HOW DO SPONSOR BANKS INSURE THAT THEIR FINTECH CLIENTS ARE NOT OWNED OR CONTROLLED BY MONEY LAUNDERERS?

As a former career money launderer, I want to bring an important subject to the attention of the sponsor banking industry. In the competitive world in which sponsor banks operate, the acquisition of fintech clients, whose products and services represent potential lucrative, and therefore profitable, business for those banks, compliance officers should always be on the alert for those companies which are owned or controlled by criminal organizations, and which would most likely be laundering the proceeds of crime through the fintech's accounts.

To prevent the illicit use of a fintech client's accounts at your bank, one must keep in mind that a drug money laundering operation can easily adapt the techniques they typically use to purchase, invest in, or corrupt closely held legitimate businesses, to companies in the fintech sector. That possibility is probably the last thing AML compliance officers at a sponsor bank is thinking about, as they labor to insure that their bank's fintech clients comply with regulatory requirements , especially customer identification procedures.

It is therefore my humble opinion that bank management defer bringing any new fintech client onboard until and unless they verify that the start-up capital passes the Source of funds test, and that the principals and officers are also vetted.

Second, when the company passes these checks, and commences operations through your accounts, transaction monitoring should be initiated periodically, it looking for individual suspicious transactions, but payments that appear to be inconsistent with the fintech's trade or business. As a money launderer, I always insured that my drug trafficking clients' criminal profits moved seamlessly through the accounts of a front company, without raising suspicions from transaction monitors, but a very close analysis of the business, which the banks didn't undertake, would have yielded some strange issues, like phantom customer profiles.

Finally, as the fintech becomes more financially successful, check to see whether there is actually a factual basis for the increased business flow.

If this area of anti-money laundering compliance is of interest to you, you would like to hear this old laundryman's take on solutions that work, and you are in a sponsor bank, you might want to seek an invitation to the SOCURE BANK SECOND ANNUAL LEADERSHIP FORUM 2025, September23-24, 2025, where yours truly will be the Keynote Speaker.

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