For fintechs, navigating global compliance schemes has gotten more and more difficult in recent years, amidst new global regulatory bodies and statutes. Currently, this can be seen in the UK, where a new regulatory structure is being developed following Brexit, forcing cross-border payments providers to adapt.
At Payoneer, we’re all too familiar with these challenges. As we’ve grown as a company, our compliance team has had to deal with all sorts of challenges to ensure we’re able to provide an uninterrupted service to our global customers. Here are some of the biggest compliance challenges fintechs are facing in 2021, as well as how they should be navigated to maintain their regulatory status.
Partnering with the Right Bank
When scouting out a banking partner, there are a few things to consider beyond the financial aspects of growing your business. To effectively navigate different global regulations, you’ll need a partner who understands your business model and company culture. This means finding someone who will align with your growth plans so that you have the support you need when tackling new compliance challenges.
To find the right partner, the first thing you’ll need to do is to sit down with your shareholders and properly analyze your growth strategy and what exactly you’ll need from your bank to realize your plans. Once you find a partner, maintaining an open line of communication is critical to ensure that they can assist you with both maintaining compliance and meeting the needs of new regulatory bodies.
Keeping Up with Global Sanctions Compliance
Balancing your business expansion plans with global sanctions compliance is a complicated process that requires you to stay agile as you move into new territories.
Different countries have their own sanctions policies, which, on occasion, directly conflict with each other. For example, the US and EU have different sanctions policies with regards to Iran, meaning you’ll have to tread carefully to remain compliant in each area you operate in. To avoid the hefty fines and reputational damage associated with non-compliance, you’ll need to take a multi-pronged approach to implement an effective sanctions policy.
Firstly, this means developing an effective Know Your Customer (KYC) policy. It’s important to find a KYC partner who has an in depth knowledge of the sanctions policies in the parts of the world you operate in and who can effectively screen your potential customers. Secondly, you’ll need to monitor your existing customers to ensure they don’t impact your sanctions compliance. To do so, you’ll want to take advantage of AI and machine learning programs that can provide real-time updates, allowing you to act as quickly as possible should a problem arise.
Adapting Your KYC Policy for Politically Exposed Persons (PEPs)
One part of an effective KYC policy is the ability to properly vet politically exposed persons (PEPs). These are high-ranking individuals who might be susceptible to bribery and fraud, amongst other crimes, and who often draw extra scrutiny from regulatory bodies.
When it comes to vetting PEPs, things like job title, third-party relationships and additional sources of income take on added significance. In addition, you need to make sure your KYC policy takes into account where the PEP is based; a US based official will impact your compliance status differently from one based in China.
As with your KYC policy for other customers, AI and machine learning are great tools to help monitor PEPs, which you’ll need to do to stay one step ahead of any issues that could impact your compliance status.
The points outlined here are only a small part of the compliance challenges your business is likely to face this year. That said, formulating effective banking relationships and KYC procedures are essential to remaining compliant and successfully expanding your business.