In a very candid interview, Perseus Mlambo, who heads up the card issuing company Union54 detailed the serious events that led to them halting their operations. This included fraud on many levels that racked up huge amounts of cost. One of the key lessons that can be derived from this experience is the responsibility of FinTech companies to undertake rigorous onboarding and ongoing due diligence inside a robust compliance framework.
To ensure this, the foundation of the business itself needs to be strong. Increasingly, compliance is seen as an afterthought and not a core focus, something that can be figured out at a later date when in reality it is an immediate priority. Delaying this compliance road mapping only compounds these issues for further down the road. Central Banks and regulators put a lot of focus into ensuring businesses that apply for licenses have their policies in order, this alone highlights just how important these issues are.
KYC and AML procedures are of tantamount importance as it ensures FinTech companies know exactly who their end-users are and ensure they are appropriate for their risk appetite and framework. This is tied in with ongoing monitoring as the business conducts its operations.
Unfortunately, there are always going to be bad actors in the world who seek to disrupt and attack businesses whether that be fintech or otherwise, so it is important to constantly be vigilant to the risk and ensure measures are in place to try and mitigate those risks and prevent fraudulent activate from happening.
The interview that Perseus did was a timely reminder of the importance of compliance in fintech activities and just how costly poor compliance can be to a business if not properly thought through. It is well worth the read.