In the famous Cypriot folk tale, “Spanos and the Forty Dragons”, a young man sets out to prove his bravery to the people of his village by killing forty dragons who cut off the village’s water supply. Using little more than his wits, Spanos (which, according to the tale, means “the one who cannot grow a beard nor moustache”) tricks the dragons into believing he is stronger than they are, a better hunter, and even protected by a magic ointment. Wishing to become like him, the dragons allow Spanos to pour boiling-hot resin over them, killing them on the spot. Spanos later diverts the stream back to his village, and returns triumphant to his home.

This kind of tale, of course, isn’t unique in the cultural landscape of the world. Many cultures have similar stories of persons who “punch above their weight”, from the Biblical David and Goliath to Julia Donaldson’s modern-day “The Gruffalo”. The reason it came to my mind was a discussion I had several days ago with a colleague, ahead of my participation in the iFX EXPO in Cyprus next week. My colleague, who was busy preparing for the trip to the Mediterranean island himself, wondered aloud what will it take for Cyprus to become, as he put it, the “Singapore of the Mediterranean”.

Busy with calls and emails, our conversation on the matter was short and did not include any citing of Cypriot folklore. But several days later, as I projected a re-run of the conversation in my midnight-mind (which, for some

Remonda Kirketerp-Møller, Founder and CEO, muinmos

reason, enjoys tying the loose ends of long-ended discussions), I heard it say: “Be like Spanos”. Meaning, if the small island-nation wants to slay much larger, great-in-numbers financial dragons, it has to take a similar approach to the one Spanos took, and act as if it’s bigger and stronger than they are, turning its small size from a disadvantage to an advantage. And it all, of course, comes back to client onboarding. I’ll explain.

The Competitive Regulator and the FI Dilemma

Bigger is better. Bigger means more clients, more opportunities, and therefore more profit. Before the EU existed, a German license was a lot more desired than a Cypriot one, as it gave the FI access to a much larger, richer market.

However, in the EU, it no longer really matters if the FI is licensed in Germany or Cyprus, as a license in any Member State virtually opens the door to the entire European Market. Or, in other words, the EU has levelled the playing field for the small Member States, and they can now compete with the dragons of the continent, eye-to-eye.

This is a good example to how the European Market does not just drop national borders between the Member States, turning them into one large economical block; but also turns the European Market itself into, well, a market – in which nations, including their national agencies, compete one with the other, as one would do in any market.

This competition, of course, can create an incentive to ease regulation in order to draw FIs to a certain jurisdiction, and create a conflict of interests between the regulators’ role as a protector of investors, and the desire to attract more business (what I call a conflict of interest between the near future and the far future, as a too-fast rise in FIs in an under-regulated market can bring, in the long run, to a loss of investor trust in the market, and long-lasting damage to all its participants).

If this inherent conflict sounds familiar, it is because it is known to any FI. Traditionally, an FI could either onboard a client quickly, easily and with a pleasant customer experience; or maintain a high level of compliance, on the expense of onboarding speed and customer experience.

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During the years, many FIs have resolved this dilemma one way or the other. Some have chosen to gamble on the compliance side, dropping many onboarding requirements and hoping for the best. Others are very selective in the jurisdictions they onboard from, limiting their target crowd in order to assure high levels of compliance even where they have an EU passport to freely onboard in certain jurisdictions.

Only lately, with the emergence of AI and other technological advances, another solution emerged, one that improves both customer experience and compliance level. I am talking of course of my own company’s system, which has automated the entirety of their onboarding process, from automated client categorisation and suitability and appropriateness determinations to every kind of KYC/AML check imaginable, while remaining fully compliant in every jurisdiction.

The (small) Size Advantage

And here we return to Spanos. The EU, we saw, levelled the playing field between the small and the large. Technology tips the scale in favour of the small regulators. Why? For this, we have to go back again to our (Muinmos’) client onboarding platform, and to an important lesson we’ve learnt over the past years, and it is – the smaller the FI, the faster it is to adopt and successfully integrate the platform. Thus, the smaller the FI, the better it is in improving its client onboarding and compliance (that is not to say the larger organisations do not successfully adopt our product – it’s just that they usually do it in their own time).

The reasons for that are many: from the tendency of large banks to have slower decision-making processes, to the larger number of users that need to be trained, to the fact that smaller FIs usually don’t have change-inhibiting legacy systems.

The same logic, I believe, applies to regulators as well. For example, CySEC, according to Wikipedia, has 103 employees (2017 data). BaFIN, on the contrary, according to the same source, has 2,535 (as to December 2014). If CySEC, therefore, wants to change its modus operandi, incorporate a new software solution or digitize its databases, it can probably do so a lot faster than the 25-times larger BaFIN.

This is a huge advantage in a world where technology is key in both making processes faster and more compliant; and can not only give regulators from smaller markets like CySEC a competitive advantage in the short-term race for the FIs’ choice of jurisdiction, but also keep the market well regulated and healthy for the long run.

A Few More Words

On a final note I’ll add, I was happy to read the words of CySEC’s new Chairman, Dr George Theocharides, upon his recent appointment a fortnight ago, that his “goal is to ensure that CySEC continues to act as a protective shield for investors, and also leads the way for the sector’s healthy growth. Financial technologies are developing at a rapid pace and I will work towards preserving the high standards set by CySEC over previous years, while also ensuring it can be flexible and effective in facing the challenges that lie ahead”. I believe these three components – investor protection, healthy growth and technology go hand-in-hand, and I wish the new Chairman all the best in successfully turning CySEC into one of the continent’s dragons.


Remonda Kirketerp-Moller, Founder and CEO Muinmos


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