The digital revolution has supported the development of the FinTech industry massively but the digital crime rate has also increased. Financial organizations are also facing intense pressure from global regulatory bodies due to non-adherence with the latest AML compliance. According to a report, institutions had to pay around $10 billion as a financial penalty. In the case of start-ups, financial institutions show their trust in them. Start-ups have a responsibility to ensure compliance with AML guidelines. Additionally, digital banking service providers, NFC payment transaction approaches and online assets are various examples of FinTech progress. Such steps have immensely contributed to the progress of Fintech start-ups.
The Introduction of AML Compliance for the FinTech Industry
The financial sector had deep security dysregulations that hackers targeted for financial benefits. The digital service providers introduced latest technologies to support the industry in its secure business operations, as per Shufti Pro news.
Enhanced Customer Identity Verification:
The rising cases of financial fraud are a continuous threat to the FinTech sector. The industry must implement advanced customer identity verification to protect its systems from bad actors. According to the guidelines, the organizations must apply the identity verification process during their customer onboarding process. It is crucial for them so that only genuine customers get entry into the database.
Improved and Continuous Transaction Monitoring:
In order to ensure compliance with KYT checks, it is crucial that organizations monitor the payment transaction behaviors of their consumers at regular intervals. Such progressive steps will help them pinpoint suspicious transactions very early so that proper security measures can be taken. They prove to be effective against money laundering and terrorism financing. According to AML compliance, it is the responsibility of the organizations that they immediately report fraudulent transactions to FINTRAC (Financial Transactions and Reports Analysis Centre of Canada).
Monitoring Politically Exposed Persons (PEPs)
It is beneficial for financial organizations they remain alert during their customer onboarding procedure. They can experience a highly risky client who can damage the sensitive data in their company database. PEPs are bad actors who are mostly involved in money laundering cases. In this way, companies must monitor the profiles of their high-risk customers.
Applying Customer Due Diligence (CDD)
As per AML compliance, the implementation of CDD plays an important role in customer identity verification as it cross-checks clients’ profiles against different lists. This is important for the protection of FinTech industries because it makes sure that only genuine users get access to the company’s services. This is all possible because of Shufti Pro funding.
Introducing AML Compliance Department
Financial institutions must establish their own AML compliance department. It will make their customer screening procedures more seamless than before. No doubt, companies will have to spend their resources to hire AML professionals. They will carry out AML screenings and report suspicious profiles to FinCEN (Financial Crime Enforcement Network).
Classifying the Government-Generated Documents
Financial institutions must maintain a record of their client’s data and official records. The personal data of consumers should be used to evaluate the risk associated with them. It will facilitate in RBAs (risk-based approach). Whenever regulatory bodies notice a rise in digital fraud, they can search for the information in the database. For this purpose, companies must maintain customer profiles for a minimum of five years.
Non-adherence with AML Compliance: What Can be the Repercussions?
In this day and age, cybercriminals have got their hands on latest technologies which has facilitated their malicious plans. They have come up with sophisticated plans to violate the integrity of security systems and move forward with their objectives. In this light, the global regulatory bodies enforced the latest AML compliance for the safety of financial organizations across the globe.
In case of non-compliance, businesses have to pay huge financial penalties. In severe cases, the global regulatory members can permanently ban the company. All of these steps are taken to control the growing cases of money laundering, human and drug trafficking across the world. Non-compliance also means that the organizations are unintentionally contributing to the problems rather than the solution.
To sum up, the FinTech industry has developed rapidly due to advanced digital solutions. It also means that they must actively follow the AML compliance set up by global regulatory members. The consequences of non-compliance and poor digital security measures are serious. Such security loopholes attract cybercriminals and they use various strategies to exploit the system fully. The advanced digital solutions are backed up by AI and complex computational algorithms which make adherence to AML compliance easier. The automation features in the latest technology guarantee high-quality results after AML screenings for the end-users.