KYC AML regulations

KYC/AML Regulations – Establishing a Secure System for the FinTech Industry

Financial companies are facing huge financial losses due to non-compliance with KYC/ AML guidelines. They had to pay approximately $10.4 billion in penalties. When it comes to Fintech start-ups, the financial companies put their trust in them. Fintech start-ups have the obligation to stay compliant with the KYC/AML regulations. Moreover, online banking platforms, NFC payment methods, and digital properties are several examples of financial technology development. They have facilitated the financial industry in their digital revolution. 

The KYC/AML Regulations System for the FinTech Sector

A few years back, the FinTech sector was so dysregulated that cybercriminals targeted it. Nonetheless, the software service providers came up with advanced technological solutions to facilitate the financial sector in their operations. Consequently, the higher regulatory bodies have introduced amendments in the KYC regulations to support financial companies. A brief introduction of all the changes is as follows:

Proper Customer Identity Authentication:

The cases of financial fraud and scams keep surging with the passage of time. The FinTech Industry should opt for an efficient client identity verification system. The companies should apply it during their client onboarding process to ensure the entry of genuine customers. 

Ongoing Transaction Screening:

To ensure KYT compliance, it is critical that companies keep a check on the transaction behaviors of their clients. It will help them detect suspicious activities early on before matters get worse. It will also be an effective step toward the prevention of money laundering and financial terrorism. Nevertheless, it is the responsibility of the companies that they report fraudulent activities to FINTRAC (Financial Transactions and Reports Analysis Centre of Canada), according to the BSA requirements. 

Screening of High Profile Individuals (PEPs)

Financial companies should be super careful during the screening process of their clients. It is important because they can be on global watchlists and if they enter the system they can attack sensitive information. Companies should pay special attention to PEPs because they mostly attempt money laundering. Hence, there should be regular monitoring of high-risk profile clients. 

Effective Customer Due Diligence (CDD)

CDD is an important component of the KYC procedure because it verifies a client’s identity. The professionals cross-check the information against genuine resources. Therefore, financial technology companies must never forget the application of the CDD procedure before giving them access to their services. 

The Foundation of the KYC/AML Regulations Department

Fintech companies should establish their own KYC/AML regulations department. It will facilitate their screening procedures. Of course, companies will need to hire the relevant candidates for the post (AMLOs). They will be responsible for regular AML screenings and handling the suspicious cases to FinCEN (Financial Crimes Enforcement Network).

Structured Employee Training Programs Regarding KYC and AML Solution

No amount of security protocols can work effectively if the staff members do not get the proper training to execute the plan. The training programs can have briefings, peer-to-peer interactions, and tactical exercises to disseminate awareness to the employees. 

Organizing the Official Documents

Organizations should keep a record of customers’ information and documents. They should acquire personally identifiable data to create a risk-based profile. In case of rising fraud cases, regulatory bodies can ask for the information. Companies should maintain the data for at least five years. 

Quick Reporting of Suspicious Activities

The procedure says that the employee should report the suspicious activity to the AML officer quickly. The KYC/AML regulations officer will take the issue to higher regulatory bodies. In this way, the experts will investigate the matter without unnecessary delays (because of long procedures),

What can be the Consequences of KYC/AML Regulations Non-compliance for the FinTech Industry?

It is true that businesses have benefited a lot from technological advancement but the same is the case for cybercriminals. They have found new and complex ways to exploit the security systems. To take control of the matter, the higher regulatory bodies introduced KYC/AML regulations to safeguard the financial companies and individual customers. 

If financial institutions do not follow the KYC/AML regulations, they have to face the consequences i.e. hefty fines. The case of non-compliance is extreme, the authorities can even put a permanent ban on the business. It is because they contribute to the rising incidences of money laundering, drug trafficking, and other forms of financial terrorism. In this way, fraudsters see easier paths to exploit the organizations. 


All in all, it should be noted that the financial technology industry (FinTech sector) is rapidly growing. Still, they should remain compliant with the KYC/AML regulations given by higher regulatory bodies. They should know that non-compliance and poor cybersecurity protocols encourage scammers to attack the systems and fulfill their illicit objectives. KYC Verification is proven to be a great solution to this issue. The latest technology has an efficient Identity authentication process that has the backing of several artificial intelligence networks. They ensure accurate results because of system automation. It is good for the companies because they can ensure compliance with the guidelines and take control of financial crimes.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Scroll to Top