Why FinTech’s are exposed to financial crime risk
Financial technology (FinTech) companies have transformed how financial services are delivered. Digital payments, embedded finance, open banking, digital wallets and alternative lending models have increased access, speed and convenience. At the same time, these innovations have introduced new and complex financial crime risks.
Regulators now expect FinTech companies to demonstrate the same level of rigour in managing money laundering, terrorism and proliferation financing risks as traditional financial institutions.
For Money Laundering Reporting Officers (MLROs) and senior compliance leaders in the FinTech sector, the challenge is no longer simply to satisfy minimum regulatory obligations it is to demonstrate a deep, defensible and evidence-based understanding of financial crime risk that withstands regulatory review, supports investment and client acceptance decisions and drives proportionate, risk-aligned control execution.
Arctic Intelligence’s ML/TF/PF Risk and Control Assessment Solution has been developed specifically for FinTech’s. It supports them in meeting regulatory expectations, providing a structured, evidence-based, regulator-ready framework that empowers teams to identify, assess and govern financial crime risk across every line of business.
Why FinTech’s are targeted by organised criminal networks
FinTech’s are inherently exposed to financial crime risk for several reasons:
- Central Gatekeeper Role in Digital Finance: FinTechs provide primary access points to payment systems, digital wallets, embedded finance platforms and alternative financial services, making them attractive gateways through which illicit funds can be rapidly placed, layered and moved across the financial system.
- Instant Digital Onboarding and Remote Account Access: Fully digital onboarding processes, while efficient, increase exposure to synthetic identities, impersonation fraud and document manipulation if not governed by robust verification and behavioural monitoring controls.
- High-Velocity and Real-Time Fund Flows: FinTech platforms enable near-instant funding, transfers and withdrawals across multiple rails, creating rapid transactional velocity that can obscure suspicious behaviour without sophisticated, real-time monitoring.
- Cross-Border and Multi-Jurisdiction Exposure: FinTechs often service international customer bases, provide remittance and crypto-adjacent services and operate across multiple regulatory regimes, increasing exposure to high-risk jurisdictions, sanctions obligations and proliferation financing corridors.
- Alternative Payment Methods and Digital Assets: Use of e-wallets, prepaid instruments, virtual IBANs, cryptocurrencies and tokenised assets introduces new pathways for illicit funds to enter, circulate and exit digital ecosystems.
- Third-Party APIs and Embedded Finance Partnerships: Open banking APIs, marketplace integrations and embedded finance partners create additional entry points for illicit funds and fragmented control environments if not governed through integrated AML/CTF frameworks.
- Scalable Platform Models: Rapid growth models can magnify control weaknesses at speed, allowing criminal activity to scale quickly across large customer populations if risk frameworks do not scale proportionately.
Taken together, these features make FinTech’s a primary target for organised criminal networks and place enterprise-wide, evidence-based ML/TF/PF risk assessment at the centre of regulatory expectations.
Introducing Arctic Intelligence’s ML/TF/PF Risk and Control Module for FinTech’s
Arctic Intelligence’s FinTech’s Risk and Control Module provides a comprehensive and configurable foundation for conducting robust, enterprise-wide ML/TF/PF risk assessments tailored to these sectors.
This module enables FinTech’s to:
- Identify and Prioritise ML/TF/PF Risks: Using FinTech-specific risk taxonomies aligned to FATF and supervisory expectations, the module guides firms through identifying the highest-impact risk areas across digital onboarding models, customer and beneficial ownership profiles, payment and wallet products, API and embedded-finance channels, transaction velocity and behavioural flows and geographic exposures.
- Assess Controls and Operational Effectiveness: Moving beyond static compliance checklists, the solution maps controls to real FinTech risk drivers and enables testing of both design and operational effectiveness allowing firms to demonstrate, with evidence, that controls are operating as intended.
- Calculate Residual Risk Transparently: Residual risk reflects a FinTech’s true financial crime exposure. Arctic’s module aggregates inherent risk indicators with control performance data to produce defensible residual risk ratings that are directly aligned to risk appetite, escalation thresholds and governance frameworks.
- Produce Audit-Ready Documentation: Built-in audit trails, version history, review workflows and aggregated reporting provide regulators, internal audit and senior management with transparent, evidence-based documentation explaining how financial crime risk conclusions were reached and governed.
This solution embeds specific typologies, regulatory best practice and global risk methodologies into a scalable, configurable risk and control platform that supports consistent application across business lines, geographies and legal entities.
The built-in audit trail, review logs and Board-ready reporting enable stronger governance oversight while making complex risk outcomes digestible for executives and boards.
Who does this module apply to?
The money laundering, terrorism and proliferation financing risk and control module contains a library of risks, controls and control tests designed specifically for different types of FinTech’s:
| Alternative Lending Platforms | Marketplace Lending Platforms |
| Buy Now, Pay Later Providers | Point of Sale FinTech’s |
| Cross-Border Payment Platforms | Merchant Acquirers |
| Crowdfunding Platforms | Micro-Investing Apps |
| Crypto Investment Platforms | Money Remittance Platforms |
| Crypto Wallets | Neo-Banks / Challenger Banks |
| Crypto Custody Platforms | NFT / Tokenisation Platforms |
| Decentralised Finance Platforms | Non-Bank Lenders |
| Digital Brokerage and Trading Apps | Open Banking Platforms |
| Digital Credit Providers | Account Aggregation Platforms |
| Digital Currency Exchanges | Payment Gateways and Processors |
| Digital Wallet Providers | Peer-to-Peer Lending Platforms |
| Embedded Finance Providers | Personal Financial Management |
| InsurTech | Robo-Advisers |
| Invoice Financing / Factoring | Digital Wealth Managers |
| Digital Only Banks | Share Trading Platforms |
| Stablecoin Issuers / Payment Rails | Wealth Tech Infrastructure |
What does this module contain?
A. Enterprise-wide ML/TF/PF risk assessment, covering the following risk groups:
- Environmental Risk – covering exposure to internal and external risk indicators.
- Customer Risk – covering customer base profile, customer location risk, legal form risk, industry / occupation risk, PEP risk and customer activity risk.
- Product and Services Risk – covering the services provided by FinTech’s that are subject to AML/CTF laws and the inherent risk characteristics of each of these.
- Channel Risk – covering face-to-face and non-face-to-face customer onboarding and transaction channels.
- Transaction Risk – covering higher risk transaction types.
- Country Risk – covering higher risk country risk exposures based on the residency, nationality or citizenship (Individuals) and country of registration, incorporation, domicile or operations (Entities).
These modules also include a comprehensive library of suggested controls and control tests to support design and operational effectiveness testing.
FinTech’s can deploy the content module out-of-the-box or tailor it to their methodology, eliminating the need to start from scratch while maintaining full ownership of their risk model. It also allows firms to import their own risk indicators and controls or enhance the expert-built libraries to suit their bespoke risk methodology and regulatory environment.
B. Product and Services ML/TF/PF risk assessment module, covering over 120 different products and services, with inherent ML/TF/PF risk attributes of each over the following risk groups:
- Commercial and Business Lending Products – covering Commercial Overdrafts / Lines of Credit, Crowd Funding and Equipment Loans.
- Deposit and Savings Products – covering Cash Management Accounts, Deposit Accounts, Savings Accounts and Transaction Accounts.
- Investment and Wealth Management Products – Asset Management, Discretionary Portfolio Management, Financial Planning and Robo-Advisers.
- Investment Products – covering Investment Funds, Trading in Bonds, Commodities, Currencies, Derivatives and Equities and Unit Trusts.
- Payment and Transaction Services – covering Cash Passports, Credit Cards, Debit Cards, Digital Currency, Merchant Acquiring, Payment Processing, Prepaid Cards, Domestic and International Remittance, Stored Value Cards and Transaction Services.
- Personal Lending Products – covering Buy Now Pay Later (BNPL), Cash Advance Loans, Debt Consolidation Loans, Early Wage Access, Medical / Dental Loans, Mortgage Broking, Peer-to-Peer Lending and Personal Loans.
- Superannuation, Pension and Insurance Products – covering Insurance and Superannuation Accounts.
C. Channel ML/TF/PF risk assessment module, covering over 30 different inherent ML/TF/PF risk attributes of each over the following risk groups:
- Face-to-Face Channels – covering Internal Physical Channels; Relationship Managed Physical Channels and External Physical Channels.
- Non-Face-to-Face Channels – covering Internal Remote Assisted Channels; Internal Manual Channels; Internal Digital Self-Service Channels; Internal Programmatic / Embedded Access Channels; External Interbank and Payment Infrastructure Channels and External Digital Channels.
- Face-to-Face or Non-Face-to-Face Channels – External Partner Intermediary Channels.
- Customer Onboarding Channels (General) – Channel type; onboarding through face-to-face channels and non-face-to-face channels and customer onboarding through intermediaries.
- Transaction and Delivery Channels – Value of transactions by delivery channel type.
- General Channel Risks – Higher channel risk indicators.
Get started with Arctic Intelligence
Whether you are establishing your first enterprise-wide ML/TF/PF risk assessment or upgrading a legacy spreadsheet-based program, Arctic Intelligence’s FinTech’s Risk and Control Module is a scalable, defendable and configurable solution that meets the needs of modern compliance teams.
Book a demo or contact us to explore how our platform can help your business strengthen compliance, mitigate financial crime risk and build a risk program that stands up to regulatory scrutiny.
Or visit our website to learn more.
