RegTech Kyckr signs Aussie finance client as money laundering scandal spreads

“RegTech” provider Kyckr has just signed its first Australian financial institution amid the widening Commonwealth Bank money-laundering fiasco.

RegTech — or regulatory technology — is a buzzword used to describe services that provide businesses with efficient compliance management. Some have called it “the new FinTech” referring to the much-hyped market for online financial services.

Risks around internal governance were brought into sharp relief last month following revelations that CommBank faced massive fines for allegedly failing to comply with anti-money laundering laws.

On Friday the scandal widened when Fairfax reported that Australia’s other three big banks — ANZ, NAB and CBA — were also under investigation of money laundering.

Up to $5 million a day had allegedly been laundered through the four banks — and smaller mid-tier banks were also suspected of being involved.

Kyckr (ASX:KYK) managing director David Cassidy says his automated data regulatory system would have caught crooks trying to launder cash through banks.

“The challenges reported by the CBA are typical of banks globally trying to comply with anti-terrorism and anti-money laundering obligations,” Mr Cassidy told Stockhead.

“In the last 20 years regulation has become really complex to the point that you need automation and quality information to keep up,” he said.

“Banks are still relying on people to go through all the information and they can’t keep pace like an automated system can.”

KYK shares closed up 3 per cent at 18.5c on Thursday.

While the company cannot disclose which financial institution has taken up the software, he said it was “not a mum and dad super fund” and that the size of their latest partner was big enough for ASX’s ears to prick up.

The company’s software consolidates data from regulatory agencies across the world and provides a picture of where and to whom money is moving, raising a red flag as soon as it spots a anomaly.

“Most banks will have a connection to ASIC but the reality is most regional banks have customers in up to 100 countries so it is virtually impossible to keep up with the compliance obligations,” Mr Cassidy said.

“They can often have out-of-date or inaccurate data but we go straight to the source and turn on company watch so we are alerted any time there is a change.”

Earlier this year KYK signed agreements with Bloomberg and Citigroup to provide access to its business registry data, setting a foundation for reach into the US and European markets.

In its first year of operation, the company made $1.6 million in sales and a $3.4 million loss with $2.8 million in the bank at the end of the period.

The bigger banking picture

CBA now faces a federal court case and Australian Prudential Regulation Authority (APRA) inquiry as well as a threat of a class action from its own shareholders.

Chief executive Australia’s financial intelligence and regulatory agency (AUSTRAC) Peter Clark highlighted the need for accurate reporting.

“By failing to have sound AML/CTF systems and controls in place, businesses are at risk of being misused for criminal purposes,” Mr Clark said.

“We believe this can be achieved by working collaboratively with and supporting industry. We will continue to work in this way with our industry partners who also share this aim and demonstrate a strong commitment to it.”