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Keeping Your Firm on the Right AML Regulatory Track

Author: Albany Beck
Posted in: Latest News , Insights
Read Time: 2 Min Read

As the growth of the fintech sector accelerates regulatory scrutiny is intensifying, placing an extra burden on compliance teams that often lack the resources and expertise to keep pace. 

Worth just under $300bn in 2023 the sector is expected to be valued at more than $1tn by 2032 driven by innovations in AI, blockchain and other digital tools. But as it grows so does the risk of criminals using fintech services to finance their activities and move money unnoticed. 

In response, regulatory authorities, including those in the EU, have been tightening anti-money laundering (AML) and know your customer (KYC) regulations. It’s part of the reason why crypto and fintech firms were hit with record fines of $5.8bn in 2023. 

For the first time this exceeded the fines handed out to traditional finance firms, highlighting the need for fintechs to urgently strengthen their AML and KYC capabilities.  

Navigating an evolving regulatory landscape

Several fines were caused by a failure to implement robust AML processes. Equally, firms are struggling to keep on top of evolving compliancy demands, such as:      

The Sixth Anti-Money Laundering Directive (6AMLD) - Introduced by the European Union and implemented by member states in 2021, 6AMLD has extended AML compliance requirements to fintech and crypto companies, addressing gaps and inconsistencies in previous directives. Key points include: 

  • Extension of criminal liability: 6AMLD holds legal entities accountable for AML breaches, not just individuals.
  • Expansion of predicate offenses: the list of predicate offenses, including cybercrime and environmental crime, has been broadened.
  • Increased penalties: larger fines and longer prison sentences for AML violations have been introduced.
The Directive on Administrative Cooperation 8 (DAC8) - The DAC amendments, known as DAC8, were adopted by EU member states in May 2023. They create a framework for crypto-asset service providers to report transactions made by EU clients and will help tax authorities track the trade of crypto-assets and the proceeds generated.

Although DAC8 isn’t an AML regulation, it is expected to create challenges for financial firms such as effectively integrating these rules into their AML and KYC procedures.

For fintech and crypto companies, these continual regulatory shifts make investing in teams that can ensure ongoing AML compliance a top priority.

Harnessing AI to boost AML Compliance

One solution fintech firms are turning to is artificial intelligence (AI) which they are increasingly adding to client lifecycle management platforms and KYC systems, to monitor activity and flag anything suspicious.

There are obvious benefits such as AI’s ability to analyse vast amounts of data quickly and accurately, identifying behaviours that may indicate money laundering activities. Alongside efficiency benefits, machine learning also enables AI to detect patterns that traditional methods may miss and adapt to evolving threats. 
However, the integration of AI into AML processes presents challenges. Skilled professionals are required to interpret AI driven data and identify issues such as embedded biases or privacy concerns. Inevitably regulatory frameworks around AI will also increase, adding another compliancy task to the list. 

Building fit-for-purpose AML and KYC teams

The combined impact of tighter regulations, more sophisticated criminality and complex solutions such as AI, has made the demand for skilled AML professionals greater than ever.

Developing a team that has regulatory knowledge, analytical skills, technical expertise and problem-solving abilities, is critical. But it can’t be done overnight, it takes training, investment and time to get right, which is why fast growing fintech firms often find they have gaps in their compliancy capabilities. 

Albany Beck’s AML & KYC Academy was established to address this challenge and support your firm to meet regulatory demands at short notice. 

The academy trains talented graduates, school leavers and career changers with the technical and practical expertise to manage the full lifecycle of the AML process and carry out urgent compliancy tasks that will keep your firm on the right side of regulations. 

Rather than hiring and training talent directly, we provide a readymade team who’ll act as part of your workforce, with the option of taking them on full-time when you’re ready. 

Read more about our AML & KYC Academy and get in touch to discuss how we can support your firm to rise to the regulatory challenge: https://albanybeck.com/aml-kyc