SPONSOR BANKS NOTE: EUROPEAN FINTECH SCANDAL SPOTLIGHTS COMPLIANCE SHORTCOMINGS

If you missed this week's fintech scandal, involving a group of Turkish companies, the article included a number of important bullet points regarding systemic compliance issues, which deserve your attention if you are at a sponsor bank, working to increase the effectiveness of your fintech partners.

1. Fintechs often operate under lighter regulatory burdens, compared to traditional banks.
2. Most fintechs lack the extensive compliance infrastructure built into larger financial institutions.
3. Even when fintechs implement robust anti-fraud measures, criminals can exploit loopholes, use shell companies, manipulate KYC procedures, or exploit high-volume transaction flows, to mask illicit funds.

It was also pointed out to me by a friend who also reviewed the article that many fintechs seem to hire inexperienced compliance officers, who perpetuate these shortcomings. His opinion is spot on. Knowing these issues assist sponsor banks, and the professionals who advise and assist them, to devise effective workarounds to systemic industry problems.