Can FinTech Transform the Future for AML Compliance?

FinTech or financial technology has been around ever since the advent of credit cards. It is not necessarily restricted to any new mobile app a bank launches to digitise its processes or the advent of an online payment method. It is something that has made operations for banks, businesses and consumers more efficient as well as cost effective. One such area where FinTech has made a groundbreaking success is fraud prevention solutions. Such solutions include Know Your Customer verifications and anti money laundering or AML compliance solutions.

The ratio of financial crimes in banks and financial institutes tends to be higher. As a result, such businesses also need more robust detection and prevention procedures for such crimes. Sadly, the financial sector has been both slow and reluctant to adopt such procedures. Most businesses view them to be an onerous, and costly overhead to add to their operations. Understandably, manual detection and verification procedures can take time and have a higher probability of errors or oversight. Consequently, they can have more drawbacks than plus points.

FinTech Solutions for AML Compliance

Thus, in this scenario, Fintech has the perfect opportunity to come up with digital solutions that can efficiently perform such tasks. Over the past few years, the fraud detection and prevention industry has advanced immeasurably. Digital solutions are now available for businesses to detect and prevent fraud. For AML compliance, in particular, there are a number of solutions now available in that can enhance the productivity of the process. Tech specifically now being used for introducing solutions for compliance and regulatory measures is now being known as regulatory or RegTech.

Such tech is entirely designed for the purpose to incorporate regulatory and compliance measures into businesses. It uses technology like artificial intelligence, machine learning, blockchain etc. to offer compliance solutions that are easy to implement as well as use. Where human compliance checks can take days on end to verify customers, FinTech can use cutting edge technology to reduce the time and increase accuracy for such procedures.

AML Background Checks

One such innovative FinTech solution is KYC and AML background checks that are provided by different fraud protection solution providers. Banks can implement compliance measures availing their AML and background check services. Such service providers check a customer’s financial status against the watchlists issued by regulatory authorities world over. The software runs the existing or new customer’s name against the lists and manages to warn the bank or financial institute of their vulnerable status.

Smart AML Compliance – A Reality or Myth?

Fintech is coming up with smart AML compliance solutions that can help decrease the time required for performing compliance and reduce human error possibilities. Since banks and financial institutions are mostly reluctant to comply with anti money laundering regulations, fast and cost-effective solutions can help them fulfil their regulations with as less friction as possible. AI-based solutions like transaction monitoring systems and KYC/AML verification checks can shape the future for efficient banking.

Until now FinTechs have come up with exceptional tech solutions to make business processes easier for the financial services sector as well as the e-commerce industry in general. Banks and financial institutes, in particular, have to adhere to a number of regulations and laws in order to run their operations cleanly. One of the latest of these regulations is anti money laundering regulations. To help companies comply with such laws, the FinTech industry has developed highly refined solutions to automate processes. One example of such tech is identity verification with KYC & AML.

The banking and financial services sector has been slow, if not reluctant, to adopt automated measures for compliance. Understandably so, they need to make sure that the system is entirely secure and can actually improve the process in question. Compliance with KYC and AML regulations is extremely important for financial institutes. Particularly so since global regulatory bodies have been implementing harsher rules for compliance in an attempt to curb money laundering. Hence, it is high time that companies implement smarter and more efficient methods to fulfil compliance requirements.

Compliance Requirements – Blessing or a Curse?

For most banks compliance requirements have been long considered a long and tedious procedure to fulfil. This is due in part to the fact that until now they have mostly opted for manual or outdated methods for compliance. Manual AML compliance procedures are long and costly; which is the primary reason for companies to fulfil them at a bare minimum level. Slow processes can lead a company’s clients to abandon on boarding entirely and lead to losses for businesses.

However, faster and safer ways are now being developed by the FinTech sector to fulfil compliance requirement. Banks are gradually getting onboard with the idea of implementing digital compliance processes to authenticate their clients. Because let’s face it, the threat of financial crimes is serious and it is important for banks and investment firms to make sure their clients have legitimate practices. Any potential money laundering activity can make a bank face serious fines from its government or even a global regulatory authority.

Digital KYC & AML Solutions from FinTech

Increasing the compliance staff is not a viable solution to fulfil compliance regulations. Since the constant change in regulatory requirements for the financial sector, it is crucial for them to adopt digital compliance procedures. There are a number of computerised options available for AML process. One of them is a transaction monitoring system. It is principally used to monitor the clients’ transactions and bank activity. It has protocols in place to identify and detect any suspicious activity that takes place from a client’s account.

Another option for banks is to avail identity verification with KYC and AML. A number of KYC verification service providers offer AML checks to check a user’s financial status. It is a fast and efficient method based on machine learning and can check the status of a customer with seconds. This can make the anti money laundering compliance process significantly faster and easier for banks to implement.