The authorities in China are seeking to expand anti-money laundering supervision of non-bank payment providers and have also stepped up fines. Jose Caldera explains why this is needed.
Payment service providers (PSPs), online and micro-lenders, and consumer finance companies, such as PayPal and Square, have an increasing important role in how money moves within the financial ecosystem.
They provide real-time payment options for small merchant, peer to peer (P2P) payments within and across jurisdictions.
China has been bolstering their anti-money laundering (AML) programmes extensively in the last two years, following worldwide trends and addressing well-known domestic corruption and bribery scandals.
Its latest action extends regulations to these new actors in the financial ecosystem.
This move, by the second largest economy, recognizes the importance of monitoring non-traditional financial institutions.
These new business models and capabilities have expanded threats to the financial ecosystem and are being abused by nefarious actors worldwide.
The Financial Action Task Force, the Financial Crimes Enforcement Network FinCEN and the European Union, among others, have responded with new guidelines and regulations and they continue to revise AML typologies to guide all compliance teams in how to thwart these new threats.
Furthermore, as nations rush relief packages and economic incentives to deal with COVID consequences, the whole financial ecosystem, traditional and new, is being put to test, and unfortunately being abused.
There has been a noticeable increase in money muling, elderly abuse, loan abuse and healthcare fraud.
Online lenders, PSPs, and even health care providers are investing in Identity proofing and transaction monitoring technologies to deal with the new threats and comply to the regulatory frameworks.
Assuming China will use their regulatory framework fairly to all players, domestic and foreign, the tightening of regulations is a positive step for the AML industry and the protection of the international financial ecosystem.
Jose Caldera, chief product officer at Acuant