FinTech: Importance of Anti-Money Laundering

The Quintessential Technology Source for Corporate Financial Professionals

FinTech: Importance of Anti-Money Laundering

By Sarah Dawson, CFO Tech Outlook | Wednesday, February 03, 2021

In FinTech, money laundering is appealing to suspects because of the rise in the pace of commencement of transfers in these networks, the unrestricted movement of money, and private accounts' transaction making money laundering simpler for criminals.

FREMONT, CA: Financial technology is employed to develop and simplify the use of emerging technologies for financial services. Finance Technology (FinTech) seeks to compete with the conventional financial services approach because technology has been developed and traditional techniques are inadequate, so the financial industry needs FinTech and its solutions.

FinTech has developed the finance industry leveraging technology such as mobile banking, mobile transfers, blockchain, and bitcoin. FinTech must comply with the legislation in the same manner as conventional banks. These regulations are Anti-Money Laundering (AML) Regulations. Both financial sectors are at risk of financial fraud, so FinTech, like other economic sectors, must comply with regulators' AML obligations. While these rules are usually different from country to country, there are also FinTech Regulations worldwide that need to be followed. Detailed information on AML for FinTech can be found in the rest of our report.

Anti-Money Laundering Significance for FinTech

With the advent of technology, financial crimes have also grown. Regulators have some financial responsibilities to reduce the possibility of financial fraud. In particular, since the 2008 financial crisis, authorities have made some arrangements to protect financial institutions and clients, including anti-money laundering laws. Like other financial sectors, FinTech may face crimes such as money laundering if it does not comply with these requirements. Regulators may also enforce severe penalties, such as fines and disciplinary action. Money laundering of FinTech firms triggers serious loss of credibility, resulting in unpleasant repercussions.

On the other hand, there is a critical aspect that should be considered: conventional approaches are not appropriate for FinTech companies to conform with AML legislation, so FinTech companies should choose AML-compatible technological solutions.

How High is the Possibility of Money Laundering for FinTech?

FinTech systems in the finance sector have undeniably offered comfort to industry and consumers, and FinTech is growing and expanding regularly. As Fintech continues to expand, concerns about money laundering (AML) are also developing. In FinTech, money laundering is appealing to suspects because of the rise in the pace of commencement of transfers in these networks, the unrestricted movement of money, and private accounts' transaction making money laundering simpler for criminals. With the rise in digital money distribution, criminals are continuing their money-laundering operations in this direction. The fact that electronic anti-money laundering (transaction laundering) has begun to replace conventional anti-money laundering initiatives has also started. In this scenario, it indicates that FinTech is a possible target for money laundering of criminal organizations. As a result of all of these data, FinTech could be exposed to significant AML risks. FinTech should use best practices to discourage AML/CTF and stop criminal investigations.

Weekly Brief