Anti-Money Laundering (AML) and Financial Crime Compliance for Fintechs

Onboarding

During the onboarding process, financial institutions must conduct thorough customer due diligence (CDD), know your customer (KYC), and enhanced due diligence (EDD). This involves verifying a customer’s identity, assessing their risk level, and reviewing business activities.

Customer Due Diligence (CDD)

Verifying a customer’s identity
Assessing their risk level
Conducting background checks
Screening for sanctions lists
Reviewing business activities

Screening

Screening is an essential part of the onboarding process. It involves checking customers against various watchlists, including:

Sanctions lists
Politically Exposed Persons (PEPs)
Adverse media
Using technology to automate this process, but manual screening techniques are inaccurate and inefficient

Ongoing CDD/KYC

CDD/KYC is not a one-time event; it’s an ongoing process that requires continuous monitoring.

Ongoing Transaction Screening (TS)

Banks monitor clients’ overseas transactions for potential counterparty name matches to sanctions and other watchlists
Identifying potential risks

Ongoing Customer Monitoring

Conducting new scans of the client base when watchlists or sanctions designations change
For high-risk customers, when AMS databases have been updated
Identifying potential risks

Ongoing Transaction Monitoring (TM)

Evaluating clients’ behaviors against expectations at onboarding
Monitoring accounts for suspicious patterns that might indicate financial crime
Identifying potential risks

Screening and Monitoring Platforms

Contemporary screening and monitoring platforms can now apply APIs to integrate with the wider AML/CFT technology suite, providing a consistent view of customers across different platforms. These platforms also allow for real-time monitoring as transactions happen and enrich alerts with additional data to provide a holistic customer view.

Investigations

Ongoing screening and monitoring produce alerts that require investigation. Human review is necessary to validate potential concerns, which can be undertaken by the MLRO and a small number of staff in Fintechs or dedicated teams in larger banks using Case Management Systems (CMS).

Investigators are now tooled-up with Social Network Analysis (SNA) tools
Allow them to identify hidden connections and access wider open-source contextual information
Enhance the investigation process

Integration and Streamlining

Larger institutions often have multiple levels of investigation, including AML, Fraud, and Sanctions teams. However, some legacy banks are now seeking to integrate and streamline all types of financial crime investigation in one place due to the basic similarities of the process being undertaken.

The diagram below illustrates the similarities between different forms of monitoring, which have one of three types of outcome: no further action, an internal client review, or a report to the authorities (discussed in the section on reporting).