FinTech solutions and funding are increasingly being used to circumvent US Sanctions – but the latest data on recent fines is not good news at all.
The greatest worry is in the FinTech space – where developers and IT specialists look like potential sitting ducks. Any FinTech will need funding, and its transactional base is by nature global. With the likes of China, North Korea, Russia and Iran ramping up on IT expertise – US Sanctions-hit individuals, entities and transaction types who try to embark on FinTech solutions or funding could cause major problems for fledgling start-ups in desperate need of capital. This could easily lead to FinTech firms being caught out inadvertently due to the global, cross-border nature of FinTech.
The latest data on the impact of US fines for Sanctions, AML and KYC issues reveals that non-US firms are ever more likely to be fined harder than US firms. There is now a very clear message: EU Blocking Statutes which attempt to deny US Extra-Territoriality do not work in practice. Moreover, the likes of Angela Merkel and Mahathir Mohamed’s recent remarks that US cross-border powers or extra-territoriality should not be taken seriously are dangerously irresponsible, which leads to everyone, including FinTech firms, getting very confused.
Recent data show that a mere 1% of all global illicit finance is being captured – but the US is comprehensively the best at tracking, and fining – typically for mere “Apparent Violations”. This involves pushing for massive settlements without the need for a conviction.
The only way forward is for any firm – particularly FinTech – to get expert advice and training, and implement a proper OFAC US Sanctions and AML plan to bolster any existing money laundering and terrorist financing, KYC programmes. EU MiFID and GDPR fines came to $82.7M in the past 15 months, but the overwhelming message is that if you are not looking out to prioritise US Sanctions & AML policy, you are not in business.
FinTech often see themselves as disruptors, but as they fall under the US definition of financial institution, they are as potentially liable as any global entity for Sanctions, Money Laundering, KYC, Terror Financing. The global, cross-border transactional nature of FinTech, and focus on technological know-how over geo-political expertise in FinTech means there are grave risks of FinTech firms inadvertently getting caught out.
Being intrinsically globally liable in a world where US Sanctions and AML reach is cross-border and extremely potent is a very scary prospect.