NEW YORK—A new poll reveals that 60% of fintechs surveyed report paying at least $250,000 in compliance fines last year, with one-third paying more than $500,000.
The State of Compliance Benchmark Report from identity risk management company Alloy also found larger fintechs were more likely to report higher compliance fines—37% of fintechs with 1,000+ employees reported paying over $500,000 in compliance fines last year.
The report’s findings are based on a survey of more than 200 compliance decision-makers working at financial technology companies in the U.S. The survey ran from June 6-12, 2023, and included respondents from small (1-500 employees), medium (501-1000 employees) and large (1000+ employees) organizations. The report was conducted on behalf of Alloy by Qualtrics.
“Nearly all fintechs (93%) reported that bank secrecy act (BSA) compliance requirements—including anti-money laundering (AML) and know your customer (KYC) requirements—were challenging to meet. Even so, most fintechs (80%) are doing more than the minimum amount of risk management required to meet these compliance requirements—suggesting a robust compliance program requires labor beyond even what is mandated by the U.S. government,” Alloy said.
The Chief Concerns
When it comes to the consequences of mismanaging compliance, while fintechs are concerned with fines, they are even more concerned about customer confidence in their ability to properly handle operations, according to the survey. Thirty-four percent of fintechs said customer confidence had the greatest impact on their BSA compliance decisions, followed by reputational damage at 25%, Alloy said.
"Because fintechs enable people to manage their money and make financial decisions, there's no wiggle room when it comes to compliance," said Gizelle Barany, general counsel at Alloy. "In addition, the pace of bad actors is often faster than regulators are able to keep up with, so it's not surprising that many fintechs are doing more than the minimum to prevent financial crime."
Read the full report here.
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