Challenges in AML for Fintechs
Nearly all Fintechs are subject to AML/CTF regulations (Law 10/2010, of 28 April, on the Prevention of Money Laundering and Terrorist Financing, and its Regulation, Royal Decree 304/2014). This is because they operate as credit institutions, payment institutions, investment service companies, or providers of virtual currency exchange services for fiat currency and electronic wallet custody, among other activities. However, surprisingly, many of these Fintechs are not fully aware of their status as obliged entities or the responsibilities this entails.
Non-compliance with these obligations poses a significant issue for Fintechs, given the potential impact on their businesses. It is not just about the financial penalties stipulated by the regulations, which can amount to millions or even lead to the closure of regulated activities, but also the reputational damage that could deter shareholders, banks, suppliers, and even potential customers.
Notably, the Ministry of Economy, Trade and Business, and the Treasury Department highlighted in their Addendum to the National Risk Analysis 2024 that the use of technological innovations in financial operations is one of the top five vulnerabilities in the prevention of money laundering and terrorist financing.
AML/CTF regulations impose on obliged entities the responsibility to ensure their services are not used for money laundering or terrorist financing and to identify operations indicative of these crimes.
Current challenges: General obligations for Fintechs regarding AML/CTF
While new European regulations have been published this year, which will be discussed further, they are not yet applicable.
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