The FinTech ecosystem in Latin America doubled in size from 2018 to 2021, fueled by increased regulatory oversight and consumers swapping cash for digital finance. In LatAm alone, digital payment volumes are forecast to increase by 25% through 2025. As a result, criminals who have become comfortable in cash will move at greater rates to digital platforms. This changes the dynamic of the challenge faced by compliance teams in the cross-border payments sector.

Much of today’s security tech infrastructure consists of legacy systems. These systems rely heavily on human input, creating inefficiencies and inaccuracies that impair not just the customer due diligence (CDD) process but the financial security of firms. Some estimates suggest that false positives account for 42% of all anti-money laundering (AML) alerts. 

These challenges pressure the overarching CDD framework that firms must build and iterate. As a result, many are turning to innovative regulatory technology (RegTech) solutions to manage evolving risk profiles, automate and triage alerts, and improve scalability. This can also help prioritize in-house compliance expertise on the most challenging, urgent, and high-risk issues.

However, emerging RegTech solutions do not fit into a “catch-all” bucket. For comprehensive AML/CFT compliance, firms need to review several areas of their RegTech stack, including:

• ID verification (IDV)
• Screening for sanctions, politically exposed persons (PEPs), and adverse media
• Transaction monitoring
• Crypto and blockchain monitoring
• Internal and external reporting

Any decision to invest in new technology can positively and negatively impact how a firm functions. As a result, it’s critical to understand and analyze the potential implications before deciding to proceed. Above all, firms need to remember that there is no one-size-fits-all solution. Compliance teams must identify and implement the appropriate AML processes for their business models and strategies, considering manual and automated approaches and their wider risk appetite.

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