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Discovering fintech solutions to anti-money laundering challenges

Nabil Hassoumi
Nabil Hassoumi
Risk Proposition Sales Enablement Director, Refinitiv

A new white paper from Refinitiv unpacks the impact of post-COVID-19 hyper-digitalisation on the financial services industry, before looking at some of the key trends and regulatory developments shaping the sector, and offering advice on building a resilient anti-money laundering (AML) framework.


  1. A new Refinitiv white paper explored how fintechs can solve dynamic AML challenges and analysed some key technological developments.
  2. Given the many challenges that define the anti-money laundering landscape, companies need to build resilient, effective compliance frameworks.
  3. We look at the five core elements crucial to building an effective AML framework, including customer onboarding and risk scoring.

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Hyper-digitalisation and the anti-money laundering space

The hyper-digitalisation sweeping the financial services arena presents industry participants with a double-edged sword.

On the one hand, digital initiatives have opened up significant new opportunities, but at the same time, financial crime risk is becoming harder to detect as sophisticated criminals leverage technology to their advantage.

This has created a situation where AML professionals find themselves in the spotlight.

They must adapt their control frameworks to manage evolving financial crime risk, while supporting their firms’ evolution to digital. More than this, they must ensure positive customer experiences, and often achieve these goals with fewer resources at their disposal.

Consequently, many banks and financial institutions (FIs) are harnessing the power of technology and taking the lead from a new breed of fintech disruptors.

Read the Refinitiv white paper: How fintechs can address AML challenge

five core elements crucial to building an effective anti-money laundering framework

Enter the disruptors

Fintech disruptors are increasingly active in the financial services arena. These agile players are using leading-edge technology to achieve more with less, and are finding new ways to improve the customer experience, pinpoint potential crime and manage regulations.

These companies are adept at leveraging social media, seamlessly integrating data and delivering scalable platforms that cater to changing customer requirements.

In response, a number of major banks and insurance providers have launched digital products, with some making strategic investments into fintech companies. Meanwhile, others are even starting fintech incubators to improve their innovation potential and position themselves favourably to compete with these new market influencers.

Key trends in financial services to fight financial crime

What’s trending?

Against this backdrop, several trends are unfolding within the industry, most notably:

Cloud-based and SaaS-based solutions

These solutions are growing in popularity, given that both offer companies a chance to grow and expand without the need for significant new infrastructure spend.

Blockchain

Blockchain technology continues to impact the industry, with crypto markets growing exponentially and non-fungible tokens (NFTs) – a blockchain-based way for artists and other creators to monetise their work – rapidly becoming highly sought-after.

AI is burgeoning at an equally significant rate, with machine learning (both supervised and unsupervised) continuing to expand across AML functions. Both network analytics and robotic process automation (RPA) continue to attract increased investment.

Realize the full potential of artificial intelligence

Key regulatory developments

Our paper goes on to discuss some key developments in the regulatory space. Some points to note include:

  • Payment Service Providers (PSPs) in the UK should be aware of The Payment Services Regulation 2017. In addition, The Monetary Authority of Singapore has issued guidelines for PSPs, and the European supervisory authorities have also provided guidance to prevent terrorist financing and money laundering in electronic fund transfers.
  • Crypto firms (including exchanges, traders and asset managers) are also in the spotlight, with concerns around sanctions evasion, undetected financing of terrorism, and other prohibited activities rising on the regulatory radar.

Sanctions are our highest priority and receive dedicated attention

The Financial Action Task Force (FATF), the U.S. Office of Foreign Assets Control (OFAC) and the European Commission have all been active in shining a spotlight on regulatory concerns and requirements surrounding crypto.

  • Digital wealth platforms have attracted the attention of the European Commission in particular, with the body proposing two legislative initiatives to reform the EU’s digital economy: the Digital Services Act (DSA) and the Digital Markets Act (DMA).
  • Lenders (including buy-now-pay-later (BNPL) service providers) should also take note. Even if a merchant or BNPL provider falls outside of the consumer credit regime, it is likely that the UK’s anti-money laundering regime would apply, and that certain requirements would need to be met.

Core elements of a resilient AML

When building a resilient AML framework, a range of elements should be considered.

These include customer onboarding and know your customer (KYC) processes; ongoing monitoring to assess changing risk; transaction monitoring; perpetual KYC that monitors for changing circumstances; and risk scoring.

At all stages, due consideration must be given to ensuring a positive customer experience, and this is where digital onboarding – which transforms static, hard-copy based onboarding processes into dynamic, client-friendly experiences – can make all the difference.

Ultimately, it is AML leaders who will need to step up to the plate and fulfil the crucial role of balancing financial crime mitigation with customer-centricity in the new digital age – and harnessing the power of the right technology and data offers these professionals the best chance of success.

Read the Refinitiv white paper: How fintechs can address AML challenge

Webinar: Decrypting AML compliance for cryptocurrencies and VASPs


Faqs

What are the threats in terms of technology in the financial services industry?

Digital initiatives have realised significant new opportunities, but at the same time, financial crime-risk is becoming harder to detect as sophisticated criminals leverage technology to their advantage.