How Your Favorite Fintech Apps Might
Be Breeding AML Risks
Though Digital platforms and Fintech apps have made it much easier for us to make transactions quickly, at the same time, these apps have also created many compliance problems for the allies and the customers as well.
One such example of this is Fintech apps that are growing in number with every passing day.
Let’s understand it with an example!
Suppose you have to make an online transaction to send money to one of your friends overseas, and with just a few taps and within seconds using your most trusted Fintech app, you complete your transaction.
At first, it looks great that you made the transaction in simple and easy steps. But wait, under that smooth and fast transaction, there might be something more sinister that may lead to money laundering activities.
Are these Fintech apps not reliable and trustworthy? They most are reliable as they promise convincing and innovation in handling your money.
However, this could be beneficial for the launderers to exploit these platforms to launder their money from one place to another in faster ways.
In this blog, we’ll explore how some of your favorite fintech apps might inadvertently be creating grounds for AML (Anti-Money Laundering) risks and what you need to know to stay protected.
Understanding the Fintech
Fintech, also known as financial technology, is the advanced technology that is used for financial services like online transactions and so on.
Using the Fintech app, people can easily make digital payments, do online banking, and even make investments using these services. So one can say that fintech is the advanced solution for financial services.
And that is the reason, fintech companies are offering a vast range of services that make managing finances easier and more accessible.
But when it comes to the popularity and scale, questions about their security and regulatory compliance have also become a major concern and made the financial risk industry. Are these apps exposing themselves to money laundering and other financial crimes?
Why Fintech Apps Are Attractive to Money Launderers
Money launderers always find new ways to move their illegally obtained money from one place to another. And FinTech could be exploited by the launderers for this purpose.
So, we are going to discuss the areas that can be the reason Fintech apps are used for money laundering.
Anonymity and Speed: Many of the Fintech apps offer quick, fast transactions and often do not ask for identification. And such platforms always attract the launderers, because of the ease and simpler way for criminals to move money with less identification process.
Global Reach: As these apps are used globally, which often becomes difficult to handle the user base, this anonymity allows criminals to easily transfer money from one place to another with minimal oversight.
Lack of Robust AML Controls: Banks and financial institutions invest a lot of money in AML controls and also comply with AML regulations to fight against money laundering. But on the other hand, the FinTech startups, who just want to process the transaction quickly, do not set the same level of security or sophisticated monitoring system in place.
How Fintech Apps Can reduce AML risk
The chances of exploiting these platforms are always there, but with stringent and robust AML risk solutions, the institutes can add an extra layer of security to stop using their platform for money laundering and other financial crimes. The following three steps could be more beneficial if implemented properly.
1. Implement Robust KYC/AML Processes
At the top of all the measures, the Fintech companies need to enhance their know-your-customer procedures. And for that, they need to implement the advanced AML screening solutions to verify the identity of each customer. If the advanced system is installed, it will also help the institution to detect any suspicious transactions and transactions to any risk business in real-time.
2. Integrate AI and Machine Learning Solution
As criminals have developed new laundering techniques using advanced technology, the solution should also be advanced and robust. AI and ML drive solutions can be beneficial as they can easily analyze the data in real time to check if any suspicious transaction is being done.
3. Collaborate with Regulators
Complying with AML regulation is essential for every business and if you are running a business that deals more in financial services, the obligation becomes even stricter.
Therefore, the Fintech companies must ensure they are complying with the regional and international AML laws. For that, they need to do regular audits and provide transparent reporting to make the compliance program even more stronger and stringent for the criminals.
Final Word!
Staying compliant with the AML regulation isn’t a choice for financial institutions this is an obligation that makes it compulsory for them to implement the AML regulation to mitigate the risk level.
Though mitigating the AML risk a hundred percent doesn’t seem practically possible, with advanced and compliant AML solutions, a business can enhance its efforts and control money laundering activities at best.
Would you like to give a test on how AML Monitoring and screening solutions can help you detect and report suspicious transactions in the Fintech business? Give AML Watcher a try and get 30 free searches.
