The news: Digital-only banking players have to prioritize anti-money laundering (AML) compliance even as they move fast in the pursuit of growth, per a new report from ComplyAdvantage, a regulatory technology firm.
How we got here: ComplyAdvantage names two reasons why digital banks are vulnerable to poor compliance:
The report also points to two recent examples of digital players facing AML issues:
Proposed outlooks: The firm calls on digital banks to include “a few non-negotiables” in their AML approaches:
The big takeaway: ComplyAdvantage highlights a significant problem for digital banking players: They may want to act fast, but they can’t treat their legal obligations as lower priorities.
This tension is also on the minds of financial services professionals. For example, it was raised at a Money20/20 session by the Fintech Fight Club debate team last month, which covered whether banks or fintechs are more innovative. Defenders of the banking side argued that pushing pace is outweighed by the risks of catastrophes like losing customers’ funds, or betraying their confidence and trust.
Moving forward, digital banks will need to increase their compliance investment, particularly when they are still in their early stages. For example, they could turn to regtech-focused companies offering assistance with AML and know your customer (KYC) processes, such as: