- Fintech and Money Laundering Pain Points
- Why Fintech AML Compliance is Important
- AML in Fintech-Associated Risk and Challenges
- How to Select an Effective Fintech AML Solution
Anti-money laundering, AML in fintech has several risk mitigation requirements, and fintech AML compliance holds equal gravity as compliance in conventional financial institutions. Fintech is one of the fastest-growing industries that has been rising at a meteoric rate in terms of technology, usability, and revenues.
The word ‘fintech’ is extremely broad, and its scope is still unknown to many. Fintech chiefly includes mobile banking, digital banking, crypto trading platform, decentralized finance (DeFi), payment apps, mobile wallets, lending apps, crowdfunding, insurance, and trading apps.
Be it e-wallet, lending, trading, etc., all have one common feature, i.e., they deal with user onboarding and transaction processing in volumes. Hence, financial technology or fintech businesses have absolutely no escape from anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations.
AML in fintech is also essential as financial technology faces huge competition from traditional financial services, and there is constant pressure on fintech businesses to follow AML-CFT guidelines, overcoming all the challenges and frictions coming in the way of achieving optimum fintech AML compliance.
Fintech and Money Laundering Pain Points
Modern-day financial miscreants always look for platforms with high transaction volumes and mass payment processing options. Hence, fintech is the most convenient platform for criminals, and more and more money launderers today prefer laundering illicitly gained money via transaction aggregation, also known as transaction laundering.
Fintech money laundering also involves channelizing money by misusing e-commerce platforms for fake payments. For instance, many fintech and money laundering methods are carried out by camouflaging banned products or services beneath a front site or a legitimate-looking site. Fintech and money laundering nuisances thus go hand in hand. At times, the process is extremely difficult for the authorities to capture to bring the perpetrators of the crime to justice.
Why Fintech AML Compliance is Important
Financial technology has achieved its new zenith with advancement and sophistication in technology, user experience, and global internet capacity. However, this comes alongside an ongoing risk of identity theft, financial fraud, and terrorism threat. The fact is that innumerable financial technologies are sprouting at unprecedented levels, and since fintech is mainly technology-based, they face much pressure to remain fraud-proof. AML in fintech is an emerging regulation, and regtech firms are offering special fintech AML solutions for those startups that find it challenging to cope with fintech money laundering.
AML in Fintech-Associated Risk and Challenges
The financial technology methods are extremely fast and huge in capacity, making money launderers exploit the fintech platforms while keeping pace with its technological advancement. For instance, fintech payments are fully remote over the internet. The financial miscreants leverage the virtual nature of the payments, take advantage of its anonymity, and conceal their identities to perform high-level frauds linked to identity thefts.
Secondly, speed has been directly linked to user experience in fintech. However, fraudsters often take advantage of this feature by exchanging large transactions across domestic and international accounts, even before the authorities can respond to the alerts and initiate an investigation. Experienced and sophisticated fraudsters get away with huge illicit money transfers in a jiffy, even before the risk team can determine whether they should file a suspicious report to the concerned state authority.
Third-party payment systems have spread sporadically in the form of apps across phones, tablets, and computers, paving the way to money muling, smurfing, and structuring illicit money to the point that it is untraceable. It is extremely important for the fintech AML compliance team to monitor and understand the crime pattern constantly and scrutinize the payment vulnerabilities to outpace the AML fintech financial crimes.
How to Select an Effective Fintech AML Solution
Fintech is fast growing and equally competitive; fintech payments are preferable to those users and merchants looking for speedy transactions and faster receivables. Fintech payment platforms, be it digital banking, crypto trading, payment app, or e-wallets – mainly all process user payments in batches to speed up the account settlements. Money launderers take advantage of this process and exploit the blindspots in fintech AML compliance, making the industry extremely vulnerable to aggregating batch transactions.
AML fintech noncompliance could cost businesses huge financial penalties or even bring them to the brink of permanent closure. IDMERIT offers IDMaml, a world-class fintech AML solution with end-to-end fintech AML compliance functionality. IDMaml extends individual and business identity verifications; sanctions, PEP, adverse media screening; and transaction monitoring all on one platform.
IDMERIT’s custom-made fintech and AML solution is an all-in-one payment risk mitigation platform for companies requiring bulk payment batch processing daily. For companies seeking an optimum fintech AML solution, contact IDMERIT AML fintech connoisseur and understand the complete nitty-gritty of fintech and money laundering risk mitigation procedures today.