EU regulators should form either a new, regional agency, or a continent-wide network of bodies, tasked with managing authentication measures to guard against fraud, according to the European Association of Corporate Treasurers (EACT).
In its response to a European Commission consultation on the EU’s regulatory handling of fintech, the EACT writes: “In order to strengthen cybersecurity and prevent fraud, it is essential to authenticate users and partners.
“For instance, frauds have been committed when hackers impersonate legitimate business partners, and request change of business partners’ details – such as bank account or contact information.”
With that in mind, it argues: “A pan-European, centralised service – or a network of interconnected, national services – providing secure identification would considerably reduce the risk of malicious impersonation and fraud.”
The EACT points out: “Today, this is in practice done by large, high-tech companies – for example, internet service providers that provide digital certificates.”
However, it notes, “these organisations do not guarantee security standards, transparency or privacy rights”.
As such, it adds: “There is a need for international cooperation at state level to address this key issue. Otherwise, multiple standards and practices will lead to fragmentation of solutions and the diversity will leave loopholes to fraudsters.
“Such a fundamental topic as identity should not be left to private organisations, but should be dealt with by states. The current status of digital identity is comparable to a situation where passports or identity cards would be issued by private organisations.”
The EACT also tackles a question on the hot-topic field of blockchain – ever more commonly known in the financial sector as distributed ledger technology (DLT).
Providing an overview of how DLT is slotting into the treasury function – and what types of advantages it could provide as it beds in further – the organisation writes: “Corporate treasurers currently have a certain lack of visibility in terms of the practical uses that DLT will offer them, not only with regard to access to finance, but more widely.
“The most apparent applications would seem to be in the area of payments, loan syndication, KYC – or, for instance, in trade finance and also for improving the ownership transfer for receivables financing.”
Furthermore, it notes, “DLT could offer easier and faster settlement of assets (from T+3 to intraday for certain bonds) and therefore simplify the services offered by custodians.”
In terms of potential sticking points with DLT, the EACT says that it sees standardisation as the main challenge.
“We are seeing plenty of initiatives working with this new technology,” it writes, “but it is not possible to find any proposals that would ensure that their technology will be accepted and used everywhere.”