Financial Crime World

Payment Service Providers in the Face of Financial Crime: Key Takeaways

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Implications for Payment Service Providers (PSPs)

Payment service providers must be prepared to adapt their business models, customer interactions, and internal operations in response to evolving control mechanisms aimed at countering financial crime. Key considerations include:

  • Balancing speed and risk: Policy decisions will aim to calibrate due diligence on new merchants, weighing the need for efficient transaction processing against the risk of facilitating illicit activities.
  • Operational choices: PSPs must balance customer experience, cost, and responsiveness when designing their services.

Key Business Decision Making

Effective financial-crime risk management is essential for PSPs to make informed decisions about products, services, and market entry. Compliance should be an integral part of the processes for designing and approving products. Considerations include:

  • Evaluating financial-crime risks: PSPs should assess the potential risks associated with each product or service.
  • Compliance as a design principle: Compliance should be built into the design and approval process to avoid costly and ineffective solutions.

Regulatory Scrutiny

PSPs can expect increased regulatory scrutiny as incidents of fraud and money laundering surface. Engaging early on with regulators and market participants can build credibility, enhance investor confidence, and provide a competitive advantage.

Lessons from Banks’ Experience

Establishing robust anti-financial crime capabilities is a complex undertaking. Key lessons from banks’ experience include:

  • Compliance-by-design: Embed controls within processes and decisions to create compliant-by-design processes.
  • Proportionate design: Design controls in proportion to the business model, and think ahead to focus on data.
  • Business case development: Build a business case to avoid expensive solutions that are only marginally effective.
  • Planning for complexity: Plan for complexity and extract better value from existing controls.

Unintended Benefits

Strong anti-financial crime capabilities can enhance the environmental, social, and governance (ESG) profiles of PSPs. This can lead to a range of benefits, including:

  • Enhanced reputation: Demonstrating commitment to fighting financial crime can improve public perception and enhance brand value.
  • Increased investor confidence: Compliance with anti-financial crime regulations can boost investor confidence and attract new capital.
  • Access to new markets: PSPs that prioritize ESG considerations may be well-positioned to access emerging markets or partner with organizations that share similar values.