Fintech Regulatory Compliance – Things to Consider
Updated: Jul 8, 2020
Fintech is not a new industry – online payment systems, crowdfunding, and decentralized fiancial resources had already existed for some time now. However, over the past few years, rapid innovations within the sector have led to its exponential growth. By 2025, the market for Fintech is expected to be valued at nearly $460 Billion.
However, the rapid rise of Fintech has also raised concern about the lack of properly established regulatory environment. Regulators particularly worry about the potential risk of investment fraud, financial deception through the use of unregulated cryptocurrencies, and the use of artificial intelligence in fintech for criminal means. This article will serve to explore the potential emerging landscape of fintech regulatory compliance and what it entails.
Increasing Cost of Non-Compliance
The more accessible and decentralized nature of Fintech makes it particularly attractive to criminal organizations and terrorist groups seeking to launder money or anonymize their transactions. To counter this increasing number of jurisdictions are enforcing increasingly stricter Know Your Customer (KYC) due diligence and Anti-money laundering (AML) within the sector to bring it on par with those of the most traditional brick and mortar banking sectors.
Several fintech companies have already been fined millions of dollars for non-compliance. One notable case was that of Zenefits, a San Francisco based fintech startup valued at over a billion dollars. The company had to pay a $7 million in penalties to the Department of Insurance policies for allowing unlicensed brokers to sell its products.
Regulation of ‘Robo-Advisors’
Automated A.I powered wealth and management systems are bound to become increasingly common. Such fintech services, due to their considerable cost-savings, would be particularly attractive to investors with smaller portfolios.
Potential exists for compromise and abuse of such resources in the hands of cybercriminals. Thus, a comprehensive regulatory regime has been or is being implemented in many world jurisdictions to help monitor and report any suspicious activity or transactions.
Cryptocurrency Regulatory Frameworks
Interest in cryptocurrencies has tapered off recently as a result of worries about price volatility, entry saturation, and practical applications of this mode of transaction. Regulatory bodies are scrambling to provide a robust framework to regulate issuers of cryptocurrencies.
Enforcement actions are being taken against companies whose customers have potentially been defrauded. However, the size and still monumental growth of crypto-assets mean that such measures are likely to remain a challenge in the near future.
How ComplyGenics Can Help
Many Fintech companies do not have the resources at hand to properly navigate an environment of increasingly complex regulations and compliance measures. ComplyGenics is here to help. We provide such services as compliance audit and program remediation, AML rule tuning, and model validation, helping you mitigate risks and keep up with the best industry KYC and AML standards. We also specialize in staffing for the niche, helping you connect the right talent for your firm within the industry. For more information, visit our site or contact us.