AML compliance for fintechs: the best guide in 2025
- azakaw
- Jun 1
- 8 min read
Updated: 7 hours ago
The fintech industry has brought new ways for people to access financial services, through instant digital payments, trading apps, neobanks, crypto exchanges, etc..
But with innovation comes scrutiny, and regulators across the globe are tightening anti-money laundering (AML) requirements for fintechs to make sure they are not exploited by criminals.
Getting AML compliance for fintechs wrong means considerable fines, loss of licenses, and damaged investor confidence.
This guide explains everything about AML for fintechs: the key requirements, how to build a compliance strategy, and the consequences of non-compliance.
Keep reading our guide created by a team of regulatory experts to master Anti-Money Laundering rules and requirements for Fintech companies.
Fintech AML Key Takeaways |
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What is AML in the fintech industry?
Anti-Money Laundering (AML) translates into the rules and processes that prevent criminals from using financial services to hide illegal money.
What is KYC for fintechs?
Know Your Customer (KYC) is an important part of AML as it assures that fintechs verify customer identities before offering their services.
In short, AML equals preventing financial crime, and KYC equals verifying customers. And for fintechs, both are non-negotiable.
Why must fintechs comply with AML regulations?
One of the most closely watched sectors of the financial industry is where fintechs operate. Regulators hold traditional banks to the same, if not higher, standards.
Building credibility, safeguarding clients, and assuring long-term growth are the goals of AML compliance.
Growing regulatory pressure worldwide
From the Financial Action Task Force (FATF) to local regulators such as the FCA in the UK, the FinCEN in the US, and the UAE Central Bank, authorities expect fintechs to comply with the same standards as traditional banks.
Our experience tells us that the regulatory bar is rising, especially for digital-first businesses.
High-risk profile of fintechs and neobanks
Fintechs and neobanks are often classified as high-risk entities within the financial sector due to their digital-first models, high transaction volumes, and rapid international expansion.
The lack of a traditional physical presence and heavy reliance on technology increase exposure to financial crime, including several types of fraud, money laundering, and illicit financing.
Their innovative approach also attracts a diverse global customer base, which can complicate identity verification and transaction monitoring.
For these reasons, regulators and banking partners require fintechs and neobanks to implement robust compliance programs, including digital KYC/KYB, continuous monitoring, and dynamic risk management.
Impact of non-compliance
Authorities have the power to suspend or cancel operating licenses, effectively shutting down a fintech for non-compliance, and impose multi-million dollar fines on non-compliant fintechs.
Even if the business is not shut down, its executives may be charged with crimes, and it may suffer harm to its reputation and investors.
What are the AML requirements for fintechs?
Fintechs need to develop AML compliance procedures that encompass the full customer lifecycle in order to function securely and lawfully.
Although there are some jurisdiction-specific variations, these standards are widely recognised and upheld.
Customer Due Diligence (CDD) and Onboarding
Before offering services, fintechs must confirm each customer's identity by implementing Customer Due Diligence processes.
This includes Politically Exposed Persons (PEP) and sanctions screening, Enhanced Due Diligence (EDD) for high-risk clients, and KYC checks, which use digital onboarding tools to confirm the identity of customers.
Transaction monitoring
Onboarding is not the end of AML compliance.
Fintechs need to implemment transaction monitoring systems that identify questionable trends, lower false positives, and more.
According to the expertise of our team, these systems should adapt to customer profiles and risk levels, ensuring resources focus on the most suspicious activity.
Reporting Suspicious Transactions (STRs)
When suspicious activity is detected, fintechs are required to report it to regulators. For example, in the UAE, STRs are filed through the goAML platform.
The experience of our expert team says that timely and accurate reporting demonstrates regulatory compliance and helps law enforcement combat financial crime.
Screening for sanctions and PEPs
Customer information must be continuously screened against updated sanctions and watchlists.
This ongoing process helps prevent relationships with sanctioned individuals or entities and ensures fintechs remain compliant as global sanctions evolve.
Related content: What is a PEP?
Ongoing monitoring and reviews
AML is a continuous effort. Fintechs must update customer risk profiles, refresh KYC documentation, and monitor accounts regularly.
This proactive approach allows them to catch suspicious activity that may not have been visible at onboarding.
Maintaining an AML policy and compliance programme
Every fintech must develop a clear AML policy that documents responsibilities, controls, and escalation procedures.
This policy should be reviewed regularly, adapted to new risks, and communicated across the organisation.
Strong internal governance is key to demonstrating compliance.
Who regulates fintechs for AML compliance?
A mix of international standards and local regulators regulates and enforces AML compliance.
For fintechs, understanding exactly who sets and enforces the rules is essential for expansion and scaling.
FATF guidance and global standards
The Financial Action Task Force (FATF) provides a global AML framework through the FATF Recommendations.
Countries that fail to comply are at risk of being grey/black-listed, which has serious consequences for their financial sectors.
Regional and local regulators
UAE: Central Bank, Dubai Financial Services Authority (DFSA), Abu Dhabi Global Market (ADGM), Virtual Assets Regulatory Authority (VARA), and the Executive Office for AML/Counter Terrorism Financing (CTF).
UK: FCA.
EU: Anti-Money Laundering Directives (AMLD).
US: FinCEN.
The role of fintech regulatory sandboxes
Many regulators offer sandboxes where fintechs can test products under supervision.
Our experience suggests that these sandboxes are crucial for fintechs, as they enable companies to experiment while ensuring that AML safeguards are in place before full launch.
AML challenges for fintech companies
AML compliance for fintechs can be especially challenging due to how fast they usually grow, their often complex products, and, of course, the evolving regulations.
According to our experience in this industry, here are the most common hurdles:
Scaling compliance with fast growth
Compliance teams often struggle to keep up with fast growth. Manual processes quickly become insufficient, which creates risks of oversight.
High false positives in screening
Screening tools are essential, but they often generate high levels of false positives. This wastes resources and can delay legitimate transactions, which frustrates customers, naturally.
Lack of in-house expertise
Fintechs that are at an early stage of development and growth may not have dedicated compliance professionals, which leaves them vulnerable to mistakes.
Outsourcing or partnering with RegTech providers can help bridge this gap.
The complexities of crypto and cross-border transactions
Crypto assets and international transfers carry additional risks. Each jurisdiction might treat crypto differently, which means fintechs need to maintain flexible compliance frameworks.
TIP: Read our ultimate guide about AML compliance for cryptocurrency
Balancing user experience with compliance
Fintechs tend to thrive on smooth and fast onboarding experiences. However, removing too many compliance steps creates regulatory risks.
The challenge is to maintain a frictionless user journey without compromising security.
How to build an effective AML compliance programme for Fintechs
Building a strong compliance programme requires the right tools, a clear understanding of risk, and leadership efforts and dedication.
Appointing a Compliance Officer or MLRO
Regulators expect fintechs to designate a Money Laundering Reporting Officer (MLRO) or someone in a similar role.
This person is accountable for ensuring compliance, reporting to regulators, and leading investigations.
Choosing the right AML software and technology
Technology is critical in scaling compliance. Automated AML software such as azakaw’s can integrate with fintech platforms to conduct KYC and monitor transactions.
The best tools use AI and machine learning to reduce false positives and detect complex patterns.
Staff training and internal policies
Compliance is not the job of one department; it is a company-wide responsibility.
Fintechs should invest in regular AML training for employees so they can recognise suspicious behaviour and follow escalation procedures.
Implementing a Risk-Based Approach (RBA)
A risk-based approach means focusing compliance resources where they are most needed.
For fintechs, this might include applying stricter AML checks to high-value transactions or customers from high-risk regions while streamlining onboarding for low-risk users.
Using regulatory sandboxes and staying up to date
Since regulations evolve quite often, fintechs must stay engaged with regulators.
Participating in sandboxes and industry consultations helps businesses anticipate changes and adapt early.
What are red flags for fintechs in AML?
Red flags in AML for fintechs are signals of potential suspicious activity.
Fintech teams must know how to spot these indicators quickly, as recognising red flags early allows fintechs to act before regulators step in:
Unusual transaction patterns, such as round sums or rapid-fire transfers;
Customers who are reluctant or refuse to provide identity information;
Use of multiple accounts to split transactions into smaller amounts (structuring);
Transfers to or from high-risk jurisdictions with weak AML oversight;
Suspicious crypto transactions, including use of mixers or privacy coins.
What happens if a fintech fails AML compliance?
Failing AML obligations carries serious consequences that go far beyond financial penalties.
Regulatory fines and penalties
Global regulators impose significant fines on fintechs that breach AML rules. These fines can cripple early-stage companies and severely impact more established ones.
Business license suspension or revocation
In severe cases, regulators can revoke or suspend operating licenses, shutting down operations overnight.
Criminal liability for executives
Senior leaders may face personal liability, including criminal charges, if a fintech is found to have willfully ignored AML obligations.
Reputational damage and investor impact
Compliance failures damage investor trust and customer confidence.
It might be harder for companies to recover from such reputational damage than from financial penalties.
AML for Fintechs FAQs
Do all fintechs need to comply with AML regulations?
Yes. If you process payments, offer trading, or provide financial services, AML rules apply.
What are the AML risks unique to fintechs?
Speed of transactions, cross-border flows, and crypto assets are AML risks unique to fintechs.
How do fintechs handle KYC and onboarding?
Most fintechs use digital identity verification and risk-based checks.
Can fintechs, regardless of size, outsource AML compliance?
Yes, fintechs can outsource certain AML functions such as KYC checks, transaction monitoring, or sanctions screening to specialised RegTech providers or compliance-as-a-service firms (e.g., azakaw).
Outsourcing AML compliance, however, does not remove the fintech’s legal responsibility. Regulators expect the company to maintain oversight, appoint a compliance officer, and ensure the outsourced provider meets regulatory standards.
Which regulators oversee fintech AML compliance?
It depends on jurisdiction: FCA (UK), FinCEN (US), UAE Central Bank, and others.
What are the best AML tools for fintechs?
API-first, automated platforms that combine KYC, transaction monitoring, and sanctions screening, like azakaw, are the best AML tools for fintechs.
Who regulates fintech AML in the UAE?
The UAE Central Bank, DFSA, ADGM, and VARA, alongside the Executive Office for AML/CTF, are the entities that regulate AML in the UAE.
What are the penalties for non-compliance?
Fines, license suspension, criminal liability, and reputational damage and among the penalties for non-compliance.
Conclusion
AML compliance should not be seen as a hurdle. It can be a growth enabler when done right.
A strong AML program in a fintech company demonstrates credibility, attracting both customers and investors. It can also provide a competitive edge when expanding into new markets.
Embed compliance into processes from the start, as it is easier than retrofitting later. Automation ensures fintechs can grow quickly while maintaining compliance at scale.
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