2022 Compliance trends for FinTechs

The FinTech industry is growing and evolving at a rapid pace. In order to keep up with the latest compliance trends, FinTech companies must be proactive and adaptable. This article will discuss some of the compliance trends that FinTechs should be aware of in 2022.

The current compliance landscape for FinTechs

1. KYC and AML Compliance

Hyper-digitalization is reshaping the financial services industry. One of the top risk areas is synthetic identity fraud, now accounting for 80 - 85% of all identity fraud. 2023 losses for the US unsecured credit market solely due to fake identities are expected to top $2 billion! To combat this threat, leading FinTechs are leveraging services offered by anti- money laundering (“AML”) services providers such as Prove and LexisNexis. Now more than ever a proactive layered approach to Know Your Customer (“KYC”) and Anti-Money Laundering compliance is key to minimizing fraud losses.  

2. New rules for cryptocurrency projects

As consumer adoption increases, cryptocurrency faces increased regulatory scrutiny. In the US, the Securities and Exchange Commission (“SEC”) has vocalized its plans to bring clarity from a regulatory perspective to the cryptocurrency market. US Market Regulators such as the Commodity Futures Trading Commission (“CFTC”), and the Office of the Comptroller of the Currency (“OCC”) have also issued statements advising the work their respective agencies are doing and will be doing in the crypto space.  As a result of increased regulatory presence projects must assume that the runway for “grey areas” is shrinking rapidly, business models propped up by legal opinion memos must have these memos refreshed frequently to ensure your project isn’t blindsided by a proverbial knock at the door by a state or federal financial market regulator.  

3. Third-Party Risk Management

Third-Party Risk Management (“TPRM”) is a critical issue for all businesses, but it is especially important for FinTechs. To quickly get to market many FinTechs leverage strategic partnerships to cover critical components of the product's core functionality. Understanding the risk profile of these strategic partners is paramount to ensuring your project's seamless continuity. Leaders in the financial services space have begun to make significant headway in creating beyond-the-check-box third-party risk management programs. Requiring to see key policies, audit reports, and recovery plans is now being required not only during pre-contract due diligence but also at varying frequencies throughout the duration of the relationship.   We expect those partnering with US banks will see a demand for increasing oversight stemming from the recent marketing compliance issues resulting in Cease-and-Desist Letters being issued by the Federal Deposit Insurance Corporation (“FDIC”). 

Conclusion

The compliance landscape for FinTechs is constantly evolving, and it can be difficult to keep up with the latest trends. However, by understanding the most common compliance risks and taking steps to mitigate them (including partnering with AskDegree), you can give your FinTech a competitive edge. By staying up-to-date on compliance trends and implementing best practices, you can create a culture of compliance that will help your FinTech thrive. 

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