Financial Crime World

Kazakhstan’s Fintech Boom Masks Underlying Financial Crime Risks

As Kazakhstan becomes a leader in cashless transactions, fueled by fierce competition and a supportive regulatory environment, concerns are growing about the country’s vulnerability to financial crime risks. Despite its rapid fintech growth, Kazakhstan is failing to address the underlying risks that threaten its financial stability.

Fintech Growth Outpaces Regulation

According to a recent study by RISE Research, the number of fintech start-ups in Kazakhstan has quadrupled over the past five years, with 200 startups now operating in the country. The fintech industry accounted for 40 per cent of all venture capital financing in Kazakhstan in 2023.

Lack of Transparency and Oversight

However, this growth is accompanied by a lack of transparency and oversight. Binur Zhalenov, chairman of the National Payment Corporation of Kazakhstan, acknowledges that competition drives innovation but warns that “transparent game rules” are essential to ensure fair play. Despite this warning, experts warn that the country’s fintech ecosystem lacks robust anti-money laundering (AML) and combating the financing of terrorism (CFT) measures.

Rise of E-commerce and Non-Cash Payments

The growth of e-commerce in Kazakhstan has also contributed to the rise of non-cash payments, with online shopping accounting for 12.6 per cent of all retail trade in 2023. However, this trend is expected to continue, further driving the digitalisation of payments and increasing the risk of financial crime.

Banking Sector Remains Main Driver

The banking sector remains the main driver of fintech development in Kazakhstan, but the country’s fintech ecosystem lacks specialized areas such as crypto exchanges and eKYC firms. Experts warn that the lack of regulation and oversight creates an environment conducive to financial crime.

Fintech Companies Must Navigate Risks

Andrey Sedenko, CEO of Tarlan Payments, believes that fintech companies in Kazakhstan have a chance to achieve success, but only if they can navigate the risks posed by financial crime. Ainur Zhanturina, founder of RISE Research, warns that it is crucial for fintech market players to stay ahead and set the pace in the market.

What’s Next for Kazakhstan?

Despite its fintech success, Kazakhstan cannot afford to rest on its laurels. The country must implement robust AML/CFT measures, collaborate with fintech startups, and integrate govtech and AI tools into its financial processes. The future of Kazakhstan’s fintech industry depends on it.

Key Takeaways

  • Kazakhstan’s fintech growth has quadrupled over the past five years
  • Lack of transparency and oversight creates an environment conducive to financial crime
  • Fintech companies must navigate risks posed by financial crime
  • Robust AML/CFT measures, collaboration with startups, and govtech integration are crucial for future success