AML work requires a lot of effort and resources, such as regular monitoring and reporting. In addition, AML regulations can be complex and hard to understand, making it difficult for companies to sometimes fully understand why fighting financial crime is in fact essential to business growth.
Understanding AML compliance and its importance
Making sure your business is compliant is important for preventing being used for criminal activities, such as terrorism financing, fraud or tax evasion. Not being compliant can have serious consequences for FinTech businesses - particularly for smaller ones with less resources. Failure to comply with AML regulations can result in:
- Substantial fines
- Penalties from regulatory authorities
- Suspension or revocation of company license
- Reputational risks
A company’s reputation is one of its most valuable assets and any negative publicity relating to their failure to comply with financial crime regulations can cause long lasting damage.
The challenges of AML compliance
Financial services providers face a number of challenges when it comes to AML, such as: changing regulations and a lack of resources allocated to carry out compliance work. The number of transactions are only increasing in today’s digital age. Implementing regulations, policies and processes to identify and prevent money laundering activities is essential. However, most companies get by on manual processes that are inefficient and unsustainable for businesses in the long run.
The ever-evolving nature of the financial landscape and the rise of fintechs mean that AML compliance regulations are constantly changing. Therefore, the true answer to staying compliant moving forward lies in automated AML tools, such as real-time transaction monitoring, in order to identify suspicious transactions to report on properly.