Institutions like FinTech companies have come up with efficient ways to make “money transfer beyond borders” easier. However, the volatile nature and complexities make them subject to AML monitoring. The involvement of intermediaries, legal requirements, currencies, and market types further make cross-border payments risk aversive. Along with other risks, FinTech companies also face high chances of money laundering as transactions once crossing the border are hard to detect.
Rapid digitization is changing the ways customers make money transfers and advent of digital banking is also streamlining transactions. With the availability of independent platforms, cross-border payments are expected to cross $156 trillion by the end of 2022. This blog provides detailed insights into this type of money transfer and how AML solutions help secure them.
AML Verification for Cross-Border Payments – A Detailed Overview
Cross-border payments are much more complex than the way customers perceive them. They involve more strict anti money laundering checks, identity verification, and high fees. Despite the regulatory checks FinTech companies may provide, customers can still fall vulnerable to cyberattacks, fraudulent schemes, and loss of money. Similarly, in the case of these third-party firms, they experience transactions involving illicit funds exposing them to serious legal repercussions.
As banks charge over-charge cross-border payments, customers convert to independent FinTech companies. However, this requires them to deploy efficient AML solutions for better screening of the transactions. Customers demand trackable, swift, and secure money transfers which further increases the need for FinTech companies to establish better digital onboarding as well as funds validation mechanisms.
AI-powered AML compliance solutions help these firms build enough security to restrict access of criminals and mitigate chances of financial crimes. Ultimately, FinTech companies can stay put with the regulatory standards while providing secure and protected cross-border payments. Details regarding different types of transfrontier transactions are in the next section.
- High-Value Transactions
FinTech companies facilitate payments for high-value assets that customers opt to buy from across the border. These include jewelry, expensive vehicles, artworks, property purchase, and others. Similarly, online platforms also offer investment in startups or other businesses.
However, while providing all of these services, FinTech companies can not leave AML compliance unattended. Therefore, prior to accepting or permitting large-scale cross-border payments, these firms should perform Customer Due Diligence (CDD) and risk assessment to mitigate chances of money laundering.
- Payments Made With Credit/Debit Card
This type of cross-border payment requires the presence of physical cards. In most cases, travelers or overseas employees use this method to either make withdrawals, pay for utilities, or make other payments. As credit/debit card owners are monitored by their respective countries, regulatory bodies of their present-stay regions should also perform AML screening of these customers.
It is crucial for FinTech companies to monitor travelers and overseas customers as they possess a high risk of financial crimes. AI-powered anti-money laundering solutions provide real-time identification of cardholders and cross-verification of backgrounds which helps these firms to validate transitions in less time.
- Transfrontier Transfer of Money
Due to high rate of inflation in some countries such as Sudan, Ghana, Zimbabwe, and others, people migrate to regions with promising growth. Furthermore, in most cases, one breadwinner moves to some other country and sends money to their family. For this purpose, FinTech companies provide them with robust services to instantly transfer money.
However, cross-border payments involve high chances of money laundering as the firms are unaware of source of funds. In order to validate them, FinTech companies require AML solutions to verify customers as well as keep track of their activities to ensure they do not become a part of some money laundering scheme.
AML Security – Solutions for FinTech Companies to Streamline Cross-Border Payments
Cross-border payments pose high risks of fraudulent transactions which mandate FinTech companies to employ efficient AML compliance programs. Countries from all around the world are facing a significant increase in financial crimes, payment scams, and cyberattacks. Therefore, the need for FinTech companies to incorporate anti-money laundering mechanisms is also skyrocketing.
Different regulatory bodies are placing strict AML verification requirements in force to monitor cross-border payments. For this, FinTech companies are deploying AI-powered AML solutions as customers demand more robust, convenient, and easier processes to flow their money across different countries.
In order to limit friction and chances of exposure to criminal activities, FinTech companies need to establish AML compliance programs. They not only provide security to money transfers but also aid in staying in line with legal obligations. Digital AML systems streamline cross-border payments by automating verification. Hence, FinTech companies can assure seamless transactions in any part of the world without having to require physical visits.
The Way Forward
Digital AML solutions are reshaping the future of cross-border payments post-pandemic. Travelers, migrants, and overseas employees can make transactions online by undergoing easy identification steps. Moreover, FinTech companies are bringing convenience to global customers while keeping anti-money laundering checks and transaction security intact. By incorporating AI-powered AML security services, these firms can not only reduce the volatility of cross-border payments but also make the process way more reliable.
