Phil King is/was a backer of KYC provider Identitii. Adds to the intrigue. The article pasted below is from todays AFR.
How a fintech tried to solve Westpac's AUSTRAC mess.
The list of organisations knocking on the doors of Westpac to help with its AUSTRAC anti-money laundering crisis includes consultants, lawyers, accountants, PR firms, software companies, compliance specialists and head hunters.
But there is one company that stands out for the determination it has shown over the past two years in trying to help Westpac improve the quality of its compliance with AUSTRAC's strict reporting requirements.Martin Rogers argued multiple times in favour of Westpac using the Identitii software.
Sydney-based fintech Identitii has used its networks in business, finance and regulation to arrange multiple meetings with Westpac chairman Lindsay Maxsted, several meetings with AUSTRAC officials and a meeting with an adviser to Home Affairs Minister Peter Dutton.The Identitii software can be laid over the top of a bank's legacy payments systems and be used to collect, store and share transaction data with AUSTRAC.
The company is backed by some of the wealthiest and best-connected people in business, including UBS banker Matthew Grounds, Latitude Financial chairman Mike Tilley and high-profile fund managers David Paradice and Phil King.
Martin Rogers, a major shareholder in Identitii and chief investment officer of KTM Ventures, first approached Maxsted in July 2017 to argue in favour of Westpac installing Identitii's software.Rogers came to the meeting with Maxsted armed with a compelling case for action thanks to data compiled during Westpac's participation in a trial of the Identitii software. The trial included Macquarie Bank, Standard Chartered, JPMorgan, Rabobank and Barclays.The trial was designed to show how Identitii could help banks enhance payments by attaching to each payment information required to clear remittances such as “purpose of payment” or know-your-customer information.The Identitii software attaches the data directly to a standard payment message using a secure token embedded into the message. This means that banks can exchange detailed information using Identitii’s platform without making any changes to their legacy payment systems.False positivesFollowing Westpac's participation in the trial, Sybil Crasto, the bank's head of liquidity product and solutions, said in a press release: “We have certainly had to increase headcount with regards to managing correspondent relationships, which also comes with a degree of operational risk – and, of course, ongoing capability and capacity implications.”The exact details of what Identitii found during Westpac's participation in its trial are confidential. But Chanticleer understands there were single-digit false positives generated through Westpac's use of the SWIFT payments network.A false positive occurs when a payment made between two banks fails to proceed because the SWIFT message contains insufficient or incorrect information. These mistakes can be very costly.Banks typically pass on most of the cost of errors to all customers conducting international transfers over SWIFT: the cost of error processing means the typical transaction cost for any transfer is about $US30 ($44), even though Swift charges a bank only US5¢.When Rogers highlighted to Maxsted the high level of false positives in Westpac's SWIFT payments, Maxsted acknowledged awareness of the issue but nothing came of the meeting.In September 2018 – more than a year later – Rogers renewed contact with Maxsted and once again pushed for Westpac to examine the adoption of Identitii's software. This meeting occurred about a month before Identitii listed on the ASX.Once again nothing came of the meeting.RELATEDWestpac's failures: how did they happen?Westpac's disclosures of problems with AUSTRAC in the notes to its financial statements prompted Identitii to step up its efforts to have big Australian banks, and possibly AUSTRAC, adopt its software.With this in mind, it arranged a meeting in Brisbane in July this year with an adviser to Dutton, who is the minister responsible for AUSTRAC. The meeting was attended by Identitii chief executive Nick Armstrong and chief product officer Ben Buckingham.The two argued in favour of AUSTRAC adopting the software. The company had previously put its case to AUSTRAC officials through a consultant and former detective superintendent of the Australian Federal Police, Nicholas McTaggart.The meeting ended with Dutton's representative saying Home Affairs should find out if AUSTRAC had the budget to implement the Identitii software. It is understood AUSTRAC does not endorse the software of any commercial vendor.HSBC is the only bank to have adopted the Identitii software to attach more data to some payment instructions sent over the SWIFT network. It is believed this is the first deployment of a live blockchain in a global bank to manage compliance.Rogers was a director of Identitii until October this year. He did not seek re-election to the board. About a week before the annual meeting, the board of Identitii said it had become aware of a destabilising influence to remove Mike Aston as independent non-executive chairman of the company.RELATEDFintechs have much to learn from Westpac scandalAston survived the AGM and remains chairman, although 44 per cent of shareholders voted against him. Since listing on the ASX at 75¢ a share, Identitii shares have fallen to 33.5¢.If Westpac had gone ahead with a contract to use Identitii's software, it probably would have cost the bank $20 million. It would have had benefits beyond that because it would have shown AUSTRAC the bank was being proactive in improving its anti-money laundering protections.This week, the bank said it would spend about $80 million as part of an AUSTRAC response plan that included closing the LitePay payment channel, commissioning an independent expert, spending $25 million on improved data sharing and $34 million over three to six years on programs to raise awareness and prevent child exploitation.UBS banking analyst Jon Mott said on Wednesday he believed Westpac would need to spend “several hundred million dollars” to fix its anti-money laundering issues.
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