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Spotlight on compliance programs
within Fintechs

February 24, 2023
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Recent developments within the fintech space have led to increased scrutiny from regulatory agencies, law enforcement, and consumers alike. One such area of focus has been on compliance programs within fintechs.

While many fintechs claim to have a robust compliance program, an increasing number of firms have come to light that do not actually "practice what they preach". Common themes that have been observed include weaknesses in identifying and mitigating their Anti-Money Laundering ("AML") risks, treating procedures as check-the-box formalities, inexperience in performing thorough investigations, or simply lacking the personnel to keep up with growing backlogs, leading to missed regulatory deadlines. Perhaps these issues stem from rapid business growth or inexperience in navigating the compliance landscape. Either way, it's time that fintechs take a more proactive approach in maturing their compliance efforts so they can confidently grow their business.

While in the past, most fintechs have focused on developing products and services that meet the needs of their customers; they have been slow to recognize and invest in sustainable compliance programs that can keep up with growing needs. The lack of focus can have long-term repercussions as it could damage their reputation, impact their business growth areas, and hinder their partnerships.

Just within the past year, millions in regulatory fines have already been imposed on the likes of Robinhood, Kraken, and Coinbase for various types of violations related to their AML and Sanctions compliance programs. Others like Bitzlato, Binance, and FTX are under scrutiny by FinCEN for suspected money laundering activities. Extending further out of the crypto space, regulators are also targeting sponsor banks working with other types of fintechs and have criticized them for having weak controls and oversight of their fintech partnerships. This has impacted their business as expansion and growth plans needed to be put on hold until they were able to address these issues. It is clear that compliance is an ongoing concern for regulators and that it is not going away any time soon. In order to navigate a rapidly changing regulatory environment, it is imperative that fintechs commit to investing in the proper infrastructure to manage their compliance obligations.

The solution is simple: It is time for fintechs to move beyond adopting the "one-size-fits-all" model to check the box and instead adopt a personalized, risk-based approach to creating robust AML and compliance programs that are relevant to their business. Investment in building these sustainable compliance processes and culture early will avoid more significant headaches down the line that may include regulatory action (i.e. fines, cease and desist, etc.) that adversely impacts the business. Management should take a step back and take a look at their current landscape holistically and devise an actionable plan to strengthen their program.

Businesses should evaluate recent AML-related enforcement actions and developments within the fintech space and ask themselves whether they are currently equipped to avoid similar types of feedback if their compliance program was viewed under a microscope.

We've got you covered!


StrategyBRIX excels in this space, possessing the experience and expertise to help fintechs navigate these types of problems. The team has decades of combined experience within the compliance space assisting fintechs and other financial institutions to undergo large transformations of their compliance programs. Feel free to reach out to see how we can help.

Written by Jon Lo, 'Spotlight on compliance programs within Fintechs'
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