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4 minutes read

Why FinTech Industry Needs Real-Time AML Compliance?

By Guest Author
By Guest Author
4 minutes read

Financial Technology was invented in 1918 when the US Federal Reserve Banks developed Fedwire funds services. Later the launch of payment solutions like Paypal made it a household term. It transformed the banking operations and influenced the decades-old industry within a short period. FinTech enthusiasts provided several revolutionary products like Anti Money Laundering (AML) compliance solutions, payment solutions, credit scoring services, online loans, mortgages services, etc. 

The tremendous success of FinTech attracted the attention of regulatory authorities as well. New regulations are imposed on FinTech and most of the global regimes imposed typical AML compliance regulations on FinTech that were previously imposed on the banking sector. The reason for these stringent AML and Counter Financial Terrorism (CFT) regulations is the increase in financial fraud in Fintech. The regulatory authorities do not only impose regulations, but they also make sure that Fintech businesses comply with those regulations as well, otherwise huge penalties are imposed. 

FinTech has the ultimate solution for all of its compliance needs and it is an “online AML screening solution”. AML screening solution also called AML compliance solution is an AI-based solution that verifies that the customers of a business have no history of money laundering or terrorist financing. Such solutions not only serve FinTech but it has an equal significance for all of the financial sectors. 

AML compliance solutions screen the identity of a person against global blacklists, money launderers lists, watch lists, and PEP lists. For example, Shufti Pro is a globally acclaimed AML screening solution provider. Its AML screening solution is considered one of the best solutions due to its qualities of quick results (within 60 seconds), global coverage, seamless integration, user-friendly interface, GDPR, and other data protection compliance, etc. 

Benefits of Real-Time AML Screening Solution for Fintech

Below are some major reasons why real-time AML Verification solution is feasible for the Fintech industry:

  • Technical Aspects 

FinTech is a technology-driven industry. Fintech businesses are driven by artificial intelligence and machine learning. In such technical business models, manual verification is not a feasible solution. Most of FinTech businesses are in an online relationship with their clients so manual verification is not possible. 

  • Global Clientele

Most of FinTech businesses have clients pooling in from every corner of the world. It is not possible to verify the clients without a solution that has databases with global coverage. Global risk cover is mandatory to mitigate the diverse risk coming from clients. 

  • Regulatory compliance

Regulatory compliance is mandatory for FinTech. For example, recently some countries like Canada, Switzerland, UK, and the U.S. imposed AML regulations on some FinTech businesses like crypto exchanges, money services businesses, etc. 

FinTech companies are bound to practice thorough compliance with these regulations, otherwise, hefty fines and penalties will be imposed on them. Real-time AML screening will help them attain the status of AML compliant business and will enhance their credibility and customer value. 

  • Frauds 

Frauds in FinTech are mostly cybercrimes involving HiTech hackers and organized groups of terrorist financiers and money launderers. Real-time AML screening solutions will reduce the risk of serving criminals with the same technical strength that criminals use. 

In the case that a criminal registers with a payment solution and delivers a huge amount of money, the business will be deemed responsible for a lack of AML practices if they process the transaction without AML screening. 

  • Cost-Effective

AML solutions are a cost-effective method of AML compliance. No doubt that Fintech has their hands on some sort of technical assets to conduct their operations. But AML screening at a global level is something that requires exhaustive resources like databases, AI setup, extensive set up for collecting and verifying data, etc. 

Building an in-house solution would not be feasible for Fintech businesses due to the high-costs of these products. Outsourcing is feasible because it can be acquired within a  budgeted cost. Also, the hassle-free integration and processing involved in such solutions are important.

To wrap up, the FinTech industry has a huge potential and proactive risk prevention will aid in achieving great success. Real-time AML compliance solutions are the invention of the Fintech industry and it has the potential to protect its mother industry from criminals and fraudsters. Being a cost-effective, quick, hassle-free and technologically advanced solution, it is the ultimate AML compliance solution for FinTech.

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