The appointment of Gabriel Makhlouf as the 12th governor of the Central Bank of Ireland earlier this year hasn’t gone unnoticed. Until recently the top official in New Zealand’s treasury, he will be the first foreign official to occupy the post in the entire history of Ireland’s financial regulator. Coincidentally, Gabriel Makhlouf also boasts top UK civil servant experience – having served as the principal private secretary to Gordon Brown, chancellor of the exchequer at the time. 

The choice doesn’t come as a surprise, as Ireland is on a cusp of great opportunity. Dublin remains the most popular choice for financial services companies to relocate post-Brexit. While other top destinations for banks and fintech firms include Paris, Frankfurt and Luxembourg, the Central Bank of Ireland seeks to lure high quality applications from UK-based firms seeking to retain access to European markets – as it decides whether to grant authorisations to relocate. Many applaud the regulator for exercising a degree of caution when Ireland could be chasing even greater gains. And the new governor of the Central Bank will be central to maintaining the stability of Ireland’s financial system as it embraces new entrants.

Ireland’s success has not been an overnight venture. The country has long been one of the most confident and successful nations in Europe, boasting a booming jobs market and an economy that was the EU’s fastest-growing in 2018, for the fifth consecutive year.

At the same time the cautious stance of the Central Bank of Ireland is front and centre. Ireland sits within the EU’s top ten countries for money laundering activity. Some have even voiced concerns that Brexit has increased the risk of Ireland becoming a “perfect storm for money laundering”. This is a serious challenge for a responsible and increasingly attractive market like Ireland – and, of course, its financial institutions.

But no good story would be complete without a silver lining.

Ireland has long taken the issue of money laundering very seriously. While financial regulation can often be seen as a burden, Ireland has embraced it as an opportunity. The country has been a member of the Financial Action Task Force (FATF) since 1991. Later, in 2010 it enshrined its commitment to tackling money laundering in the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010. This piece of legislation brought Ireland in line with the European Union’s Fourth Anti-Money Laundering Directive (MLD4) – the latest version of a constantly evolving regulation designed to combat terrorist funding, human trafficking and other criminal activity. This latter regulation is one with real teeth: those who violate MLD4’s provisions face a maximum fine of at least twice the amount of the benefit derived from the breach, or at least €1 million.

The next iteration of MLD will come into effect in January 2020, providing further, much-needed improvements in specifying the adequacy of electronic documentation. The proposed MLD5 requires that member states “establish automated centralised mechanisms, such as central registries or central electronic data retrieval systems, of bank and payment accounts”.

For many EU countries, the digitisation of records may prove an enormous headache, since traditionally customer identification has been done via an in-person review of the identity document, with banks and financial institutions making photocopies. Ireland, however, is already ahead of the game. As Compliance and Risk Officers at Irish banks know, Section 33 of the 2010 Act (relating to customer due diligence) makes provision for “electronic verification of the customer’s identity on the basis of documents (whether or not in electronic form) [emphasis on original].”

This puts Ireland’s financial service providers in pole position to handle new customer onboarding, and to create an experience that is fast, mobile, and hassle-free for their customers. This is even more important as we start seeing such innovations as biometric consumer debit and credit cards becoming the fabric of the financial ecosystem. And because Irish law promotes electronic verification of identity documents, there is a substantial opportunity for financial services organisations to act fast. Only then can they improve their operations, due diligence, compliance, and customer experience and educate customers of the benefits. 

Using digital identity verification for onboarding, due diligence is achieved by asking individuals to take a photo of their identity document and then a selfie with their mobile device. Advanced artificial intelligence is then used to validate the authenticity and originality of the identity document, linking the document to the real person. This digital process can be done in seconds and the individual does not have to visit a physical location to prove their identity. Making ID verification “digital by design” financial institutions can meet all regulatory requirements, including GDPR, MLD4/5, and Ireland’s Criminal Justice Act – while also providing the convenience for the customer.

Like many other industries, financial services are rebuilding long-established business models around the core principle of providing brilliant customer experiences. Challenger banks and other fintechs have so-far led this race, but now digital verification is available to any establishment, regardless of their existing technology estate. It means that they can immediately begin to make account opening fully digital, with no tedious requirement to visit a branch. What’s more, research suggests that mobile technology can significantly decrease the risk of sanctions, provide significant improvements in user experience and reductions in Know Your Customer (KYC) friction, while delivering savings for the average bank of £5m in operational costs, rising to £10m in three years’ time.

As Ireland is embracing a transformative growth opportunity ahead, it is steadily moving forward down the right regulatory path. And identity verification technology, while being an effective compliance solution, can also help safeguard the financial sector from the ongoing risk of fines and sanctions. Ultimately, this will help maintain the attractiveness and stability of Ireland’s financial ecosystem, as London-based financial institutions join the fold.