The impact of global events on FinTech compliance and risk management

The impact of global events on FinTech compliance and risk management

In the intricate world of FinTech, the geopolitical landscape plays a pivotal role in shaping compliance and regulatory frameworks. The aftermath of the Russian invasion of Ukraine in February 2022 has dramatically altered the sanctions regime, presenting unprecedented challenges for financial institutions (FIs). This seismic shift, marked by a surge in sanctions against various entities and individuals, underscores the necessity for FIs to adapt swiftly to remain compliant.

FullCircl, which offers a customer lifecycle intelligence solution, has explored how firms can successfully navigate the changing landscape of PEPs and sanctions.

The task of identifying and managing Politically Exposed Persons (PEPs) has similarly grown in complexity. The Financial Conduct Authority (FCA) is in the midst of a review assessing how regulated businesses are aligning with their obligations concerning PEPs. This focus on PEPs, coupled with rapid changes in sanctions lists in response to global events, such as the recent sanctions against Iranian entities by the UK and potential actions against groups like Hamas and Hizbollah following attacks on Israel, adds layers of complexity for FIs.

However, the response from the financial sector has been less than ideal. Research from SmartSearch reveals a concerning lag in compliance adaptation, with only 36% of challenger banks updating their procedures for PEPs and sanctions screening post-Ukraine conflict, fairing slightly better are incumbent banks at 40%. This hesitation or inability to update compliance measures not only poses risks of facilitating illicit activities but also exposes FIs to hefty fines and reputational damage. In 2022, FIs faced penalties amounting to $4.2bn for AML breaches, a staggering 52% increase from the previous year.

The essence of compliance lies in thorough customer lifecycle management, from acquisition and onboarding to retention and relationship growth. Yet, deciphering the complex structures of PEPs and sanctions, with their convoluted corporate hierarchies and fragmented ownership data, remains a formidable challenge, impacting both regulatory compliance and customer experience.

On a brighter note, technological advancements offer a beacon of hope. Digital solutions, such as automated screening for real-time global coverage and graph data visualization, provide effective tools for navigating the complex PEPs and sanctions landscape. Innovations in identity verification and perpetual KYC processes further enhance compliance capabilities, reducing the risk of exposure to illegal activities.

FullCircl’s SmartOnboard platform epitomizes the digital revolution in compliance, offering a comprehensive solution for accelerating customer screening and risk management throughout the customer lifecycle. With features like automated KYC, AML checks, and access to PEPs, sanctions, and adverse media databases, FullCircl is at the forefront of simplifying compliance processes.

Moreover, the platform’s ability to streamline customer onboarding, coupled with ongoing screening and event-based alerts, positions FullCircl as an essential tool for FIs aiming to mitigate risks and fulfill regulatory requirements efficiently.

Read the story here.

Keep up with all the latest FinTech news here

Copyright © 2024 FinTech Global

Enjoyed the story? 

Subscribe to our weekly RegTech newsletter and get the latest industry news & research

Copyright © 2018 RegTech Analyst


The following investor(s) were tagged in this article.