After a decade in the RegTech limelight, Muinmos continues to go from strength to strength. In light of a challenging year for many industries in 2022, the company continued to show its strength in challenging circumstances. We spoke to Muinmos’ Remonda Kirketerp-Møller and Michael Thirer to learn more.
2022 was a hectic year across virtually all industries, with businesses needing to re-adjust not only to the after-effects of the Covid-19 pandemic but also the Black Swan event that was the Russia-Ukraine war.
For the RegTech sector, the second issue was particularly prescient – with sanctions and sanctions compliance soaring up the agenda in light of the war. The need for RegTechs to meet these increasing industry challenges became even more key – but not all RegTechs were able to provide clients with what they needed.
Kirketerp-Møller, Founder & CEO of Muinmos, highlighted that these challenges have provided opportunities for the company, “Financial institutions often come to us after other firms have failed to provide a complete solution – for example, they are too focused on one area of compliance or do not enable configuration relating to the institution’s own policies or regulatory backdrop. They are impressed by the depth and sophistication of our offering and the quality of our platform’s architecture. I think this played a huge part in our growth in 2022 and has resulted in us onboarding larger firms and more banks than before”.
Industry growth and trends
Despite having its roots in the late 90’s and 2000s, it has only been this current decade that RegTech has firmly established itself as a mainstream industry amongst financial institutions.
“I think the rising levels of compliance and understanding in the market are brilliant,” Michael Thirer, Legal, Governance and Regulatory Affairs Director at Muinmos explains. “If you look back even to 2020, the market’s understanding of what RegTech is and what it does and how it can solve problems is so much higher now.
“Compliance is not just about ticking a box – it’s about ticking many boxes. If you don’t tick all the boxes, you are not compliant. We have noticed that users of our technology are becoming increasingly sophisticated. They have more in-depth questions and requests than before.”
As well as greater knowledge, Thirer believes a key aspect of this return is due to maturity in the space. “We believe there is a greater maturity in the FinTech sector to take on RegTech tools and make the most out of them. With the regulatory work done over many years, there’s greater market maturity and there is now a very high emphasis on compliance across the financial sector – the base level is becoming very high.”
On the topic of an increased maturity and expectation by financial firms of the RegTech space, Kirketerp-Møller underlined a key linkage – the regulators in the market are also pushing for this greater emphasis on compliance.
She said, “Last year, ESMA (European Securities and Markets Authority) commented heavily on the fact that they now expect compliance departments in a financial institution to have a technology budget. This is not a recommendation, but a must. This is a big shift from how it used to be previously, and we can definitely see more acceptance and a greater push towards RegTechs.”
Kirketerp-Møller also mentioned that an increasing number of regulators – including the UK’s Financial Conduct Authority (FCA) – are starting to make proposals about how RegTechs should operate in the future. “We’re not talking about getting regulated as an institution, but getting authorised or registered as a solutions provider in the RegTech space,” she explained.
Thirer added that on the topic of regulation, there are two types – direct and indirect. He explained, “Indirect regulation of RegTechs exists, even today through outsourcing regulations in many places including in the EU and the UK. However, we’re now moving to direct regulation of RegTechs, and also through DORA in the EU.”
In April, the European Parliament passed MiCA (Markets in Crypto Assets) – which is likely to be the first crypto law to be introduced by a major jurisdiction.
How will the legislation’s passage affect the crypto space? According to Thirer, the recent collapse of several crypto exchanges led to a considerable lack of trust. This is where MiCA, he believes will benefit the space.
“Crypto was a reorganisation of the financial system to move trust from the central government into algorithms. Now that has failed, ironically, the central government moves in to reinstate trust in the very system which was supposed to replace it.”
He continued, “What I think will happen is that MiCA will give crypto service providers in Europe an advantage, because they will be regulated and they can be trusted, and therefore we’ll probably see a shift of investments in the crypto space towards Europe.” From here, Thirer believes the world will then follow suit and adopt similar legislation.
A move away from crypto?
The collapse of cryptocurrency firm FTX earlier this year sent shockwaves through the financial industry, with many businesses unknowing and unprepared for the crash of the company. Could this lead to a shift away from crypto?
In the opinion of Kirketerp-Møller, once the sector sees regulation, trust will increase as well as usage. “Before MiFID, financial institutions didn’t really fall under a category. They were regulated in some parts of the world but not all. The first MiFID directive, was virtually the first real regulation for investment firms, creating a stronger focus on investor protection. So, for crypto, regulation will create a more solid governance structure and greater trust around the sector.”
On the question of whether the regulation of crypto will bring more investors into it, Thirer cited the case of Marcel Duchamp’s 1917 urinal artistic work. “Duchamp took a urinal and put it in a museum and said that it was art. So by the very fact that he said it was art, this made the urinal into art.”
To link this back towards crypto, Thirer added, “The decision that EU regulators had to make was to say whether crypto is a legal tender or not. The fact that the EU regulated it says that, yes, this is now legal tender.”
Forex broker requirements
Recently, the Financial Services Authority of St. Vincent and the Grenadines announced that existing Forex brokers registered in the country will have to produce a copy of requisite licences from jurisdictions where their business activities will be conducted.
How will that announcement impact Muinmos? According to Kirketerp-Møller, this is a topic that Muinmos has been firmly focused on for a number of years, and is one that highlights the wider nature of the RegTech sector.
She said, “A lot of people talk about onboarding clients as all about KYC and AML – this is absolutely not true. There is a huge amount that go beyond KYC, AML and onboarding – and this move by the Financial Services Authority of St. Vincent and the Grenadines (SVG FSA) highlights another part of compliant onboarding, which is cross-border compliance.
“Regulators like the SVG FSA are now putting their foot down and saying ‘look, if you’re onboarding out of our jurisdiction, you must prove to us that you are doing so also with compliance to the laws that apply in the investors’ domicile”.
Muinmos celebrated its tenth anniversary last year and is now looking towards an exciting future as a key player in a fast-growing space. As it looks towards this future, has the company’s mission changed?
Kirketerp-Møller doesn’t believe the mission has changed, but she believes Muinmos is different to any other competitor. She linked the development of the company’s mPASS™ product – an AI-based regulatory onboarding engine that instantly and automatically performs client categorisation, suitability and appropriateness, and cross border clearance amongst other things – to the recent regulatory developments in St Vincent.
“We saw this cross-border compliance issue before the regulators themselves saw it, and it’s how the market should have always operated. That’s nothing new to us, but it seems to be a new thing to the market.”
Thirer highlighted that far too many financial institutions still have compliance processes that are unnecessarily lengthy and tedious, taking a considerable amount of time to complete. He emphasised that Muinmos spotted a gap in the market to address this 10 years ago, enabling compliance teams to onboard clients quickly, accurately and without any hassle.
“Since the pandemic, I think there is greater understanding from financial institutions that they don’t have to choose between compliance and customer experience. Technology can allow for both. We can help them to be both faster and fully compliant”.
Kirketerp-Møller provided a conclusion of the key appeal of Muinmos. “I think our mission has become even more focused, because a lot of RegTechs are dealing with a little piece of the onboarding process, but it’s not because they don’t know about the other pieces – they have no idea how the pieces all connect.
“They then go on selling a piece and the institutions buy it, and they find out they haven’t solved the problem because there’s another piece that is missing. We feel very strongly that our product actually connects all the pieces because we understand the problem, we understand the market, we understand the granular requirements.
“When our clients come to us, they can see that deep understanding collectively as a company, and that definitely has been one of the biggest rubber stamps that our products are beyond fit for purpose.”
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