THE SPECIAL MONEY LAUNDERING PROBLEMS FACED BY SPONSOR BANKS

As a former career money launderer (having spent ten years in that sordid business) I look first at tradecraft, the actual methods and techniques that money launderers use, and what schemes are available to them to implement, given the fact pattern that they are presented with.

When it comes to sponsor banks, they are presented with a unique set of challenges, due to the fact that laundrymen have a distinct advantage: the banks' fintech clients represent a potential field day of opportunity to be exploited, because financial criminals often face only token compliance expertise, if even that, in the person of fintech staff. To most fintechs, AML/CFT compliance is a bother they don't like, because they deem it non-productive, and not contributing to the stated business goals, the expansion of the customer base.

Add to that the fact that good money launderers will be able to freely place the proceeds of crime into the fin tech business mix, with impunity; their only real threat is whether sponsor bank compliance officers catch it when it passes through the bank. Expect them to modify legacy techniques, to disguise them as legitimate commerce, through permutations and combinations of the tradecraft, this disguising it further, before it even reaches the desk of Sponsor bank compliance departments.

Given all these warnings, in my humble opinion, Sponsor banks must take the proverbial bull by the horns, and (1) impose minimum compliance standards for their fintechs, (2) deliver the platforms and programs necessary to do the job at customer identification and transaction monitoring, and (3) regularly audit how their fintechs are operating their compliance departments. To do anything less crates an unacceptable level of risk for the sponsor bank.