Have you positioned your fintech for AML compliance?

Gary W. Lindsey, Jacob M. Rivkin
Have you positioned your fintech for AML compliance?

A proactive fintech compliance strategy can help clear out obstacles to achieving further growth.

Growth is great, but not when it outpaces compliance.

Whether a fintech is new to the scene or has several years under its belt, business ambition can overshadow protections. Compliance is one such frequently overlooked area.

Fintech compliance might not be seen as a top investment need, especially in the early stages of growth and development. But having weak compliance capabilities can lead to consequences over time, including:

  • Delay of new services and ventures
  • Penalties and fines
  • Increased regulatory scrutiny
  • Reputational risks
  • Greater difficulty acquiring investments

For the best results, a fintech’s strategy should include anti-money laundering (AML) compliance from square one. Having a plan that can easily anticipate and accommodate future expansion will help prevent setbacks as the organization’s team innovates.

A fintech should consider the following questions when it comes to AML compliance and testing.

It’s time to start thinking ahead for fintech compliance. Contact a Crowe specialist.

What is the balance of resources in your fintech’s compliance program?

What is the balance of resources in your fintech’s compliance program?

Fintechs generally can divide their AML compliance resources into three categories:

  • People, or the minds that interpret data and drive action
  • Systems and models, or the technology that supports compliance activities
  • Training and procedures, or the guidance that standardizes processes and teaches people to be more effective

It is ideal to have a strong balance across all three categories, but not every organization is able to meet this goal. Knowing in which areas a program might need assistance can help fill in gaps as organizations plan and allocate resources. If the organization lacks an organized compliance team or staff with adequate AML compliance experience, for example, it might be time to hire.

How is your fintech licensed?

How is your fintech licensed?

Fintechs that are subject to Bank Secrecy Act (BSA) and AML laws must comply with numerous requirements and standards. If a fintech is not directly subject to BSA and AML requirements, it might still have compliance obligations through other partners in its ecosystem, including banking partners. It is important for the fintech to connect with its banking partners to ensure proper AML compliance coverage.

Fintechs also might need to consider where they are licensed geographically compared to their goals. If they have ambitions for global growth, they should consider the compliance-related ramifications of those ambitions now.

Is your fintech prepared to meet the expectations of a banking partner?

Partnering with a bank can be an efficient and effective means to access the banking system and transmit funds. However, you must still show evidence that you have created and maintain an effective AML program.

Many banks are requesting more information and oversight from fintech partners as regulatory scrutiny increases. They might want to know more about how fintechs manage AML compliance in key areas such as customer identification and verification, sanctions screening, transaction monitoring, and managing model risk.

Banks might also ask for more detailed and expansive coverage and information related to their fintech partner’s independent testing. A bank might request an AML independent testing report, ask for evidence of remediation of independent testing findings, or present a preferred list of approved independent testing providers.

Fintechs might need to consider how forthcoming to be with information. Is the organization willing to hand over even more information than needed to satisfy a bank’s requirements, or does it only wish to provide the exact items that are requested? Open and candid conversations with banking partners are paramount to successful relationships.

Do AML compliance requirements factor into your business tactics?

The information gathered for proving a fintech’s compliance doesn’t have to just sit there after it’s provided. That data can fuel additional efforts throughout the business.

Data on customers and services – even if the organization didn’t have intentions of compiling it outside of compliance – can still offer valuable insights into better targeting your audience, adjusting services, and driving new initiatives.

We can help your fintech establish long-term AML compliance stability.

We can help your fintech establish long-term AML compliance stability.

Crowe independent testing specialists can help fintechs assess the effectiveness of their current AML compliance programs. We can also help them organize a strategy to strengthen capabilities based on current needs and future ambitions.

Our independent testing services follow a five-step process:

  1. Understand. We discuss your business model and what your banking partner or regulator might expect.
  2. Develop. We test a plan tailored to your fintech, its needs, and AML risks.
  3. Execute. Our team can work with your people to assess programs for proper procedures and effective results.
  4. Communicate. We discuss the results of the testing and recommended next steps.
  5. Report. We compile an accurate analysis based on the level of detail you need. This might also include management action or response plans.

Our independent testing and insights can help you demonstrate that your fintech is an asset to a bank partner and strengthen your foundation in preparation for taking on new projects – all with less risk and a lower chance of running into costly setbacks.

Reach out and take the next step toward AML compliance peace of mind.

Gary Lindsey - social
Gary W. Lindsey
Principal, Financial Services Consulting
Image - Jacob Rivkin at Crowe.
Jacob M. Rivkin
Principal, Financial Services Consulting