Brisk Transfers is a fintech company involved in the exchange of money. In the economic environment, technological innovations have brought changes in the way services and products are operationalized, through fintech startups in the financial sector. The term 'fintech' is the sum of the names financial (finance) and technology, used to designate companies that have a business model that differs from traditional banks in offering financial products and services, which operate through digital platforms, which attribute to the competition and the Australian legal system new forms of regulation in the financial sphere.
However, the facilities brought by these fintechs such as Brisk Transfers lack specific regulation, due to their own and peculiar arrangements, and it is complex to establish general” rules for a “specific” operationalization proposal, giving different forms of performance and control, as they directly impact the economic, financial and social scope.Furthermore, these companies cannot be defined as financial institutions due to the absence of a legal provision to define them as such, since the legal concept of a financial institution is limited to any legal entity, under public or private law, that captures, intermediates or invests financial resources from third parties, as long as provided by law and legally regulated by the responsible agency.
Given the characterization of financial activity as one in which a natural or legal person makes money available to another, directly or indirectly, it remains evident that fintech exercise financial activity to the extent that they intermediate financial resources, both directly and indirectly. Thus, the fintech, as operators of these activities, when capturing, intermediating or investing financial resources from third parties (individuals or legal entities), either with the transfer of values, with the circulation of currency, or with any act related to financial activity, through operations on digital platforms, they cannot deviate from the need to comply with national rules and regulations to preserve the economic order.
The financial sector is one of the most regulated in Australia and a pioneer in technological innovation. They are institutions that handle sensitive data from citizens and companies, organize financial transactions, and are constantly targeted by cyber-attacks. As such, all fintech in Australia, such as Brisk Transfers, need to adhere to regulations by Australian Securities and Investments Commission Act (ASIC), Australian financial services licence (AFSL), Australian Prudential Regulation Authority (APRA), and Australian Transaction Reports and Analysis Centre (AUSTRAC), among other bodies, besides following strict Central Bank rules. It is important to ensure that the operations carried out by Brisk Transfers, as well as the internal organization and procedures, comply with the legislative and regulatory provisions in force, professional and ethical standards and practices, and the guidelines of the deliberative body or the body executive.
Being part of the fintech system means having alignment with the laws that regulate the financial market and, also, with other possible regulations that affect the products and services offered by the company. To meet the increasing pressure to comply, it is necessary to know the entire regulatory scenario and standards such as the ASIC, APRA, AUSTRAC, and AFSL, besides having a dedicated team that will guarantee compliance with all necessary compliances. There are many regulatory frameworks and regulatory challenges that face money exchange companies and financial institutions in Australia. First, regulations keep changing and are constantly evolving. Due to the diversity and dynamism of regulations and jurisdictions in Australia, organizations find it difficult to comply with compliance rules.
Australia presented some rules for the development of the sector. One of these resolutions is by the Australian Financial Institutions Commission (AFIC) and the Council of Financial Regulators (CFR), which went ahead by developing a regulation aimed at opening and closing an account via the internet. The resolution determines that financial institutions adopt procedures and controls that allow them to confirm and guarantee the integrity, authenticity, confidentiality, and security of the required electronic documents and information, as well as adopt procedures to ensure the reliability of the technologies used in the process. Besides, they determine the application, for accounts, opened by electronic means, of the same rules as deposit accounts, whether related to the registration status and collection of fees. Thus, fintech must compare customer information with public or private databases, keep data stored for five years, have audited procedures set out in a manual, and close accounts with irregularities.
Besides, under regulation, credit fintechs may form a direct credit society or a personal loan company. In the first modality, fintech can offer credit with its financial resources. In the second, fintech organizes a credit platform in which the funds come from individuals or companies, not operating with equity. However, in both cases, the proposal is that it is forbidden to raise funds from the public, that is, there will be no deposits from customers at these institutions. Besides, a fancy name that refers to another institution, which is already regulated, should be prohibited. Companies also have to join the list of institutions inspected and regulated by the monetary authority, including from the perspective of combating money laundering.
Given their limited size, their more fragile business models, and their reduced workforce, Fintechs are exposed to many risks including that of money laundering. Fintechs can create new vulnerabilities in the financial system in the fight against money laundering and the financing of terrorism if the control mechanisms are not at the level and their regulations have been toughened especially after the CBA incident. In 2018, the Commonwealth Bank of Australia (CBA) was fined AUD $700 million because of several breaches of legal and regulatory obligations regarding counter-terrorism financial laws, lack of following due diligence, violating anti-money laundering laws, and contraventions in risk procedures. It turned out that CBA had not fully respected its obligations to identify, verify the identity and know its customers and that the detection of politically exposed persons, the risk classification, and the monitoring and analysis system for business relationships were faulty. Like regulated financial institutions, Brisk Transfers must comply with the obligations in force in the fight against money laundering, tax evasion, or the financing of terrorism.
Besides, to the extent that Fintechs develop their entire offer on the internet, the problem of cybercrime is very important. They seem particularly exposed to disruptions in services, loss of customer data, fraud, and system failures. The guide on the assessment of authorization requests as a “Fintech credit institution” published by the European Central Bank in September 2017 discusses the increased vulnerability of Fintechs to cyber-attacks. Because of their small size and their reduced financial surface, the realization of such risks would have serious consequences for the business continuity of Brisk Transfers in case of a cyber-attack.
Regulatory Framework Regarding Security Systems
Even with all the facilities that the sector proposes, through the use of technology, Brisk Transfers cannot ignore safety concerns. Many fintechs manage to be more attractive than banks by cutting down bureaucratic processes, for example. This is positive, but it can eventually expose the customer or the business itself to certain problems, for example, by discarding a process that checks the legitimacy of the information.
For this reason, Brisk Transfers must disclose the companies with which they partner, compliance with market standards, if they have complaints in consumer protection agencies. It is also essential to present a clear privacy protection policy, investment in information security, adoption of measures to combat fraud, implementation of efficient channels of communication with customers, among other measures. Besides, the company needs to be clear when presenting the business proposal. If Brisk Transfers offers services at very low prices or completely exempt from tariffs, the company will need to make it clear how it earns - or at least plan to earn - revenue. Otherwise, the company may experience operational problems or even demonstrate involvement in illegal activities.
The development of the capital markets, linked to the growing interdependence of financial centers has resulted over the past ten years in a sharp increase in the amounts and volumes traded in payment systems. In such systems, financial institutions are exposed to several risks. There are four main ones that Brisk Transfers could be exposed to the liquidity risk (an establishment runs out of liquidity to meet its commitments - position of a debtor bank), the settlement risk (a bank is unable to recover its receivables due to the default of its counterparty), the exchange risk or Herstatt risk (risk of having to pay a currency without receiving the counterparty currency) and systemic risk (the failure of a participant in the system leads to the inability of other participants to fulfill their obligations, thus resulting in a domino effect in a chain reaction). As such, Brisk Transfers need to modernize their payment tools to improve their efficiency, economy and the level of service offered, such as the objective of optimal end-to-end payment automation, known as STP (Straight Through Processing), requiring advanced information systems.
Securing is a concept that covers both a banking need and a technological reality. In banking terms, security aimed at covering the various banking risks should be implemented by the creation of automated and secure infrastructures. This coverage of financial institution needs is accompanied by technical security making it possible to secure the exchange of data and information in an increasingly open technological world, based on IP, with as imperative a rate of availability as high as possible.
Regulations Regarding Automation and Evolution of Network Protocols
The security process of financial systems is based on information systems technology which has known and has known more particularly in recent years, a very significant change. In essence at the service of these national and international banking information systems, the IT means for processing and exchanging large payments have always been able to meet the ever-increasing needs for automation in a demanding logic of reliability, speed processing, and scalability. Value-added security services (authentication, integrity, archiving) and message standardization have greatly facilitated the emergence and implementation of cross-border financial exchange systems.
However, the technological advancements, intrinsically linked to any rational organization of information, create during major renewals of protocols, languages or other hardware technologies, more sensitive periods on a security level, requiring new responses that have greater maintainability, greater scalability and global standardization of network protocols as essential support. Faced with this development, Brisk Transfers must consider implementing highly secure systems.
Security and Compliance with High Availability
From an IT security perspective, four things...
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