How Technology Can Curb Financial Crime for Fintech Businesses

How Technology Can Curb Financial Crime for Fintech Businesses

The Fintech sector has witnessed unprecedented growth over the years. A customer-centric approach and innovative technology contribute to the success of the industry. 

But there’s also another side of the picture. While fintech players revolutionize the delivery of financial services, they also struggle with a complex landscape of financial risks along the way.

Financial crime is the biggest challenge fintech companies deal with. Statistics show that money laundering in the US reaches a staggering $300 billion mark annually. That amounts to 15%-38% of the money laundered around the world. These numbers are only the tip of the iceberg because financial crimes such as fraud, cybercrime, and terrorist financing compound the threat. 

The sector requires a robust strategy to address these risks and focus on growth instead of worrying about crime. According to PwC, properly deployed technology can be a savior. Besides lowering the risk of financial crime, it can reduce the overall compliance cost by 30-50% for fintech firms. 

Here are a few ways fintech businesses can leverage technology to avert financial crimes:

Developing Effective AML Programs

Money laundering is perhaps the biggest threat to the fintech sector. Implementing effective anti-money laundering (AML) programs is essential for fintech companies. They are also a part of federal regulatory compliance. 

For example, The Bank Secrecy Act mandates American banks to adopt a risk-based approach and conduct comprehensive customer screening. According to this article here, factors like cryptocurrency, online gambling, and illicit reselling of assets compound the risk of money laundering. 

Without proper technologies in place, it is impossible to combat the threat of these high-tech forms of laundering. Artificial intelligence can do the heavy lifting when it comes to automated AML screening and identity verification. A robust and ongoing AML strategy is the best solution. 

Modernizing Data Collection

Technologies such as biometrics, machine learning, and AI capabilities can enhance data collection and identity verification processes. The sheer volume of data to be collected and handled complicates the process. However, technology solutions boost efficiency and accuracy for customer authentication and onboarding.

AU10TIX highlights the significance of automation of identity verification, as it can ease customer experiences. The best part is that fintech companies need not stress about regulatory compliance because technology does the hard work. Automated data sourcing also facilitates an effective remediation process.

Data-Driven Process and Business Intelligence

Fintech companies collect data during Know Your Customer (KYC) and Anti Money Laundering (AML)processes. This data can be valuable for driving process- and business intelligence, such as calculating efficiency KPIs, fine-tuning capacity, and measuring processing time for individual tasks.

Machine Learning technology can help with ongoing monitoring of changes to customer AML profiles and trigger follow-up actions when something is amiss. AI and data analytics can also identify patterns in the company’s finances. With data-driven processes, fintech companies can build a robust defense against fraud and money laundering activities.

Facilitating High-Quality Reporting

Effective reporting can go a long way in mitigating the risk of financial crimes in the fintech sector. With well-designed reports, firms can monitor key performance indicators and anomalies in customer activities. Technology can help in building automated and actionable reporting flows with real-time and interactive data visuals.

Fintech companies can use these visuals to keep track of suspicious accounts and customers and raise red flags before a crime occurs. They can also gain actionable insights to help with real-time decision-making and develop tactical and strategic solutions to combat crime in the long run. Compliance is another factor high-quality reporting helps with.

Strengthening Cyber Defenses

Besides direct financial crime, cybercrime is another concern for the fintech industry. Data breaches can have grave implications, including financial crime. According to 2022 statistics, the global average cost of a data breach in the industry was $6 million. Compared to this, the number was much higher in American financial companies, with a data breach costing $9 million on average.

Fintech businesses need to pay more attention to these risks and secure themselves with robust cybersecurity infrastructure. Technologies such as encryption, intrusion detection systems, and multi-factor authentication can prevent cyberattacks. Continuous monitoring and threat intelligence can also help fintech firms to stay ahead of evolving threats.

The Bottom Line

Financial crime is a real risk in the fintech sector, with every business facing the threat, regardless of size and scale. Technology can play a significant role in helping fintech businesses combat financial crime effectively.

Fortunately, several tech tools can collectively fortify the security posture of fintech companies. By having these solutions in place, they can keep criminals from exploiting vulnerabilities and engaging in fraudulent activities.


  • Tristan

    Tristan has a strong interest in the intersection of artificial intelligence and creative expression. He has a background in computer science, and he enjoys exploring the ways in which AI can enhance and augment human creativity. In his writing, he often delves into the ways in which AI is being used to generate original works of fiction and poetry, as well as to analyze and understand patterns in existing texts.