Welcome to the Web3 ID Coalition’s Member Spotlight Series, where we highlight the groundbreaking work of our current members!
Today, we’re sharing the story of FinClusive, an organization dedicated to modernizing financial crimes compliance and client credentialing in a new era of financial services. FinClusive offers groundbreaking tools that help providers know their customers and counterparties in ways that empower them to ensure their activities are secure, transparent, and compliant.
We recently had a wide-ranging conversation with Amit Sharma, FinClusive Founder and CEO, about financial crimes compliance (FCC) and its relationship to digital identity and global financial equity and inclusion.
1. How do you explain FinClusive in simple terms?
FinClusive is a regulatory compliance company that provides a full stack of anti-money laundering and digital identification services to both traditional and non-traditional financial institutions, including virtual asset, decentralized finance (DeFi) and web3 services. Like our name suggests, financial inclusion is our main goal — we aim to empower businesses to truly know their customer and bring secure, compliance-centered banking to the billions of de-risked, underbanked, unbanked, or badly banked individuals and entities around the world. Financial innovation outside mainstream banking is driving tremendous financially-inclusive opportunities. These services need to ensure comprehensive and modernized compliance to meet their global regulatory needs, as well as to ensure secure collaboration with traditional institutions.
2. How did you get started in the FCC space? Share your back story.
My background has primarily been in international and economic development, having worked in Latin America and Asia with public and private sector development agencies, micro-finance, and other areas. I was very interested in how we could “export” the power of U.S. and global capital to enable emerging and frontier markets to advance their collective economic security. I realized that even in the U.S., we had many individuals, households, and companies equally challenged to build sustainable economic resilience due to many barriers faced to engage basic banking and financial services that were both secure and non-exploitative.
Before starting FinClusive, I worked at the U.S. Department of the Treasury, first in the Office of Terrorism and Financial Intelligence (TFI) developing and implementing tools to combat transnational threats and financial crime – helping to grow the U.S. and international regulatory and best practices frameworks related to anti-money laundering/counter-terrorist financing (AML/CTF) strategies, and the use of financial and regulatory enforcement tools such as economic sanctions, combating proliferation-financing and the illicit activities of rogue states and actors. We worked tirelessly with private and public sector counterparties around the world in the development and establishment of global standards related to AML/CTF and financial crimes compliance (FCC).
I then went on to work with Mitsubishi UFJ Securities, where I learned firsthand how global banking infrastructure continued to be driven on outdated and legacy technologies and procedures, while at the same time we started seeing significant innovations in banking, payments, fintech, and blockchain, with tremendous applications to risk/compliance and regulatory technology. I became interested in where and how those new technologies could be used to bring financial services to the masses by embedding essential – and modernized – tools to manage risk, governance, and compliance. Not simply to protect the financial system from exploitation by bad actors, but to better enable secure and sustainable access for legitimate parties, especially those who have been “de-risked” or otherwise (mis)perceived as high-compliance risk.
While AML/CTF measures are still critical for our national security and the safety of our personal and economic data, their growth has forced many traditional financial institutions to exclude a lot of people around the world from much-needed banking and financial services due to their perceived risk. FinClusive was founded with the goal of combining the great innovations in banking and finance today – including within decentralized, peer-to-peer and web-native platforms – with these AML/CTF compliance measures in a way that now includes people that would otherwise have been wrongfully deemed too high-risk.
3. Your FinClusiveID (FinCID) has major implications for verifiable digital identification in the financial space. How does this product work, and how can it help promote equitable financial access for communities and countries that are traditionally underserved in this space?
Our FinClusive ID, or FinCID is a sanctioned ID that is issued to individuals and entities that come through our KYC/KYB processes. It allows our customers to verify and validate clients near instantaneously, eliminating redundant KYC/KYB activities which also often requires unnecessary disclosure of sensitive personal/entity identifying information. Essentially, it provides an efficient and secure way to build digital attestation through “verifiable credentials” backed by a client’s continually monitored KYC/KYB data, and ensure they have the appropriate level of background checks while protecting privacy. Financial services providers–traditional and emerging/alternative alike–can verify and validate clients across their platforms and network of service providers as KYC/KYB “passport,” and FinClusive can attach numerous attributes these attestations can cover, including their identity bona fides (name, liveness, biometric, gov issued ID), background due diligence (sanctions status, source of wealth, beneficial owners [if a legal entity] and affiliates), and where necessary, their finance/banking particulars (banking or exchange account, wallet addresses, etc.). FinClusive goes further for legal entities by enabling the issuance of legal entity identifiers (LEIs) to bring further validity to ensure financial intermediaries can be sure they are transacting for legitimate and fully diligent entities. FinClusive is actually one of the only certified U.S.-based issuers and validators of legal entity identifiers (LEIs) for businesses.
Identity is central to knowing your customer, and is one of the key deciding factors used by financial service providers when reaching their constituents and determining their level of “risk.” There are nearly a billion people around the world who don’t have access to formal identification, and even more who use less secure or non-digital ID methods, which don’t comply with modern regulatory standards and essentially prevent people from accessing critical financial and banking services. By providing a one-stop-shop for seamless, secure, and automated ways to verify identities, we help create a global-standard utility for client and transaction verification across networks, payment rails, and financial services providers that make it much easier for businesses and banks to reach the millions of previously under-served individuals and entities – all while still remaining compliant and enabling essential privacy protections. In an increasingly digitally engaged world, we are continually forced to turn over our personal identity and economic information. We have the technology to make both secure and private transactions work without compromising identity privacy, while enabling financial services providers to securely and efficiently verify and validate their customers and counterparties.
4. In your mind, what is the most pressing issue facing the development and proliferation of web3 identities
The financial services landscape is rapidly evolving, and there’s a significant growth in decentralized alternative financial service providers. But there remains a gap between these innovations in the financial technology and Web3 space vs the traditional banking sector. We are now seeing more traditional bank and nonbank financial institutions explore these new technologies to upgrade their own KYC/KYB and customer information programs. We’ve built our compliance-as-a-service (CaaS) platform, which includes our sanctioned digital ID and verifiable credential services to enable fintech and virtual asset companies to effectively partner with traditional banking institutions, which is still necessary if you want to access basic accounts and fiat payments through what continues to be the largest payment rails in the world. As alternative, peer-to-peer, blockchain/DeFi and web-native services grow, embedding these modernized KYC/KYB and digitally variable credentials as part of the AML/FCC process will not only increase adoption, but extend our efforts to maintain the integrity of an increasingly global and digitally interconnected financial ecosystem.
AML and regulatory compliance standards that all financial institutions have to comply with are very piecemeal, and we still need proper modernized identity management systems that can provide verifiable credentials, and personal and entity identifiers (e.g. LEIs) that are backed by compliance data. Additionally, the rules governing KYC/KYB and regulatory compliance measures still differ country-to-country, demonstrating the need for standardization in an increasingly modernized and connected world. While FinClusive works towards making this validation process safe and efficient, it’s still not as widely used, and it makes institutions reluctant to engage with modern identity verification methods that include the ability for individuals to “own” their own data–which is not current practice within regulated financial intermediation that lacks standardized KYC/KYB approaches and identity management systems.
In addition, crypto and Web3 have had a tumultuous past year, and public sentiment is mixed. The lack of widespread public support can be another challenge towards the widespread adoption of Web3 financial services–and the application of KYC/KYB-backed, digitally-issued verifiable identity credentials. As such, we work hard to showcase these applications being used in current Web2 as well as in Web3 environments.
5. What is one project you are currently working on that excites you the most?
We have so many exciting partnerships in the works for the next few months. Some of these include:
- We are working to enable interoperability of KYC/KYB processes for unhosted wallet applications that can then be permissioned/shared with regulated banks and non-bank financial institutions for instant verification and validation. We have initiated proof of concepts with several noncustodial wallet applications, innovative banks and exchanges to leverage our platform to create shareable KYC/KYB identity credentials.
- We have initiated projects to support the embedding of KYC/KYB and DiDs to wallets for individuals and small businesses operating in frontier and emerging markets (including those subject to U.S. sanctions policies) to securely connect them to financial resources and enable them to transact and access financial services.
- With several innovative banks, fintechs, wallet providers, and exchanges, we are working to enable our CaaS platform to create an interoperable KYC/KYB and credential process that will seamlessly enable cross-compliance verification between these diverse providers.
- We are working to expose our CaaS platform and KYC/KYB credentials to various blockchain networks that can enable KYC-passporting for clients interacting within their networks, providinginstant KYC and secure access across their network of service providers.
6. What can we expect from FinClusive in the next six months? Where will you be in three years?
We have several goals we believe are attainable in the next six months:
- Providing concrete examples noted above to U.S. and global regulators, showcasing these modernized KYC/KYB and identity credentials that have direct application for decentralized financial services and Web3.
- Contributing to current legislation and proposed policies for AML/FCC modernization within the digital asset sector. We expect further adoption of our global Rulebook as a best practices standard for AML/FCC application in DeFi/Web3.
- Encouraging more traditional banks to adopt these modernized tools to create greater efficiencies and bring down costs of AML/FCC compliance, showcasing how these tools turn compliance from a back-office, fixed-cost center to a value-added, privacy-enhancing, and interoperable business intelligence function that drives more customers into the global financial system
In three years, we look to:
- Enable more Web3/DeFi and alternative financial services with the essential AML/FCC tooling required to keep their systems and customers safe.
- Drive these modernized compliance tools–including KYC/KYB and digID credentials–as an “embedded” part of modern financial services, and not merely a “bolt-on” due to regulatory or enforcement pressures
- Create interoperability between traditional and web-based engagement that can enable equitable and secure access to financial service anywhere in the world–digitally–in a compliant way. Andnd connect global needs to essential banking services in the U.S.–extending the power and promise of the U.S. capital markets and an open and inviting environment to innovate in financial services.
- Provide a global standards-based set of practices – the Rulebook – that provides consistency of approach in AML/FCC across jurisdictions
7. What do you hope to achieve as a member of the Web3 ID Coalition?
I’m looking forward to making tangible progress towards policies driving Web3 identification services and ultimately driving forward financial inclusion and empowerment. Ideally, we will be able to bring “standardization” within the digital identity space. We’ll do this by leveraging applications and learnings in the financial services domain – bank secrecy, KYC/KYB, AML – to other sectors in which modernized digital identity and verifiable credentials can create greater and more equitable access channels for the world’s underserved to essential products and services, while empowering individuals to the fundamental rights and ownership of their personal data.
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Many thanks to Amit for sharing his thoughts on the future state of financial verification and compliance! Be sure to check out this space in the coming months for more Member Spotlights, as we’ll continue to profile innovative organizations dedicated to advocating for public policy that paves the way for secure, portable, and trusted digital identities.
