An Anti-Money Laundering (AML) compliance program is a cornerstone of operating in the financial services industry. Regulators expect fintechs, broker-dealers, money transmitters, and other regulated entities to have a program that is not only well-documented but also operational, risk-based, and effective.
AML compliance requirements are built into laws such as the Bank Secrecy Act, the USA PATRIOT Act, and the Anti-Money Laundering Act of 2020. These laws apply broadly, covering many types of institutions and activities. While the specific rules vary, most AML programs share the same foundation: assessing risks, defining written procedures, training staff, monitoring for suspicious activity, and reporting to the relevant authorities.
This article explores the core pillars of AML compliance and its key components, from risk assessment to training, monitoring, and testing. It also addresses key challenges fintechs face and outlines the areas that regulators are likely to prioritize.
Why AML Compliance Matters for Fintechs
If a firm handles payments, trades securities, offers cryptocurrency services, or facilitates cross-border transactions, having an AML program is likely required, either by law or through business relationships.
Regulators like FinCEN, SEC, FINRA, and state financial authorities expect AML programs to be proportionate to the risks of the business. Even if a company is not directly supervised, its partners might be. As partners are accountable for ensuring that the fintech operates with adequate controls, they require the same standards as formal regulators. This scrutiny can influence whether a fintech can secure new partnerships, access certain payment rails, or expand its services.
Failing to meet AML expectations carries business risks that go beyond regulatory penalties. Weak or poorly executed programs can result in loss of licenses, termination of key relationships, increased fraud exposure, and reputational damage that is difficult to reverse.
For a fintech looking to grow and scale, building a functional, risk-based AML program is an operational safeguard. It helps maintain the trust of partners and customers while providing a structure that can adapt as regulations and business models evolve.
Who Regulates AML Compliance?
In the US, AML compliance is primarily governed by the Financial Crimes Enforcement Network (FinCEN). FinCEN sets the core rules under the Bank Secrecy Act and enforces reporting, recordkeeping, and program requirements.
Depending on the type of financial institution, other federal regulators may also examine for AML compliance. This includes the Securities and Exchange Commission (SEC) for broker-dealers, the Financial Industry Regulatory Authority (FINRA) for member firms, the Office of the Comptroller of the Currency (OCC) and the Federal Reserve for banks, and the Office of Foreign Assets Control (OFAC) for sanctions compliance.
Depending on the client’s geographical location, international regulations may also apply. Internationally, many jurisdictions follow the standards set by the Financial Action Task Force (FATF), which provides recommendations adopted into local laws.
In addition to regulators, banking partners, payment processors, and other third parties also evaluate whether fintechs' programs meet the standards they must follow. This dual layer of oversight (formal regulatory rules and partner-imposed standards) shapes how fintechs must design and maintain their AML programs.
What Is an AML Compliance Program?
An AML compliance program is a set of policies, procedures, and internal controls designed to help a financial institution identify, monitor, and report suspicious activity that may be linked to money laundering or terrorist financing. In the US, the Bank Secrecy Act requires regulated entities to develop and maintain such a program, adapted to the risks associated with their products, services, customers, and geographic reach.
The Five Core Pillars of AML Compliance
US regulators define an effective AML program as having five essential elements:
Written internal policies, procedures, and controls to mitigate identified risks.
A designated compliance officer with authority and resources to manage the program.
Ongoing employee training relevant to roles and responsibilities.
Independent testing to assess program effectiveness.
Customer due diligence (CDD), including beneficial ownership identification and risk-based monitoring.
These elements are the foundation of most AML programs, regardless of business model or size.
Sanctions, Controls, and Risk Culture
In the US, the OFAC requires screening customers, counterparties, and transactions against sanctions lists like the Specially Designated Nationals (SDN) list. While sanctions screening is regulated by OFAC, in practice, it is integrated into AML programs.
For fintechs, screening should be embedded in both onboarding and ongoing monitoring so that prohibited activity is detected promptly. As sanctioned parties often try to obscure their identities, effective programs account for variations in names and other attempts to bypass controls.
Internal controls are where your risk assessments actually come to life in daily operations. Think of them as the bridge between what you've identified as risks and what your team does about them every day. Good controls spell out the specifics: when an alert pops up, who handles it, what steps they follow, and how they document their decisions.
You'll also need ways to verify that these controls are working. That might mean scheduling periodic audits or setting up automated reports that withstand regulatory scrutiny. Here's what matters most: controls should match a fintech’s actual risk profile. Generic, one-size-fits-all controls leave gaps. Controls built around a fintech’s specific risks catch problems to prevent those gaps.
Risk culture determines whether these controls and processes work in real conditions. A strong culture comes from leadership that prioritizes compliance, allocates sufficient resources, and supports decisions that may slow short-term growth but protect the business in the long run. Employees across departments should understand that compliance is not just the responsibility of one team but a shared obligation.
For fintechs, especially those working with third parties, maintaining a compliance culture enables all parties to operate with the same standards and priorities.
Learn how Regly vendor management can help you organize third-party data, flag emerging risks, and compile reports for audits and examinations →
US vs. Global: Similarities
Globally, AML programs share many of the same principles. The FATF sets international standards that are adopted by member countries, including the EU’s Anti-Money Laundering Directives, the UK FCA rules, and MAS guidance in Singapore.
While terminology and reporting formats vary, core expectations are consistent: conduct customer due diligence, monitor for suspicious activity, report findings, and maintain adequate records. For fintechs operating across borders, aligning with FATF-style standards can help maintain consistency and reduce the need for country-by-country program redesigns.
9 Key Components of an Effective AML Compliance Program
An effective AML compliance program is a set of coordinated processes that operate daily to mitigate financial crime risk. While the exact design should reflect the business model and risk profile, most programs should incorporate the following elements:
1. AML Risk Assessment
For fintechs, the risk assessment should address three key areas: what they’re selling, who they’re selling to, and where they're located. Each piece shapes the risk profile differently. A BNPL platform serving US consumers faces different risks than a cross-border remittance service. A crypto exchange has different exposure than a neobank. Their customer base matters too. Are they working with retail investors or institutions? Small businesses or enterprises? And geography adds another layer. Transactions flowing through certain countries carry a higher risk, and different jurisdictions mean different regulatory requirements.
High-risk products might include those that allow rapid movement of funds or anonymity, while high-risk geographies include jurisdictions the FATF identifies as having strategic deficiencies. Customers also have varying levels of risk depending on their industry, transaction behavior, and whether they are individuals or entities with complex ownership structures.
The risk assessment results should be used to directly inform designing and prioritizing AML controls. If a particular product or customer segment is identified as higher risk, the compliance program should apply stronger monitoring, additional due diligence, or more frequent reviews. Conversely, lower-risk segments can be subject to proportionate controls, allowing compliance resources to be allocated efficiently.
Documenting the risk assessment is as crucial as conducting it. The evaluation should be in writing, clearly outlining the factors considered, the rationale for risk ratings, and how these ratings were determined. This document should be updated at least annually or when significant changes occur, such as adding a new product, expanding into a new region, or onboarding a different type of customer base.
2. Internal Policies and Procedures
Internal policies translate the findings of the AML risk assessment into specific rules and workflows. They should clearly outline how the company identifies customers, monitors activity, escalates alerts, and maintains required records. Policies also need to define roles and responsibilities to clarify who is accountable for each task, from onboarding checks to regulatory reporting.
Procedures should be practical for daily use but comprehensive enough to withstand regulatory review. Policies should also be reviewed regularly and updated when business models, product offerings, or risk profiles change.
By directly connecting policies to assessed risks, a fintech can demonstrate that its AML program is both tailored and operational. This approach also makes it easier for new staff, auditors, or partner institutions to understand how compliance is integrated into the business.
3. Customer Identification and Due Diligence
Customer Identification and Due Diligence processes, as a part of any AML program, consist of:
Customer Identification Program (CIP), which establishes the minimum information that must be collected and verified before opening an account, such as name, date of birth, address, and identification number.
Customer Due Diligence (CDD) that assesses the customer's risk profile and the nature and purpose of the relationship.
Enhanced Due Diligence (EDD) applies when customers or transactions present higher risks, requiring additional verification and closer monitoring.
Fintechs often serve both individuals and businesses, which means implementing Know Your Customer (KYC) and Know Your Business (KYB) procedures.
KYC verification for individuals may include document checks, database validation, and biometric verification. KYB extends to identifying the legal entity, verifying its legitimacy, and confirming its beneficial owners. This is reinforced by the Corporate Transparency Act, which will require many US businesses to report their beneficial ownership information to FinCEN, creating additional opportunities for verification.
Discover how Regly can integrate KYC into your onboarding workflow and help you automate ID checks, map beneficial ownership, and keep compliance evidence audit-ready →
4. Transaction Monitoring
Transaction monitoring involves reviewing customer activity to spot unusual or suspicious behavior that might signal money laundering or terrorist financing. This approach should be risk-based, with more resources directed toward products, geographies, or customers identified as higher risk in the AML risk assessment. For example, a fintech processing cross-border payments from high-risk jurisdictions may need more frequent and detailed monitoring than one operating solely in low-risk domestic markets.
Good monitoring programs blend automated detection with human review. Monitoring systems can be configured with rules and scenarios that flag transactions exceeding certain thresholds, transactions that look structured to avoid reporting requirements, or activity that breaks from a customer's normal patterns. Automation handles the volume, but human analysts determine whether flagged activity is actually suspicious or just unusual but legitimate.
When the system generates an alert, it needs to flow through a documented investigation process. Analysts review the supporting data, gather additional information when needed, and escalate cases that don't have reasonable explanations. Every step requires documentation. This paper trail shows regulators and partners that the fintech handles alerts consistently and follows its stated policies. Without proper documentation, even a well-designed monitoring system won't stand up to regulatory scrutiny.
Learn how Regly AML transaction monitoring can help you detect risks →
5. Suspicious Activity Reporting (SAR)
Suspicious Activity Reports (SARs) are a key output of an AML program. A SAR must be filed when there is reason to suspect that a transaction involves funds from illegal activity, is structured to evade reporting requirements, or has no apparent lawful purpose. The decision to file should be based on documented investigation steps and aligned with the program’s escalation procedures.
Timelines are strict. In the US, most SARs must be filed with FinCEN within 30 calendar days of detecting suspicious activity, or within 60 days if more time is needed to identify a suspect (OCC). Filing requires careful documentation of the activity, the reasons for suspicion, and any supporting evidence.
One critical safeguard is avoiding “tipping off” the customer. Staff should be trained not to disclose that a SAR is being considered or filed, as doing so could interfere with an investigation. By combining clear triggers, defined timelines, and strong confidentiality practices, fintechs can manage SAR obligations effectively and reduce the risk of regulatory scrutiny.
6. OFAC and Sanctions Screening
As part of financial crime compliance in the US, OFAC requires sanctions screening. Fintechs must screen customers, counterparties, and transactions against the SDN list and other applicable watchlists. This process applies at account opening and on an ongoing basis, as lists are frequently updated.
Screening systems should be configured to detect potential matches, including variations in names or different identifiers, and route alerts for quick review. When a match is confirmed, the transaction or account typically gets blocked, and the fintech must file a report with OFAC. Record-keeping matters here: screening results, decisions made, and actions taken all need documentation. These records prove compliance when regulators ask.
International operations add complexity. Fintechs working across borders often face sanctions obligations beyond OFAC, such as EU or UK sanctions lists. Building these additional lists into screening procedures creates consistency across operations and reduces the chance of processing a prohibited transaction. A single screening framework that covers all applicable sanctions regimes is more efficient than trying to manage multiple standalone processes.
7. Training Your Team
Training equips employees to recognize and respond to potential money laundering or sanctions risks. It should cover the company’s AML policies, red flags for suspicious activity, and the specific procedures for escalating concerns. The depth and focus of training should match each role’s responsibilities. For example, onboarding staff may need more emphasis on identification and verification, while operations teams focus on transaction monitoring and alert handling.
New hires need training during onboarding, and all staff need refreshers at regular intervals, typically annually. Additional sessions become necessary when regulations change or new risks emerge. Documentation is critical here: attendance records, training materials, and completion dates all need to be tracked. Regulators routinely ask for proof that training is current and comprehensive. Without proper records, even the best training program looks like a compliance gap during an exam.
For fintechs, especially those with distributed teams or outsourced compliance functions, consistent training helps maintain a shared understanding of expectations. It reinforces that compliance is not limited to the compliance department but is a responsibility shared across all business functions.
8. Recordkeeping and Documentation
Recordkeeping supports both the operational needs of an AML program and its regulatory obligations. In the US, most AML-related records, like customer identification documents, transaction histories, and copies of filed SARs or CTRs, must be retained for at least five years. For fintechs, maintaining these records in an organized, secure, and easily retrievable format is essential for responding to audits, partner reviews, or law enforcement inquiries.
Documentation should extend beyond formal reports. Case notes from investigations, alert dispositions, and decisions on whether or not to escalate an issue provide valuable audit trails. These records demonstrate that the program is active, decisions are reasoned, and alerts are resolved in line with established policies.
The program should also account for responding to official requests, like FinCEN 314(a) information-sharing notices or subpoenas. Having clear procedures for identifying, collecting, and delivering requested records reduces delays and shows readiness to cooperate with regulators and investigators.
9. Independent Testing
Independent testing checks whether an AML compliance program actually works the way it's supposed to. Internal audit teams or external third parties can handle testing. However, the key requirement is independence: the reviewers can't be involved in running the day-to-day compliance operations they're evaluating. The goal is to find gaps, weaknesses, or outdated procedures before regulators find them first.
Testing should examine all the program's core components: customer onboarding processes, transaction monitoring systems, SAR filing procedures, sanctions screening, and recordkeeping practices. How often testing happens depends on the fintech's size, complexity, and risk profile. Many fintechs run these reviews annually or every two years. Smaller, lower-risk operations might test less frequently, while complex platforms with higher risk exposure often need more frequent reviews to stay ahead of potential issues.
Findings from independent testing should be documented, prioritized, and addressed through a clear remediation plan. Tracking and closing these items promptly demonstrates to regulators and partners that the company actively maintains and improves its compliance framework.
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Covering each of these elements allows a fintech to maintain a functioning AML program that meets both operational and regulatory needs. While the exact approach will vary by business model, documenting and regularly reviewing activities provides a way to adapt as risks and requirements evolve.
Common AML Compliance Challenges for Fintechs
Building an AML program for a fintech is fundamentally different from traditional financial services. Fintechs move fast, and that speed creates real tension with compliance requirements. You might onboard thousands of customers in a week, launch a new product feature in days, or expand to new markets overnight. Meanwhile, your AML program needs to keep up without breaking.
The pressure points are predictable but tough to manage. Your customers expect instant account opening and seamless transactions, while your compliance team needs time for proper KYC and transaction monitoring. Your product team wants to ship new features quickly, but each change might require updates to your risk assessment and monitoring rules. Your sales team is pushing for geographic expansion, which means navigating new regulatory requirements and risk profiles.
These competing demands create practical problems. You might find monitoring rules that worked at 10,000 customers falling apart at 100,000. Manual processes that seemed fine during your pilot become bottlenecks at scale. Documentation that was "good enough" for the early stage suddenly looks inadequate when regulators or bank partners come knocking. The challenge isn't just building an AML program; it's building one that can grow and adapt as quickly as your business does.
The most common challenges include:
Fast Growth vs. Slow Compliance
Fintechs often scale faster than their compliance infrastructure can handle. New products, market expansions, or partnerships may roll out before supporting policies, monitoring systems, and staffing are in place. This creates gaps that can lead to inconsistent onboarding, incomplete due diligence, or missed red flags in transaction activity.
When growth outpaces compliance, the program often relies on manual workarounds and reactive fixes. While these can address immediate issues, they are rarely sustainable and may fail under increased volume or scrutiny from regulators and partners. Building compliance capacity in parallel with business growth reduces the risk of operational strain and regulatory findings.
Onboarding Friction and User Drop-Off
Compliance checks at onboarding are essential, but they can also introduce friction that deters new customers. Lengthy forms, repeated document requests, or unclear instructions increase abandonment rates, particularly in consumer-facing fintechs where speed is part of the value proposition. This risk is heightened when onboarding workflows are not designed with both compliance and user experience in mind.
A risk-based approach can help reduce drop-off. Low-risk customers may require only standard identification and verification steps, while higher-risk profiles undergo enhanced checks. Integrating technology such as automated ID verification or database lookups can also streamline the process without lowering compliance standards. The goal is to meet regulatory requirements while minimizing unnecessary delays that can discourage legitimate users from completing signup.
Data Quality and System Integration Issues
Accurate and complete data is essential for effective AML monitoring. Poor-quality customer information, missing fields, or outdated records can lead to false positives, missed alerts, and delays in investigations. These gaps often originate from inconsistent onboarding procedures, inadequate verification steps, or reliance on manual data entry.
For fintechs using multiple systems, such as separate platforms for onboarding, transaction processing, and monitoring, a lack of integration can create blind spots. If systems do not share information in real time, compliance teams may not have the complete picture when reviewing alerts or conducting investigations.
Addressing these issues often requires both process improvements and technology solutions. Standardizing data collection at onboarding, applying validation checks, and integrating key systems helps reduce errors and gives compliance staff the complete, reliable information they need to assess risk effectively.
Common Misconceptions
Misunderstandings about AML compliance are common in fintech, especially for early-stage companies or those entering regulated activities for the first time. These misconceptions can lead to program gaps that increase both regulatory and operational risk.
Some of the most frequent include:
“AML rules only apply to banks.” In reality, many fintechs fall under AML requirements directly or through partner-imposed obligations.
“KYC at onboarding is enough.” AML compliance requires continuous monitoring, not just a one-time identity check.
“We’re too small to be a target.” Smaller companies can still be used to move illicit funds and are often targeted because they may have weaker controls.
“Technology alone solves compliance.” Tools help, but they must be paired with sound policies, trained staff, and active oversight.
Addressing these misconceptions early helps fintechs avoid costly remediation later and build programs that stand up to both partner and regulator expectations.
What Regulators Are Looking for Now
Regulators are shifting their focus from whether an AML program exists to how well it works in practice. They want to see evidence that controls are active, risks are addressed, and suspicious activity is handled appropriately.
The key regulatory expectations include:
Effectiveness: Regulators are prioritizing tangible results over the mere presence of policies and procedures. They expect programs to demonstrate that suspicious activity is being identified, investigated, and reported in line with the company’s risk profile.
Alignment with FinCEN’s AML/CFT Priorities: Risk assessments and controls should address the national priorities identified by FinCEN, such as cybercrime, fraud, corruption, and sanctions evasion. These priorities should be reflected in monitoring rules, training content, and escalation processes.
Increased scrutiny of fintech-bank partnerships: Banking regulators hold partner banks accountable for the compliance performance of the fintechs they work with. As a result, fintechs face expectations equivalent to those applied directly to banks, including documentation, monitoring, and reporting standards.
By addressing these focus areas, fintechs can strengthen both their regulatory posture and their relationships with banking partners. This proactive approach reduces the likelihood of compliance gaps being flagged during examinations or partner reviews.
Recent Developments in AML Compliance
AML compliance requirements continue to evolve, and regulators are introducing changes that directly affect how fintechs structure and operate their programs.
Proposed Rule on Risk-Based AML Programs (2024–2025)
FinCEN's proposed changes mark a shift in how regulators think about AML compliance. The new language specifically calls for programs that are "effective, risk-based, and reasonably designed," which sounds like standard regulatory speak until you consider what it actually demands from companies.
The most significant change is the requirement for formal, documented risk assessments. This moves beyond having a general sense of your risks to creating detailed documentation that shows exactly how you identify, measure, and manage money laundering threats. You'll need to put your risk thinking on paper in a way that regulators can review and understand.
The proposal also ties company programs directly to national AML and counter-terrorist financing priorities. This creates a new layer of accountability. Your program can't just address generic money laundering risks anymore; it needs to show how you're contributing to broader national security and financial crime prevention goals.
For fintechs, this means one-size-fits-all compliance is officially dead. A remittance platform sending money to high-risk jurisdictions needs different controls than a domestic peer-to-peer payment app. A crypto exchange requires different monitoring than a traditional broker-dealer. FinCEN is essentially saying: show us you understand your specific risks and build your program accordingly.
Enforcement Trends: Where Firms are Failing
Recent enforcement actions highlight recurring weaknesses: outdated risk assessments, inadequate monitoring for high-risk activities, delays in SAR filings, and insufficient sanctions screening.
One of the most notable examples of enforcement is Wise US, on which the coalition of six US state regulators, including California’s Department of Financial Protection and Innovation, imposed a $4.2 million penalty in mid-2025. The regulators cited significant shortcomings in the company’s Bank Secrecy Act (BSA) and AML/CFT program. Wise was required not only to pay the fine but also to implement comprehensive remediation: improving risk management, enhancing internal controls, and submitting to multi-year regulatory oversight.
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Building an effective AML compliance program is an ongoing operational priority. Fintechs face unique pressures from rapid growth, evolving products, and heightened partner and regulator scrutiny. By aligning risk assessments, controls, training, and reporting processes with both legal requirements and actual business risks, companies can create programs that work in practice, not just on paper.
As enforcement actions and new rules make clear, regulators expect AML compliance to be risk-based, well-documented, and demonstrably effective. Addressing gaps proactively and embedding compliance into daily operations not only reduces regulatory risk but also strengthens credibility with partners and customers.
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