Risk – What’s on the horizon?
“Risk, the final frontier? This is the voyage we are all engaged on, a mission to explore strange new frauds, to seek out new threats and new mitigation strategies, to boldly go where no risk professional has gone before” If it’s not immediately obvious to you where I got the above quote from and made a few changes for this article, then I am pleased you aren’t as grey haired as I have started to go. If however you are having a little giggle, you are showing your age!
So what is on the horizon? Well as most of you are aware, 2 part authentication is starting to be replaced with various biometric verification system tools, be they retina scanning, facial recognition and/or combined with finger vein technology. They may not yet be mainstream in the UK, but I want to look further ahead in this article and concentrate on the wild frontier that is cryptocurrency.
One of my business colleagues likes to include the following little phrase when talking about risk that, “Only pioneers get scalped” and this has been true of investors who reading the hype surrounding Bitcoin, have invested monies in the next big thing only to lose some, if not all of their investments.
But let us just suppose for a moment that you have indeed made some substantial gains by investing in cryptocurrency. There you are sitting on the profit, and looking to spend it in the real world, perhaps on a larger home or a portfolio of investment properties. So you cash in your crypto chips and transfer it back to your bank account. This then potentially raises an issue with regards to AML and the origin and provenance of your crypto gains. I know this question is now starting to be asked theoretically at least in lenders AML departments. How comfortable is a lender or indeed the whole industry at present with profits made from crypto currency speculation? Are we accepting them and if not will we in the future? Will there come a time when conveyancers and lenders will accept direct transfers of crypto currency into their own E Wallets?
My own observation is that the above scenario is dependent as to whether crypto currencies are here to stay, or are they merely a bubble? Most of you will remember the dot com bubble, with its similar spectacular gains and falls. The market eventually settled and so I think will crypto currencies but not in the current wide variety we see today. There are in fact currently over 1600 cryptocurrencies currently traded.
Thus a market is borne, and a business that accepts crypto currency deposits having built an appropriate risk management system will lead the way. However, these businesses by their very nature will attract criminals seeking to launder monies via this new frontier, and thus the regulators will be standing by with suitable enforcement notices and fines in hand. There will I envisage be testing times for those businesses that engage in these products, but technology is now advancing at break neck speed and customer expectations have now become demands for convenient tech savvy products and on boarding techniques and this will drive the market. (I should therefore be posting this article on Facebook and Twitter, see what I mean!)
So one can assume that from a crypto currency deposit starting point that crypto currency mortgages will evolve with crypto lenders and crypto conveyancers. The industry will indeed boldly go where it hasn’t gone before. “Its money Jim but not as we know it!”