Year by year fraudsters evolve and attempt new methods to conduct fraud that bypass AML and KYC, which can increase challenges for firms like Ondato

We spoke to CEO and Co-Founder, Liudas Kanapienis, as he discussed the new fraud methods that will be prevalent next year, and discussed details around how micro-modular architecture is growing the sector. 

Payment Expert: Firstly Liudas, could you explain Ondato’s micro-modular architecture and how the company is one of the leading providers of compliance-as-a-service?

Liudas Kanapienis: From day one, understanding that there is no such thing as a standardised compliance process across the industry, we took a strategic decision to build our solutions using micro-modularity. For our customers, this means that each small service or product can be used solely or in combination with any other modules. Imagine lego blocks that can stack up and connect as needed to suit any of your needs or ideas. 

For the company, this brings flexibility and the ability to adapt to even the most sophisticated processes. Another thing we focus on is not only one or another part of the KYC related compliance – we tackle it from the very beginning, including online/offline customer onboarding. We provide support through the whole journey of the consumer account as it develops with the company, including reporting to regulatory bodies.

To empower that, Ondato has over 15 different current products on the market, and we are already seeing that the Ondato OS platform becomes something like a “Salesforce for compliance” – a day-to-day one and a working tool for KYC officers.

PE: Along with partnering with Hawk AI and launching your AML risk scoring model, can you explain some of Ondato’s key contributions to safeguarding firms from risks this year?

LK: Our platform is focused on the ability to cross-integrate and both receive and exchange the data between other core CRM systems, as well as synchronise with the activities of transaction monitoring tools (like Hawk AI). This makes the compliance management effectively optimised for our customers.

As for Ondato’s contribution to protection, our goal is to make KYC processes simpler and safer so we help companies know who their customers are and to be confident that the information is accurate. That’s what our solutions help to achieve.

PE: What are some of the more complex fraud and money laundering techniques that have been introduced this year and how does Ondato intend to combat them? 

LK: The deepfake technologies and natural-skin-masks are threats that we see emerging on the market lately and, if in previous years this was more of a “prank”, in the last year we notice that it gets more and more realistic and tougher to spot. 

At Ondato we have a separate fraud prevention data scientist team whose main goal is to monitor, reproduce and tackle these kinds of fraud activities by training AI to spot them and of course, implementing the security layers within our core services (i.e. against camera stream intervention). 

Fraudsters never stop and that means neither do we. It’s a race and new threats emerge all the time. They create new ways to commit fraud, and we create new ways to defend against it. This brings a lot of responsibility but is also a very intriguing challenge.

PE: Are there any new KYC or AML regulation updates that have occurred this year or intend to be implemented next year, and what impact will they have? 

LK: At the end of June 2022, the European Parliament and the European Council reached a provisional agreement on a new bill to regulate crypto-asset service providers (CASPs) in the region. The new framework is called the European Commission’s Regulation of Markets in Crypto-assets, also known as MiCA. 

If everything goes according to the plan, policymakers should be able to finalise the legislative process this year, but it will take another 18 months for it to be put into effect. 

The main aim of MiCA is to prevent the misuse of cryptocurrency for criminal activity. Thus, the bill requires crypto transfers to be transparent by implementing a crypto travel rule. No matter the transaction amount, every crypto asset service provider will have to retain information on the transaction’s originator and beneficiary. Currently, the threshold amount is 1,000 euros. 

In regards to 2023, we expect that the new, dedicated anti-money laundering authority (AMLA) will be established with the aim to start most of the activities in 2024. 

AMLA should have the power to require actions to enhance the compliance of obligated entities within the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) framework, including reinforcement of internal procedures and changes in the management structure. 

Furthermore, one of the goals is to finalise a single EU Rulebook for AML/CFT which will include directly applicable AML/CFT rules and requirements imposed on obligated entities. The rules at EU level will be more detailed and more granular than at present and will include a number of regulatory technical standards to be prepared by the future EU AMLA, for example, on customer due diligence.

PE: What is the next step in the Lithuanian fintech sector’s evolution and how does crypto play a role in this?

LK: The Lithuanian fintech scene is becoming more mature and having a bigger impact on the financial infrastructure and ecosystem throughout the country, as well as Europe. Companies will increase their footprint and stake in the market. 

The crypto industry is another story; there is a lot of traction from the industry already established within Lithuania, but the whole industry worldwide is going through a significant down period. 

New regulations were introduced to crypto businesses and consumers, so that will change the possibilities, especially for smaller players, to run their operations. 

PE: Lastly Liudas, what are some of Ondato’s key targets for next year, and what new markets does the company intend to expand into?

LK: From day one, we are a global company serving customers in different jurisdictions all over the world. Our focus for the next year is growing the business in Germany, France, and Spain. 

Also, one of our future plans is to explore and strengthen the risk-flexibility of our platform. Currently, each individual service has been upgraded and integrated into a new, holistic ‘compliance CRM’ that provides online financial players with an unprecedented level of clarity about new and existing customers, including those imported into Ondato from legacy compliance systems. This is the path that we are continuously developing.