Reputation management for fintech within Islamic finance

Lawrence Oliver is the Director and Deputy CEO of the DDCAP GroupTM, and Ian Bernard is the Group’s Head of Compliance.

In an ever-shrinking world where media runs 24 hours a day, seven days a week, reputation has become an even more important cornerstone of business, perhaps nowhere more so than in the rapidly developing Fintech sector that is and will increasingly underpin business activity within the Islamic finance industry. There is no clearer sign that reputational risk is becoming more significant than the recently published Wolfsberg Group guidance on Negative News Screening and how it has become a critical tool for client on-boarding and due diligence processes. Negative news screening applies a range of public information, data, and analysis to help determine the risk profile of a customer and to better understand, and manage, the financial crime and other reputational risks posed by a business relationship.

There has been an elevation in recent years in the extent of scrutiny of clients, service providers and business partners to ensure that, through business engagement, these third parties do not pose any undue reputational risk to financial market institutions, who have developed a heightened sensitivity to this type of risk.

A negative Google search does not always provide the necessary comfort - the dog that doesn’t bark can raise as much concern as the one that is making the noise. Fintech firms can address reputational risk and, for newer entrants, “lack of reputation” risk in several ways. Emerging firms might consider partnering with long established firms that can provide layers of professionalism, robust and tested processes and years of industry experience that cannot be hard coded. DDCAP GroupTM is one of the longest operating and most well- respected industry providers to the Islamic finance industry and with our ETHOS AFPTM platform we created a bridge that crosses the divide between traditional industry service providers and Fintech.

In recent years DDCAP has found an increased demand for our services from emerging Fintech firms and our experience shows that these partnerships can be rewarding on many levels. As our partners succeed, so do we and, as they build their individual businesses, we can offer them not only the benefit of DDCAP’s technology- based services and systems solutions but numerous others, that are available through our own partner integrations. As well as bringing automated efficiency to our clients, our partnerships are rooted in our commitment to ensuring that the best practice and governance protocols embedded within our services is available to them, too.

In the last few years, the world has had an awakening to the ESG agenda and, consequently, conversations have become more active and urgent around how businesses can intervene to ameliorate a growing number of issues, particularly in relation to the ‘G’ (governance). Again, such considerations have been central to building and developing our automated platform, ETHOS AFPTM, especially in ensuring sustainability of our supply chain and the integrity of our commodity inventory oversight and allocation disciplines. Emerging firms can leverage their own ability to respond decisively and swiftly to these issues by partnering with appropriately validated ESG focused initiatives, whose services and actions align with their individual Shariah and responsible practices and can be shared with other participant firms practising within our wider industry to create capacity and scale.

As an example of how valuable these partnerships can be, DDCAP’s engagement with newer Fintech operating across our global network has refocused and heightened our own awareness of the markets and cultures in which we work, as well as the laws and regulations to which those firms and we are obliged to adhere. In turn our relationships have helped us to better understand and serve those markets by further developing our automated governance protocols and risk mitigants in response.