UK fintechs are most likely to shake up the AML status quo, according to new research from LexisNexis Risk Solutions

Fintechs are not prepared to accept shortcomings in the fight against financial crime, new figures from global analytics provider LexisNexis® Risk Solutions show. Almost half (48%) of UK based fintech companies don’t think the existing UK regulatory framework is effective in combatting financial crime in the UK, with one in 10 fintechs (12%) going so far as to say that it is not at all effective.

LexisNexis Risk Solutions worked with The Economist Intelligence Unit to survey senior compliance and finance executives from a range of regulated businesses. The research included fintech companies in the UK and provides an understanding of fintechs’ perspectives towards financial crime and anti-money laundering (AML) provisions in the UK. The research findings are detailed in a new report, On the Frontline: Fintechs Vs Money Laundering.

Fintechs are placing their bets on analytics and technology to improve AML

Fintechs believe advanced analytics and emerging technologies are the most effective way to improve the fight against money laundering in the UK (46% compared with 32% overall). They’re far more likely to be using analytics for AML than other regulated businesses: 86% of fintechs are using analytics already or planning to within the next couple of years, compared with 78% overall.

Challenges and concerns

When asked about what concerns them most in relation to money laundering over the next 12 months, a quarter (25%) of fintechs cited evolving criminal methodologies, such as the use of cryptocurrencies, as the largest risk. They see geopolitical events like Brexit (16%) and a lack of awareness of the threat of money laundering (16%) as the second biggest risks.

According to the report, over half (53%) of fintechs view the lack of information sharing between regulated industries as the biggest external barrier to effective AML controls, with an additional 49% stating that lack of consistency towards AML across different sectors was a significant obstacle.

While fintechs have the appetite to combat money laundering, they also face internal challenges. The report revealed that 38% felt that company culture needed to shift from apathy to actively tackling the issue, and concerningly, almost half (48%) state that there is an internal lack of understanding of money laundering typologies within their organisation. Complacency (43%) is also seen as a cultural challenge.

Michael Harris, director, Financial Crime Compliance and Reputational Risk at LexisNexis® Risk Solutions, comments:

“With their agile approach to business, good understanding of technology and being unencumbered by legacy systems, fintechs are in a strong position to take the lead in actively detecting and fighting money laundering within the UK economy. However, there are some internal challenges to overcome. Recruiting talent with the right skill set can be difficult, as fintechs compete with banks with bigger budgets. There also needs to be an internal culture shift towards understanding the AML threat better and tackling complacency.

Emerging technologies will help these firms play a pivotal role in fighting financial crime, especially given the sophisticated approaches that money launderers are now adopting. Without this, we risk always remaining one step behind the criminals.”