• Avril Brenda Chan

5 AML Requirements Every FinTech Business Should Observe

It was reported that between 1 January and 30 June 2020, regulatory fines for AML failures had exceeded those issued in the whole of 2019 by $262 million. It is key for businesses to adhere to the necessary requirements so as to be more time and cost-efficient. Below are 5 AML requirements that your business should take into consideration.

1) Reporting Suspicious Transactions

Businesses have to report any suspicious financial transactions and any attempted suspicious financial transactions when they have the grounds to suspect that these financial transactions are tied to the commission of a predicate offence. Predicate offences include offences like murder, corruption, money laundering or tax evasion. As such, businesses have to be aware of these offences so as to form grounds to suspect that proceeds of crime are involved.

2) Reporting Terrorist Financing Transactions

Another important AML requirement is reporting terrorist financing when money, bitcoin, or other property is involved. If your FinTech believes that any of these are being owned or controlled by or on behalf of a terrorist or terrorist group, it is key to report these activities. Combatting the Financing of Terrorism (CFT) often requires businesses to review information on these terrorists or terrorist groups which is usually made available by the government. Furthermore, FinTechs usually have to report to their national law enforcement agency when a client or financial transaction triggers terrorist financing. Similarly to suspicious transactions, terrorist financing transactions have to be reported and additionally requires dual reporting to a Financial Intelligence Unit (FIU).

3) Politically Exposed Persons (PEP)

When onboarding clients, FinTechs have to determine if they are dealing with a PEP is the amounts reach a certain threshold. A PEP is someone who holds a prominent public position such as the head of government, member of the legislature, judge, military officer or CEO of a government corporation. In Singapore, someone who can be considered as a PEP would be our prime minister, Lee Hsien Loong. If the client is determined to be a PEP, FinTechs have to verify the source of the client’s funds. PEP’s represent a greater money laundering risk because of the higher probability that they will abuse their positions to carry out corrupt acts, such as accepting or extorting bribes or misappropriation of state assets and thus, making use of the financial system to launder these proceeds.

4) Risk Assessments

A risk assessment is also required for FinTechs that are registered with an FIU so that they are able to evaluate and identify the risk of the commission of money laundering and terrorist financing offences. These risk assessments typically consist of an analysis of potential threats to money laundering and terrorist financing crimes. It includes a process of reviewing of clients, transactions, and geographical areas of service.

5) Compliance Regime

In order to fulfil AML obligations, businesses have to draft and implement a compliance program that can meet the reporting, record-keeping, and client verification obligations that the AML law requires. By having a compliance program, it helps to ensure that employees at all levels are well informed of the obligations required by financial service providers in a compliant manner. Furthermore, it ensures that the business has an ethical and compliant culture which minimises risks to the company.

Moving forward, businesses can adhere to these requirements by making the shift to Regulatory Technology (RegTech). RegTech helps to accelerate and strengthen companies’ processes to help them meet their Anti-Money Laundering (AML) obligations. Here at RegTank, we aim to be a one-stop compliance solution for FinTech businesses, navigating compliance, security and risk management challenges in the most effective manner.

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