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Getting Ready for Future: An AML Compliance Guide for Fintechs

The internet revolution and the smartphone revolution have changed the course of operations in many industries. The digital era brought about significant enhancements to economic utilities — in form, time, space and possession — and helped both businesses...

Assessing AML Compliance at Neobanks: Issues and Solutions

Considered the digital era’s answer to financial inclusion, neo-banking is rising to prominence, shattering the historical monopoly and hegemony of traditional banking. As populations across the globe are increasingly being connected to the internet, primarily through mobile devices, neobanks (also known as digital banks) help them provide easy access to varied financial services at a lesser cost. Compared to the incumbents, these new-generation banks offer lower costs, better convenience and faster processing time. Further, they can serve as “an economic lifeline” for unbanked and underbanked households in many countries. These digital-only banks can accept many more people who don’t qualify for traditional banking services because of the lack of credit history or stable employment. However, neo-banks are vulnerable to cybercrime, hacking and financial crimes, probably to a greater extent as compared to their brick-and-mortar counterparts. For criminals, the new-age banks could open up a hassle-free way to open multiple accounts and do transactions at will, internationally. In their bid to increase customer base enable faster service processing, these neobanks are also likely to undermine AML/CFT controls stipulated by watchdogs. For example, UK neobank Revolut admitted in March 2019 it was unable to block suspect transactions on its platform as it had turned off a system designed to stop suspicious money transfers. Revolut decided to do away with the system after it produ...

How Criminals Launder COVID Funds via Online Investment Platforms

Fraud targeting governments’ pandemic-related welfare programs have seen criminals exploiting these schemes ever since countries started helping their citizens and businesses. If reports are correct, fraudsters benefit immensely from the US government’s strategies to aid businesses affected by the COVID-19 pandemic. Also, they are making use of popular online investment platforms as a convenient way to launder money. According to a CNBC report, citing law enforcement officials, more than US$100 million in stolen COVID relief funds have gone through four investment platforms – Robinhood, TD Ameritrade, E-Trade and Fidelity – since Congress passed the CARES Act in March 2020. The US government’s rapid roll-out of the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) has been criticised as the “financial crime bonanza act of 2021”, with the programs marred with problems. The PPP allows eligible small businesses and other organisations to receive loans with a maturity of two years and an interest rate of one per cent. The EIDL program provides economic relief to small businesses that are currently experiencing a temporary loss of revenue. Inadequate controls have been cited for aiding possible fraud totalling billions of dollars. The officials noted that new-age digital investment platforms are easy options “to dump the money into by setting up accounts with stolen identities”. This article explores the fraudsters’ schemes to benefit from government programs and clean those funds illegally. Also, we look into the technology options thes...

The Crackdown on Shell Companies and the Role of Technology

The Anti-Money Laundering Act (AMLA) 2020, enacted as part of the National Defense Authorization Act (NDAA) 2021 of the US in January this year, had many key provisions to take the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regime in the co...

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