Fintech Business Compliances – An Overview

Best Practices For Fintech Business Compliances

As the fintech industry grows, it is possible that more industries verticals will overlap with fintech companies and we’ll also see some partnerships happening. As a result, it will be very important for fintechs to adapt and comply with regulations for several other industries. This decentralization will make it difficult for fintechs to identify relevant regulations. I recommend the following 6 practices for fintechs:

1. Stay abreast of Digital-only Banking

Banks are turning into digital-only banking institutions and the regulatory authorities are still trying to figure out how to identify and enforce new compliances in this changing banking environment. The online-only fintechs will be required to develop their customer interaction plan as well as the security policy.

2. Have an AML policy

Similar to the traditional banking infrastructure, the fintech companies should incorporate anti-money laundering (AML) into their security procedures. Even if you are considering merger or acquisition of an existing fintech company, do check if their AML checks are in place. Especially the digital currency is very vulnerable to money laundering as it allows anonymous cross-border transactions. To address digital currency AML, some nations even track digital wallet addresses and device identifiers. The technological implementation can help fintechs in keeping up with the AML compliances. Blockchainand Machine Learning are the two major technologies that are helping fintechs fight issues like money laundering. 

3. Build Consumer Awareness

In the last few years the Consumer Financial Protection Bureau (CFPB) has shifted their attention to fintechs. Fintech companies, especially leanders, should ensure that their CFPB standards are carried out within their operations. For instance, the fintech institutions dealing in money lending will have to ensure that the customers are given enough opportunities to be considered for discounted loans or loans at low rates. The CFPB has released a list of code for federal regulations which helps fintechs know which regulations apply to their company’s operations. Although, the list doesn’t include the name “fintech” but it is authorised to regulate companies which falls under the financial institutional purview.

4. KYC Compliance

KYC applies to every financial institution that directly deals with the end customer. It means that all the regulations that deal in onboarding and managing digital customers identity will be applicable for fintechs. Some of those regulations are Fair and Accurate Credit Transaction Act (FACTA), Dodd-Frank Reforms, Customer Due Diligence Final Rule. KYC can be considered as a tool to enforce AML with the goal to mitigate fraud by effectively monitoring customer activity. Under the KYC compliance, the fintechs are supposed to flag suspicious activities. For both big and small financial institutions, KYC is necessary. 

5. Customer Identity Protection

The fintech industry is ever-growing and the security concerns will continue to rise. Thus, the fintechs are supposed to protect the personal and financial information of their customers. It is certainly the fintechs’ responsibility as they are the data receiver.

6. Restrict Access to Data

Not most of but a very significant amount of cyberattacks happen from within companies. Most of the fintech companies have a lot of their business processes outsources which makes them vulnerable to data theft. The worst part is that when the data theft happens within the organization, it is very difficult to identify the source. 

Being a fintech company, you should restrict the access to the data and should keep an account of the individuals and companies who request access to the data. Also, the outsourcing companies that you partner with, for example, your IT service provider should be GDPR compliant. Nimble AppGenie is a GDPR compliant IT service provider, contact us here if you’re looking for an IT support service provider for your fintech.

Envision the Future of Fintech Business Compliances

By no means, the fintech industry is stagnant. It is ever-evolving and will keep expanding at a rapid pace. Likewise, the fintech regulations will continue to change and it is very crucial for companies to remain compliant to the changing regulatory environment and standards or even help regulators create new standards.