NEW YORK—Internet-based financial technologies, a growing threat to credit union’s lending portfolios, are moving into the crosshairs of the Financial Action Task Force (FATF).
The FATF recently cautioned that terrorists and other criminals are increasingly using fintechs to raise and launder funds for illicit purposes.
This decision by the FATF comes as reports indicate that a transfer of $28,500 into the accounts of Syed Farook and Tashfeen Malik, the San Bernardino terrorists who brutally killed 14 innocent people, originated from marketplace lender Prosper just weeks before the killings.
Areas presenting potential anti-money laundering (AML) and terrorist finance risk include crowdfunding, marketplace lending, virtual currencies, prepaid cards, and other technologies that facilitate the raising, disbursement, and transmittal of funds between end users—often internationally, explained the law firm of Venable LLP in Lexology.com.
“While many of these products and services are already subject to direct AML regulation as money services businesses (MSBs), particularly money transmitters, some do not fit neatly within existing AML regulatory frameworks, even though they facilitate financial transactions,” Venable LLP stated. “Still some businesses may not appreciate the application of the AML laws to their technology or, even if they do, may not have the resources or experience to implement appropriate compliance programs.”
Although regulation often lags behind technology, the growing awareness of the AML risks presented by fintechs suggests that heightened regulatory scrutiny is only a matter of time.
“As explained by the director of the Financial Crimes Enforcement Network (FinCEN), the U.S. financial intelligence unit, ‘Innovation is laudable but only as long as it does not unreasonably expose our financial system to tech-smart criminals eager to abuse the latest and most complex products,’” shared Venable LLP. “The message is clear that FinCEN and other federal regulators expect businesses to develop AML compliance policies and procedures in lockstep with the launching of new technology, products, or services.”