Financial Crime World

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Financial Crime Prevention in US Fintech Industry: Key Challenges and Strategies

A recent report by KPMG highlights the top regulatory challenges facing the US fintech industry in preventing financial crime, including fraud, money laundering, and terrorist financing.

Regulatory Focus

The report identifies several key areas of regulatory focus, including:

  • AML/CFT frameworks and risk mitigants: preventing illicit exploitation of access to the US financial system
  • Fraud models, operations, and investigation processes
  • Insider corruption and employee misconduct
  • Cybercrime and robust cybersecurity risk management

Interplay with Consumer Protection

Regulators are also paying close attention to consumer protection issues, including:

  • Use of account holds and freezes: in connection with application of Reg E, EFTA, and UDAAP
  • Model development and validation: used in consumer lending
  • Payment sender/receiver authentication procedures

Evolving Risks

The report highlights several evolving risks that regulators are grappling with, including:

  • Domestic and international terrorist financing
  • Increased focus on OFAC and sanctions compliance
  • Transnational criminal organizations
  • Drug and human trafficking, smuggling

Strategies for Fintech Companies

To stay ahead of these regulatory challenges, fintech companies should consider the following strategies:

  • Add analytics and automation: to client onboarding
  • Eliminate antiquated technology
  • Establish a mature conduct risk program
  • Strengthen controls in regulatory focal areas (FinCEN priorities)
  • Prioritize customer experience while combating fraud, money laundering, and related financial crimes

Conclusion

Financial crime prevention is a top priority for regulators in the US fintech industry. By understanding the key regulatory challenges and implementing effective strategies, fintech companies can stay ahead of these risks and protect their customers.

About the Author

Fiachre O’Neil is Chief Risk & Compliance Officer at PayPal.

Download the Report

To learn more about the top regulatory challenges facing the US fintech industry, download KPMG’s report “Ten Key Regulatory Challenges of 2023”.