SPONSOR BANKS SHOULD UNDERSTAND THAT FINTECHS WHICH ARE STARTUPS CAN BE TARGETS FOR MONEY LAUNDERERS

Sponsor banks may want to pay special attention to fintech clients for Banking as a Service that are new business enterprises, regarding elevated money laundering issues. As new ventures, and even with experienced compliance officers handling AML/CFT during customer identification, as well as transaction monitoring, there will be an initial period when compliance staff, becoming familiar with the new startup's business model. commercial goals, and business culture, absorbs the company's style, and becomes sufficiently effective, to recognize and deter financial crime, particularly money laundering.

Second, as the new fintech struggles to create, market and sell a product, and become profitable, the sometimes desperate search for stopgap funding, to keep the company operating before a product launch, might temp ownership to not look too closely at a Source of Funding offered to them, which could later insist that they take shortcuts in compliance, as a reward for the money. What if the real purpose of being a finding source was to insist later that certain business be accepted, which in truth and in fact was money laundering? What anxious and needy fintech performs enhanced due diligence on their funding?

Finally, The focus of a startup fintech is zeroed in on becoming a success, and an effective compliance program, which can be considered an excessive expense by owners cutting costs to the bone costs, might be ignored for budgetary reasons. Therefore, sponsor banks should govern themselves accordingly, when onboarding startup fintechs, and seek to guide their new compliance departments in building an effective program, while at the same time paying special attention to the client business they process through their bank.