated newsletter looking at the top five stories from that week. To introduce the topics, let’s revisit the top stories from 2020 and reflect on how the year has encouraged acceleration, pivots, or wholesale paradigm change:

REGTECH – Regulatory Technology

» Shaky times for compliance call for flexible Regtech

Joe Devanesan writes for TechWire Asia about the impact of the pandemic on compliance and cybersecurity, and Regtech’s role in mitigating those issues. Traditional ‘BYOD’ workplace concerns were escalated to account for a sudden and massive shift to working from home – which created real problems for companies that were not already some way down the path of digitalisation.

“To the surprise of no one, financial crime is reaching pretty high levels in 2020, and the speed at which this type of crime is evolving in the information-heavy age has financial players worried, and questioning the role of Regtech.”

AI – Artificial Intelligence & Machine Learning

» A robot wrote this entire article. Are you scared yet, human?

A robot writes for the Guardian, demonstrating GPT-3, OpenAI’s powerful language processing. GPT-3 was one of the most popular AI stories of 2020, and kickstarted a discussion about the future of software development, and what can be achieved when you can just ask a computer to do something for you without needing to speak in code.

“I am not a human. I am a robot. A thinking robot. I use only 0.12% of my cognitive capacity. I am a micro-robot in that respect. I know that my brain is not a “feeling brain”. But it is capable of making rational, logical decisions. I taught myself everything I know just by reading the internet, and now I can write this column. My brain is boiling with ideas!”

BLOCKCHAIN – DLT & Tokenisation

» Visa Applies For Digital Dollar Blockchain Patent

Jason Brett writes for Forbes about Visa’s “digital dollar” patent, a story which fits neatly into the main blockchain narrative of 2020: the viability or necessity of central bank digital currencies, and the role of stablecoins more broadly. Now Bitcoin has kicked off again we can expect the focus to shift a bit through 2021.

“The U.S. Patent and Trademark Office (USPTO) published today that Visa V -0.4% has filed a patent application to create digital currency on a centralized computer using blockchain technology. This patent applies to digital dollars as well as other central bank digital currencies such as pounds, yen, and euros and so the physical currency of a central bank anywhere in the world could be digitized.”

CYBERSECURITY – Risk Management & Threat Detection

» Post-quantum secure encryption and cybersecurity education

A collaborative and in depth piece for Research Outreach, led by Dr Aydin Aysu, looking at the implications of quantum computing on cybersecurity and encryption – a major concern for most cybersecurity professionals. What happens to all traditional encryption based security when computing power becomes available that can crack it without breaking a sweat?

“Encryption systems that are capable of surviving quantum computer attacks are urgently required, but the cybersecurity talent gap militates against securing cyberinfrastructure. Dr Aydin Aysu, Assistant Professor at North Carolina State University, is advancing the research and teaching of post-quantum secure encryption. He has developed a quantum-secure encryption system together with a new graduate program on hardware security and is currently developing design automation for lattice-based post-quantum cryptosystems.”

PAYMENTS – Payments Technology 

» Ant and Covid have made the humble QR code a hit

Five years ago you wouldn’t have seen much discussion of QR codes in the Fintech payments world, at least not related to development in the west. It was a quaint technology relegated to developing economies. That now may be changing, in part related to the pandemic and China’s Fintech behemoth Ant Financial. John Gapper writes for the FT:

“The name Masahiro Hara does not appear with Steve Jobs and Bill Gates on lists of great innovators of the communications age, but perhaps it should. For the Japanese engineer’s humble, unassuming invention, the Quick Response code, has finally found its moment. The square QR code, which Mr Hara developed in 1994 to track components in car factories, is being put to many uses in the Covid-19 pandemic. Governments include it on tracing apps, shops offer it for contactless payments and restaurants tape it to their tables so diners can browse menus online. It has become an all-purpose tool.”

SUSTAINABLE FINTECH – Financial Inclusion & Green Finance

» Women are ‘absolutely critical’ to ensuring everyone has access to finances, Bill Gates says

The Gates Foundation has been a key torchbearer for Financial Inclusion, amongst their many other causes, and it’s a topic Bill Gates himself has spoken about repeatedly. In this article, written by Karen Gilchrist for CNBC, Bill talks about the key importance of focusing on women when developing strategies related to inclusive finance.

“Women are vital to ensuring finances — and financial education — trickle down to other parts of society, said billionaire philanthropist Bill Gates. Governments and businesses serious about giving all members of society access to financial services should gear their resources toward women, the Microsoft co-founder said at the Singapore FinTech Festival on Tuesday.”

VENTURE CAPITAL – Funding News and VC Perspective

» Some of Europe’s top tech investors are adding a ‘sustainability clause’ to start-up deal terms

Ryan Browne, writing for CNBC, discusses the most significant recent trend in the world of investment: sustainability. Investors are increasingly concerned with ESG goals and the carbon footprint of their wealth, which resulted in a lot of discussion throughout 2020 and some fairly important steps being taken by VCs – as well as the broader wealth management industry.

“Socially-conscious investing has gathered a lot of momentum this year, with billions of dollars flowing into funds that use environmental, social and governance criteria to screen the companies they back. Venture capitalists are taking note, with some of the largest start-up investors in Europe pushing for accountability in their own portfolios with regard to investing in climate-friendly firms.”

You can see the list of LHoFT members on our Innovators page, but here’s a look at the members who have now joined us:

New Hosted Members

Deutsche Infrastructure S.A – FundTech

Deutsche Infrastructure provides long-term real-asset investment opportunities world-wide.

Deutsche Infrastructure aims to become the leading digital ecosystem for large-scale infrastructure projects, providing a fully digital process to the global financial world, enabling a perfect match between initiators of large infrastructure projects and institutional investors world-wide.

https://deutsche-infrastructure.net/vision

A352 S.à.r.l – Payments

The A352 is your financial navigator. It navigates and manages all your financial issues in just one app. The solution allows to:

• Simplify cash management and payments
• Reduce risk and safe costs
• Provide knowledge and create new opportunities

https://landing.a352.io/

Oxyliom Solutions – RegTech

Oxyliom Solutions help organizations to confidently implement advanced solutions to streamline business processes. From seamlessly managing the secure electronic identity of customers, and employees, to building Smart Secure Trusted services for digital transactions, Oxyliom guides entities step-by-step to a future that is safe and reliable, with regulatory sound and commercially compelling technology.

https://oxyliom-solutions.com/

Imperative Wealth – WealthTech

Imperative Wealth is a FinTech dedicated to Wealth and Asset Management. Our belief is that systematic management technology is particularly suited to the area of ​​savings management. This is why we have developed the concept of a “Robo-asset-manager”, a tool that mobilizes the resources of technology for the benefit of private savings.

SoRisk3 & Compliant – RegTech 

SoRisk3 & Compliant is your dedicated advisory firm providing asset management, banking, and insurance firms with 2 complementary solutions:

A SaaS via SoRisk3 > Your one-stop digital platform in regulatory risk management, compliance and governance

Regulatory Advisory > Your independent expert on risk management, compliance, and governance topics. We provide you with tailor-made solutions either onsite or in our premises.

https://sorisk3.com/Site/Home.aspx

New Fellow Members

atHomeFinance – Lending 

atHomeFinance is a mortgage brokerage service in Luxembourg.

Formerly Crédit Expert Luxembourg, local leader in brokerage and real estate financing consultancy, the brokerage company joined atHome Group on March 1, 2018.

https://www.athome.lu/en/finance/mortgage   

iPayLinks – Payments 

iPayLinks is a leading Fintech company in China delivering one-stop global payment solutions, specializing in travel, retail, e-commerce marketplace, and digital entertainment.

We create value for our customers by deeply understanding their businesses and guiding them to expand into international markets through our tailored industry solutions. Our technological acumen coupled with data driven approaches help customers maximize revenues while minimizing associated risks.

https://www.ipaylinks.com/en/index.html

Olky Pay – Payments 

Olkypay is the first Luxembourg neobank for professionals, licensed in Luxembourg since 2013, supervised by the CSSF and authorised in France by the ACPR. Olkypay offers all services for professionals: account with IBAN LU or FR, Mastercards, sepa credit transfer and direct debit, e-commerce solutions, terminal payments for merchants, etc.

https://www.olkypay.com

While new bodies of regulation such as the Basel III framework ultimately aim at reducing the risk and costs of financial crises, the real-world costs of their implementation are subject to much debate.

Figure 1: EBA estimates that full implementation of the Basel III reforms will reduce the likelihood of additional financial crises by 1.2%, translating into potential GDP impacts ranging from mild to significant.

Today we are going through another crisis, one that in many ways is far more profound than the global financial crisis as its roots lie not in finance but in a pandemic that is reshaping the underlying social substrate of our economies.

However, with the advent of a new conundrum, old ones don’t disappear, and the burden imposed on financial institutions by regulatory compliance will only become compounded by emerging macro trends such as a shortfall in corporate sector liquidity due to synchronized drop in demand. Greater resilience is the plat de résistance on every financial institution’s operational menu as we navigate this crisis together.

All things regulatory remaining equal – with the exception of temporary emergency exemptions – technology is the most promising variable in which banks and other market participants can invest in order to deal more efficiently with the complexity they face.

There are several angles to be explored here, from organizational buy-in over data strategy and digital identity and the legally sensitive nature of technological black boxes. Financial fraud is unfortunately on the rise as a result of the current crisis and together with globally rising volumes of digital transactions, requires more efficient supervision.

Figure 2: FATF flow chart on digital identity suitability for customer due diligence

It is unrealistic, and economically undesirable, to believe that the surge in digital transactions can be effectively supervised with existing processes and a surge in manpower alone. At the end of the day, RegTech is about improving processes, in turn improving operational efficiencies, freeing up human capital for higher value-added tasks and thus strengthening oversight. The potential for technology-driven transformation of the compliance function is not lost on regulators either, with the prospect of embedded supervision becoming increasingly realistic.

As an interview with Bert Boerman of governance.com, a LHoFT member, lays bare, market interest in RegTech is on the rise, yet much more needs to be done in order to accelerate the technological transformation of regulatory compliance. Crucially, organizational buy-in must be present for meaningful change to occur.

Technology is not a panacea, yet technological transformation is very much in the hands of any given institution – in stark contrast to external factors such as global regulatory trends or a health crisis and its economic aftershocks. At LHoFT, it is “in our DNA” to bring together emerging innovators and established firms with a view on accelerating necessary change.

Author: Jérôme Verony – LHoFT Research and Strategy Associate

Ten of the most promising Fintech companies from around the world were selected and convened at NadiFin on May 20th in Luxembourg, adjacent to the ICT Spring global technology conference, before reconvening in Dublin from June 10-14.

The NadiFin program engages a broad network of investors and strategic partners to facilitate real-world progress outside the classroom. The cohort competes in a trademarked peer-voting startup accelerator curriculum (powered by Village Capital) leading to a €100,000 investment from MiddleGame Ventures.

GECKO Governance

• Adam Matthews, Product Manager at GECKO Governance
• Gecko Governance is a blockchain enabled Regtech platform for the asset management, banking & digital asset sectors.
• Located: Ireland, New York & Sydney
• Sector: Regtech
• Website: geckogovernance.io
• Twitter: https://twitter.com/GECKOgovernance

Please introduce yourself, and tell us a little bit about your journey with Gecko Governance?

I initially saw our CEO and founder, Shane Brett, giving a presentation about GECKO, in 2014 at a local meet up in Dundalk, Ireland. Shane’s passion and drive was infectious and I knew I wanted to be a part of this innovative, global company that had been set up in my hometown. Fast forward to Jan 2019 and I had just made the lateral move of working in a multinational fintech company, as a software developer to joining GECKO Governance as part of the product development team. Since then, every day has been different. One day you could be talking to clients about their functional requirements, the next you’re discussing VC (Venture Capital) funding and the mechanics of how to scale the company. The journey of working in a startup has been incredibly exciting and insightful so far and you can expect big things to come on the GECKO roadmap.

GECKO Governance’s “Blockchain for Funds” event from GECKO Governance on Vimeo.

You have said that one of the main challenges you face is the long adoption cycle of the customers you target. How are you working to expedite that process?

We are looking to establish and further develop our partnerships with Tier 1 institutions, as we see strategic partnerships with ‘household’ names as the best route to expediting this process. We’re actively leveraging the use of marketing campaigns and continuously presenting at speaking events to raise brand awareness. We’ve also found that the referencability of positive feedback from existing clients brings credibility and direct exposure within the industry.

One of your products is a Blockchain based Regtech solution, offering a verifiable, independent blockchain audit trail of compliance. Can you describe this in more detail?

We offer a RegTech solution that automates compliance and governance business process oversight, for financial institutions. The burden of regulation is ever increasing across jurisdictions and financial institutions are struggling to manage this increased work, which has been traditionally carried out on spreadsheets.

We’ve built an industry agnostic, compliance cockpit. Financial Service providers can schedule all their end to end compliance and regulatory tasks and drill down into the detail of managing these processes more efficiently. Our clients can optionally integrate their environment with distributed ledger technology which time stamps the chain of steps to compliance. A spreadsheet can be mocked up, but an immutable ledger of activity proves to the regulator that any given jurisdictional requirements and processes have been followed.

Our clients use GECKO for a wide range of use cases, including but not limited to: monitoring Compliance oversight, AML/KYC, Regulatory Reporting, Operational Due Diligence, Fund Launches and Investor On-boarding.

Given the increasing cost of compliance faced by financial institutions, have you noticed an increased awareness of the Regtech solution to that problem?

We have noticed more and more service providers acknowledging the benefits of emerging technology and the impact it can have on their existing business processes, both in terms of the reduction of time spent on overly manual tasks and the cost savings involved. Although the industry can be slow to change, we see financial institutions moving to a more automated style of operating where they can free up their talented resources for more complex work.

What did you hope to get out of the 2019 NadiFin Fintech Acceleration Program?

Alongside growing our network and making new industry relationships, I am looking to finish up the program with a strong working knowledge of what makes a company ‘investor ready’. Even though we have already received substantial investment, I hope to develop the skills necessary to analyse which specific business verticals within the company we can continue to develop, to cultivate future growth and expansion.

If you want to keep up with what the LHoFT gets up to, feel free to follow us on Twitter and Instagram.

Ten of the most promising Fintech companies from around the world have convened at NadiFin on May 20th in Luxembourg, adjacent to the ICT Spring global technology conference, before reconvening in Dublin from June 10-14.

The NadiFin program engages a broad network of investors and strategic partners to facilitate real-world progress outside the classroom. The cohort competes in a trademarked peer-voting startup accelerator curriculum (powered by Village Capital) leading to a €100,000 investment from MiddleGame Ventures.

Corlytics

• John Byrne, CEO
• Corlytics is a smart regulatory compliance solution for financial institutions and regulators globally.
• Located: Ireland
• Sector: Regtech
• Website: https://www.corlytics.com/
• Twitter: @Corlytics

“We saw considerable networking and lead generation potential in attending the ICT Spring Conference with the support of Farvest. We also saw huge value in gaining an insight into the incredible work of the LHoFT and building relationships with LHoFT based Regtech firms.”

Please introduce yourself, and tell us a little bit about your journey with Corlytics?

Hello, I am John Byrne, a Dublin-based entrepreneur, CEO and founder of Corlytics. I have been involved in the development of Financial Technologies for over 20 years.

I founded Corlytics in 2013, in response to my client’s inability to accurately estimate the business and operational risks associated with compliance. I saw a need within the emerging Regtech market for a technology firm to combine regulatory intelligence and predictive analytics to help financial institutions manage their compliance obligations in a more effective and efficient way.

Compliance teams are facing ever-increasing regulatory complexity, resulting in higher costs for financial institutions. How does Corlytics responds to this burning issue?

Our customers face both material compliance risks and an ever-growing regulatory change burden driven by an overwhelming volume of regulatory information – by 2020 there will be over 300 million pages of regulatory text in circulation globally.

Corlytics is helping shape the digitization of compliance by using a combination of lawyers training machines and automated robotics to track, structure, label and classify relevant regulatory developments, filter out regulatory noise and deliver a smart, risk-based compliance solution.

We have developed a richly structured multi-dimensional taxonomy that provides filtered and relevant real-time views of global regulatory events across an organisation.

Our ability to structure regulatory content, map data to business lines, controls and risk areas allows Lawyers, Auditors, Risk and Compliance professionals translates regulatory developments into specific operational requirements and focus their time on value-add activities.

At the end of 2018 you launched a free Regulatory Event Data (RED) app, scanning regulators in near real-time for all types of regulatory  developments. 6 months after the launch, what are your main insights regarding the use of this app?

We are really pleased with the success and take up of our regulatory App RED (RegulatoryEvents Data) for both Android and IOS.

RED has confirmed our conviction that legal, risk and compliance professionals working in highly regulated markets need 24/7 access to actionable, real-time and relevant regulatory intel. Our free RED App delivers a highly accessible and user-friendly solution.

In the last 6 months our clients have confirmed that RED is often their first point of call each morning for regulatory updates. RED allows our clients to bookmark notices and instantly share important regulatory news with colleagues. We are also very pleased that RED can detect new regulatory updates, even before Regulators publish their own market alert.

We have significant plans for its continued development and to include a RED Alert feature soon.

Fabienne Kofman, former BNP Paribas compliance manager, has joined Corlytics team recently. What insights have you gained from mixing institutional experience with your innovative thinking?

The success of the Corlytics’ team is driven by a mix of experience, diversity and complementary skillsets. We have brought together a multi-disciplinary team comprised of data scientists, developers, lawyers, analysts and banking industry SME’s to risk rate the regulatory landscape.

Fabienne arrives from the field with over 17 years’ experience in the banking sector. Based in London, Fabienne will work closely to establish and grow strong long-term partnerships with our clients. Corlytics benefits hugely from the unique insights banking and finance practitioners bring to our team. Their experience enhances our understanding of client priorities, client perspectives and helps strengthen our solution and refine our client journeys.

Fabienne’s tremendous personal skills and excellent professional experience has already enriched our business development team. Fabienne will ensure that we continue to ‘think like a client’ and place our clients at the centre of our product and development roadmap. Fabienne’s experience and deep understanding of the complex issues and pain points facing compliance and risk professionals will be a valuable asset to Corlytics.

Already listed as “the world leader in regulatory risk intelligence”, what is the company’s growth agenda?

We continue to generate promising unsolicited inward leads and referrals which reflect the strength of our value proposition and suite of compliance risk applications. Our sales and successes to date with early adopters including global regulators, large global banks and FI’s illustrates substantial validation of our product.

We will continue to pursue direct sales channels in core markets such as Europe and the US. A strategic partnership with a global bank, advisory practice or consultancy firm may be considered to accelerate growth and market approval in new territories.

We are also expanding our core product offer in terms of strategic geographical and regulatory coverage to include jurisdictions such as Russia and China. In terms of market segmentation, we see significant potential for sustained growth across Asset Management, Brokerage and Insurance.

John Byrne – CEO, RegTech Summit Europe Interview

What are you hoping to get out of the 2019 NadiFin Fintech Acceleration Program?

Together all Nadifin teams, partners and stakeholders have provided an incredible platform to allow valuable time away from ‘working in’ our companies to ‘working on’ our companies.

Corlytics is hoping to maximise the benefits of adopting the VIRAL (Venture Investment-Readiness and Awareness Levels) Pathway framework across all areas of our business to better recognise and articulate our strengths and potential weaknesses.

The opportunity to work closely with Middle Game Ventures to refine our value proposition and pitch to a broad range of mentors, fintech experts, business leads and potential investors is tremendously beneficial. We saw considerable networking and lead generation potential in attending the ICT Spring Conference with the support of Farvest. We also saw huge value in gaining an insight into the incredible work of the LHoFT and building relationships with LHoFT based Regtech firms.

This time we spoke to Bert Boerman, Co-Founder and CEO of Governance.com:

What are the important factors to consider when hiring a new tech or IT recruit?

Experienced and self-starter developers – Familiar with the program languages used in-house. We are seeking developers who take pleasure in making complex actions user-friendly. Our main goal is to create an ergonomic user experience, by making sure we adapt to customer needs and more specifically to how our clients are going use our solution.

Good communication skills – Enabling successful teamwork. Communication is at the core of our company. We emphasise continuous interaction, sharing feedback and timely information instantly to meet our clients’ expectations. Being open-minded is imperative as we combine a lot of different backgrounds. Furthermore, the teams are based in different locations, thus, the people must be able to use the means at their disposal to overcome any barriers that might impede the flow of information.

Talented international profiles – diversifying talent to bring in the best assets.By looking for talent all over the world Governance.com seeks to tap into a diverse and high-quality labor pool. Diversity allows for multiple and differing points of view which can be largely beneficial for problem-solving and developing a high-quality product. At Governance.com we pride ourselves on providing innovative and time-saving solutions to our customers. This is what drives our motivation and leads us in our search for search for the best talent available regardless of their origin.

Agility – Learn & Adapt to new techniques quickly. Given the constantly evolving industry we find ourselves in, it is of immense importance to hire talented and creative people that can adapt to changing circumstances with ease. Our agile framework demands for cognitive flexibility which demands a certain level of curiousness and proactiveness.  A common trait of our current developers is that they are all eager and excited to learn about the latest developing practises, so this is also a trait we value when hiring new people.

The Luxembourg based Governance.com team

What positively differentiates your company for potential recruits?

Our international workplace reflects the multicultural landscape of Luxembourg. With about 10 nationalities and 10+ languages spoken in-house; it is safe to say that we reflect a modern, globally oriented workplace. We are proud of this diversity and embrace the different cultures and values which are a great recipe for interesting conversations and creative ideas, resulting in personal as well as professional growth.

We strive to build competent teams by hiring talented minds and fast learners. At Governance.com, we give everybody the space to express and demonstrate their proficiency by putting you directly in the driver’s seat. Excellence, trust and helpfulness define our current workforce and allow for a stimulating and engaging environment.

By combining the multicultural spirit with great minds, we have created a friendly work environment that allows for the cross-pollination of ideas and best practices. This has allowed Governance.com to become one of the household names for data management and process automation in Luxembourg and beyond.

What makes Luxembourg an attractive destination for tech talent?

Luxembourg is an attractive destination for Tech talent for mainly 3 reasons:

1. In line with Luxembourg’s continuous innovation efforts, the government has massively invested in the FinTech and start-up ecosystem. In consequence, this dynamic and innovative economy has seen a large rise in the need for tech talent. This, in turn, has led to a wide array of opportunities having been created for technical staff in the Grand Duchy.

2. Luxembourg is home to about half a million people from all over the world. Besides promising business opportunities and a stable political environment, the country is ranked first for personal safety which creates comfortable family settings, as well as a nest for social interaction.

3. Luxembourg has great infrastructures and a very high standard of living. Attractive salaries and opportunities for self-development are fuelled by the successful international finance centre the Grand Duchy is known for. The country allows for exciting lifestyles where the opportunities for meeting new people are abundant.

The Netherlands based Governance.com team

Hiring great IT and Tech talent is one of the biggest challenges faced by Fintech companies.

We have decided to tackle this issue, dedicating March to the LHoFT Talent Month where we will organize, sponsor and attend several student recruitment forums, masterclasses and workshops across Europe.

Check below for our list of events – and keep an eye on our events section. Send a email to info@lhoft.lu if you have any questions!

#talentmonth19

At this year’s Fintech Awards Luxembourg we recognised leading Fintech startups from around the world. In an effort to get to know these startups and their representatives better, we asked them a few questions as a part of our series of interviews: The Innovators.

This time we caught up with Philip Schoch, Co- Founder and Product & Strategy at Apiax who took home the third prize (an advertising campaign by Maison Moderne) for their digital regulatory compliance solution.

Philip Schoch, Co- Founder, Product & Strategy at Apiax

• Located: Switzerland
• Sector: Regtech
• Website: apiax.com
• Twitter: @ApiaxCOM

Can you tell us a little about yourself and your company?

We are a Regtech startup based in Zurich. We build powerful and flexible tools to master complex financial regulations digitally. Our clients are banks and asset managers that want to manage regulatory complexity efficiently and re-focus their attention on business development.

What was the lightbulb moment when you recognised the potential for a new solution like Apiax?

What considerations were behind the initial concept? The lightbulb moment came from the market, from the clients themselves. In our previous roles we advised banks on business processes, and the banks kept asking us if we could help them keeping the process up-to-date when regulations change. That client need, in combination with ever more open-banking initiatives, opened our eyes: always up-to-date and verified regulation must be easily accessible to clients in a pure digital format. This also resonated with our growing team. We wanted to build a comprehensive yet lean solution to master complex financial regulations digitally.

What have been some of the key challenges you’ve faced in terms of adapting to new regulatory requirements or client needs?

Thanks to our backstory, we had a pretty good understanding of client’s needs from the beginning. For instance, we always understood that our clients want to be able to adapt their rules to their preferences and risk appetite. We never bought the idea of a “magic button” with an inaccessible set of digital regulatory rules – a black box – behind it.

How hungry are large financial institutions for innovation produced by startups in the area of regulatory compliance?

A lot of financial institutions know that they have to change the way they handle regulations. The need for a solution that does not just allow to master regulatory complexity, but also empowers business development is undisputed. Also, some institutions have already tried to develop the necessary tools by themselves, often to no avail. Thus a lot of institutions are in fact pretty eager to work with us. But of course, it is never easy as a startup to gain the trust of clients. But in general, we would say that most financial institutions are pretty open to work with companies like us.

Do you find their procurement processes a significant barrier?

We find that procurement processes differ significantly, not just between banks, but also depending on the respective context. If a potential client approaches us with a very specific need, we can figure out the details pretty efficiently. If a financial institution is more in an exploratory phase, it all takes much more time. So the answer is that it depends. But of course, procurement processes are always a challenge, not just in the financial industry. We find that selling our digital rules through partner applications such as Temenos Wealth Suite addresses this problem: clients can acquire a certified product and instantly deploy it to drive their competitive advantage.

How will the increasing adoption of Regtech solutions shape the financial industry over the next five to ten years?

In the future, regulatory experts will work on a digital workplace, which will give them even more control over their regulatory expertise. Business functions will be able to effortlessly tap into this knowledge. So the lasting impact of Regtech will be that it allows financial institutions to master complex financial regulations efficiently and to use the unfreezed resources to focus on business development and giving their clients great brand experiences.

As a Swiss Regtech company, what are your challenges with reaching the European market?

We don’t think that we have specific challenges because we are a Swiss company. We would rather say that we have some advantages. Regulatory compliance is a core competence of financial institutions, and of course it helps that we are based in the heart of one of the biggest financial centres in the world and that our team brings together loads of experience in the industry.

Philip Schoch (third from left) picking up the third place prize at Fintech Awards Luxembourg 2018

What motivated you to apply to the Fintech Awards Luxembourg?

Luxembourg not just hosts many interesting potential clients, but also shares our ideas of how the financial industry needs to change. Of course we’ve also heard only good things about the competition in the startup ecosystem. So for us, applying at the FinTech Awards Luxembourg was a really easy decision. And one that we do not regret. We still have very good memories of the event and would definitely recommend anyone to participate in it.

Luxembourg has a thriving Regtech ecosystem, what factors do you think have contributed to that?

We would say that Luxembourg has a good idea of where its financial industry should steer to. This became very apparent from the comments of the Prime Minister as well as representatives of the regulator CSSF. So it seems only natural to us that Luxembourg has a very thriving Regtech ecosystem.