Booming FinTech industry poses threat to AML/CFT compliance: FIU

• Highlights industry’s lack of focus on RegTech products
• Says industry’s regulatory compliance has been minimal to-date

Sri Lanka’s booming FinTech industry’s lack of focus on technological innovations such RegTech products in enhancing regulatory compliance is creating serious challenges in ensuring anti-money laundering/combating the finance of terrorism (AML/CFT) compliance without compromising the FinTech boom, the Financial Intelligence Unit (FIU) said.

The country has witnessed a FinTech products surge in recent times, which is expected to enhance financial inclusion.  However, FIU, which is an independent institution within the Central Bank, pointed out that the FinTech industry’s focus on enhancing regulatory compliance has been 
minimal up to now. 

“Even though a considerable number of FinTech products are in the market and many more product proposals in the pipeline for approval, the number of RegTech products which harness the technology to ensure regulatory compliance of institutions have been zero up to now,” FIU said.

It went on to note that these emerging FinTech products are increasingly undermining the requirement of AML/CFT regulatory compliance.

“It is a challenge for the FIU-Sri Lanka to strike a balance between the FinTech boom and AML/CFT compliance without compromising mandates of each sector,” it cautioned. 

RegTech products, which have become an emerging trend in the global financial industry, support AML/CFT compliance by providing solutions in regulatory reporting, risk management, identity management & control, compliance, and transaction monitoring.

“Such RegTech products will greatly benefit FIU-Sri Lanka (and other Regulators) as well as institutions by driving the compliance burden towards greater automation,” FIU stressed. (NF)