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REINVENTING FINANCE AS A FORCE FOR GOOD IN THE FACE OF CLIMATE CHANGE

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Alex Lawson, Regional Director of Hedging – UK and Europe at Western Union Business Solutions

 

The world is at a turning point when it comes to the fight against climate change, no longer can entire industries sit back and watch others do the work – action from all is required. When I reflect on the efforts of our own industry, we are in a transition phase when it comes to sustainability.  We are gradually challenging pre-conceptions about financial organisations’ duty to take a stronger, more active role in the fight against climate change – but more can, and must, be done.

More and more, businesses are increasingly facing pressure from customers and partners who are voting with their feet and opting to work with organisations that are applying a sustainable lens to their business processes. In many cases, some of the easiest and most effective sustainable changes can be made  by reviewing functions the organisation is already running, or services they already offer, allowing for easy, yet impactful, action.

So how, and why, should financial organisations be applying sustainable practices to their business?

 

Alex Lawson

A collective effort

The finance industry is one of the driving forces of the UK economy, combined with the fact that in 2020 the total number of people employed in the financial services sector in the UK amounted to approximately 1.1 million – our industry has significant influence With that comes great responsibility to set a good example. In the wake of COP26, customers and partners alike are increasingly looking to work with companies that are embedding sustainable practises into their work. Financial organisations cannot afford to ignore this move.

For both reasons, it is incredibly important that we respond to the changing direction of the world’s priorities and shift our attention to the imminent environmental threat facing our planet. Going into 2022 and beyond, it is imperative that as an industry, we are able to put on a united front and demonstrate that finance can be a force for good.

 

A sustainable perspective

When it comes to making a significant difference to  the climate change effort,  far too often businesses assume this can only be achieved with grand gestures, rolling out business-wide sustainability programmes or pioneering new initiatives. In reality, sometimes the most impactful results can often come from making small changes to existing functions the organisation is already running, or services they already offer.

In fact, one of the easiest ways to make a positive change is through ongoing customer work. Day in and day out innumerable financial transactions occur. It therefore makes sense to look at how they can be adapted so that small incremental changes create a significant cumulative effect. For instance, we are now enabling all new and existing customers to support sustainable initiatives as part of their existing foreign exchange hedging strategy. By making a small adjustment to the rate achieved on a planned hedge transaction, funds are generated and invested in climate and sustainability initiatives selected by the customer, who then receive certified carbon offsets in return.

For those financial organisations looking to make an even more significant difference they can use their own financial force to amplify this impact, which is why we match the customer’s donation, with the customer receiving full credit. Whilst simple, if every financial organisation – big, medium and small – re-evaluated existing business processes and applied a sustainable lens, the resulting impact could be far greater than one grand initiative.

 

Choosing a sustainable partner

We must not forget that in the finance world, customer confidence is imperative to business transactions and proceedings which is why when it comes to making sustainable commitments, for both customer belief and the wider global picture, it is essential that these initiatives are making a real, genuine impact.

This is why opting to work with an accredited organisation that embodies best practice for climate and sustainable development initiatives, can prove invaluable in ensuring an organisation’s customers can be confident in the integrity of every green investment made.

When it comes to choosing a trusted partner, there are a variety of organisations already out there that are dedicated to identifying sustainable and climate initiatives that are designed to quantify, verify, certify and maximise progress towards the UN’s Paris Climate Agreement and the Global Goals for Sustainable Development. For instance, we partnered with Gold Standard, a recognised climate and sustainability pioneer, to roll out our Green Hedging product. By opting to work with a trusted partner financial organisation, and their customers alike, can rest assured that their work is having maximum impact. What’s more, the business can leverage the relevant insights and expertise to expand and develop future sustainable initiatives.

As we look ahead to 2022, we hope to see more businesses applying a sustainable lens to existing business processes, and in doing so, this movement will increasingly demonstrate how the world of finance can truly become a force for good.

 

Business

The Evolution and Challenges of Crypto Regulation

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CRACKING THE CRYPTO CODE

Cryptocurrency regulations are evolving quickly around the globe with authorities responding to developing risks professed by criminals exploiting the latest payment methods to mask and launder the profits from their crimes.

According to William Je Founder & CEO, Hamilton Investment Management Ltd, this has warranted the introduction of a more stringent level of due diligence by additional bodies to introduce preventative measures.

William Je Founder & CEO, Hamilton Investment Management Ltd explains: “The past ten years has seen several structural changes in Know Your Customer (KYC) and anti-money laundering (AML) regulations in both Europe and across the world. High-profile money laundering cases and the penetration of illegal monies into global markets have caught the attention of regulators.

“As regulators improve their understanding of these criminal practices, AML requirements have also been improved. However, these improvements have been a reactive process.”

To address the challenges of the blockchain ecosystem, the European Union has started to introduce financial regulations that further bolster the regulatory system in order to improve licensing models. Many member states are regulating crypto assets individually, and Germany is leading the way in being the first to regulate.

Je continues: “These national driven regulations clearly point to a future pathway for crypto companies, outlining the requirements for obtaining and maintaining a financial license from the regulator.

“Compliance, however, is to my mind essential as it not only boosts investor confidence but adds a necessary layer of protection to investors.”

As crypto evolves, so have regulatory bodies’ efforts to monitor, address and enforce restrictions. The most prominent is the Financial Action Task Force (FATF), which details guidance and determines best practices in anti-money-laundering practices and combating the financing of terrorism.

FATF Recommendations number 16, better known as the ‘travel rule’, which requires businesses to collect and store the personal data of the originators and the beneficiaries in blockchain transactions, is the most notable.

Je concludes: “What does this mean? In theory, access to this data will enable authorities to have better oversight and enforcement of crypto market regulations. In other words, they’ll know exactly who is doing exactly what.

As we have always argued – transparency is key. We need to regulate crypto as an asset class with efficacy, which necessitates legislation that is applicable specifically to digital assets and does not hinder the market.

The criminal financial trade which arguably encompasses money laundering, illegal weapons sales, human trafficking, is also international. Thus, cracking down on it is, out of necessity, an international effort.

The decentralised nature of blockchain, which runs contrary to the central-server standard we know and use nearly everywhere, presents a formidable challenge here. Rules and regulations for traditional financial institutions are being implemented wholescale into the crypto sector. We believe that this is arguably wrong footed as it ignores the innovation and uniqueness this asset class and its underlying technology entails.

Traditional forms of regulation from the fiat world do not reciprocally apply to every aspect of crypto nor to the fundamental nature of blockchain technology. However well-intentioned they may be, because these imposed regulations are built on an old system, they must be adapted and modified.”

 

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Business

How bug bounty programs can help financial institutions be more secure

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Rodolphe Harand, Managing Director at YesWeHack

 

Financial services have been one of the most heavily targeted industries by cybercriminals for several years. One alarming stat from the Boston Consulting Group found these firms to be 300x as likely as other companies to be targeted by cyberattacks.

Furthermore, the pandemic has led to a significant increase in the number of cyberattacks targeting financial institutions (FIs), with around 74% experiencing a spike in threats linked to COVID-19.

With FIs holding some of the largest collections of sensitive and private data, it’s clear they will remain an attractive target for malicious actors, especially as any data stolen can be used for fraudulent activities. This leads to the reputational damage of the financial entity that was compromised and has a knock-on effect in terms of monetary and reputational damage to affected customers.

For CISOs at FIs, the conundrum faced is how do you protect intellectual and customer data, and ensure accountability and transparency for clients and stakeholders, at a time when the pandemic has created budget constraints. Research from BAE Systems found that last year alone, IT security, cybercrime as well as fraud and risk departments had their budgets cut by a third.

Below we look at how bug bounty programs can help to address these pressing issues.

 

Protecting valuable data

Protecting customer and intellectual data has always been a top priority for FIs. However, as opportunistic cybercriminals have a lot to gain by stealing this valuable data, there is a constant evolution of threats, which means FIs must stay on their toes. By deploying a bug bounty program, FIs can work with ethical hackers that have a wealth of experience and unique skills when it comes to identifying security weaknesses within a FI’s defence, thus helping to implement effective security measures to help prevent data breaches.

Building trust among various stakeholders such as customers, suppliers and investors is critical for achieving business goals. By deploying a bug bounty program, FIs send out a message that they care about protecting the security of the data of those they work with – which in turn can have a cascading effect resulting in better business performance.

 

Improving accountability  

For FIs to win customers and keep them happy, amidst the growing threat of neo banks and customer-centric fintech organisations, speed of innovation is crucial. As such, many FIs have adopted an agile approach to build, test, and release software faster to bring online and mobile banking solutions to market quicker. However, this can create frictions between development and security teams. Security mandates are deemed to be unnecessarily intrusive and a cause of delayed application development and deployment.

Yet, with DevOps teams needing to build and deploy applications faster than ever before, an epidemic of insecure applications has emerged. According to Osterman Research, 81% of developers admit to knowingly releasing vulnerable applications, while research from WhiteSource found 73% of developers are forced to cut corners and sacrifice security over speed.

With developers often not having the time, tools, skills, or motivation to write impeccably secure code, there is an evident need to provide developers with more support when it comes to building applications securely Fortunately, bug bounty programs can provide a “fact-based” financial implication of inherent security flaws within the process. This makes it possible to hold development teams and service providers accountable for creating or delivering insecure products, thus addressing inherent security gaps within the business units and helping to drive continuous improvement.

Moreover, security awareness and education of developments teams can be improved significantly for those developers that are directly involved with the management of vulnerability reports for their bug bounty programs. This is because, the mere fact of exchanging information with ethical hackers, or assimilating the thinking of a potential hacker and having proof of concepts of vulnerability exploitation on their application components, naturally accelerates consideration of security early in the development stage and provides ongoing learning.

 

Get more return on your investment

According to Gartner, 30% of CISOs effectiveness will be directly measured on their ability to create value for the business. When security budgets are challenged, CISOs need to demonstrate business value through initiatives designed to enhance efficiency whilst stretching the dollar.

This is where bug bounties can help tremendously. Compared to conventional penetration testing, bug bounty offers a fast, complete, and measurable return on your security investment, with businesses only paying out for successful discovery of vulnerabilities. Equally, businesses get access to hundreds of ethical hackers that can test their programs, each with their own unique skillsets as opposed to only one skilled researcher testing the network. This results-driven model ensures you pay for the vulnerabilities that pose a threat to your organisation and not for the time or effort it took to find them.

Bug bounty programs also deliver rapid vulnerability discovery across multiple attack surfaces. With this approach, organisations receive prioritised vulnerabilities and real-time remediation advice throughout the process to accelerate the discovery of, and solution to vulnerabilities.

Another appeal of bug bounties is that due to the continuous nature of testing, more vulnerabilities are found over time as opposed to pen-testing. This is key to financial institutions that require agility to keep up with the continuous roll-out and updates of applications.

 

The cornerstone to a successful security programme

The risk posed to financial institutions by cyber threats will only continue, as evidenced by the number of data breaches seen in recent times. The COVID-19 pandemic has only exacerbated these risks, especially with almost all FIs having needed to shift to a remote working environment – which has only widened the attack landscape.

For FIs, a bug bounty program should be considered a fundamental cornerstone of any security strategy, with it being a modern-day cybersecurity solution that is well-equipped to tackle the immediate security challenges they face. In doing so, FIs will not only prove to customers and stakeholders their commitment to data protection and security but this will also be help them to avoid the monetary damages that could be imposed by regulators if a breach was to take place.

 

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