Oscilar recently hosted an insightful webinar exploring the evolving landscape of AML compliance for fintech partnerships and sponsor banks, bringing together leaders in the field to discuss current challenges, as well as the future of AML compliance. 

This expert panel featured Kevin Carr (VP of Financial Crimes Compliance at Unit), Ethan Singleton (Managing Principal at FS Vector), and Saurabh Bajaj (Chief Product Officer at Oscilar), moderated by Alex Johnson (Fintech Takes newsletter).

Here are the key takeaways from their discussion:

Current Compliance Challenges

The panel emphasized that AML compliance has become the fundamental "entry price" for banking-as-a-service, with the landscape growing increasingly complex. Recent regulatory actions have consistently highlighted AML as the most common denominator in consent orders, indicating a critical area of focus for both banks and regulators.

"Since the Bank Secrecy Act was first passed, and then the Patriot Act, AML — whether it's traditional finance or banking as a service — always seems to be an issue, particularly at scale," noted Ethan Singleton, highlighting the persistent nature of these challenges.

The threat landscape has evolved dramatically, as Saurabh Bajaj explained: "Modern money laundering exploits these digital schemes and the digital ecosystem really, really well. The current landscape is very complex...threats have been emerging across multiple vectors. We have digital payment risks that include crypto based asset laundering, P2P platform exploitation, digital wallet abuse, exploiting real-time payment system vulnerabilities."

Traditional AML systems, designed for a simpler era of banking, are struggling to keep pace with the velocity and complexity of fintech partnerships. Banks face unprecedented challenges in managing risks across different products, geographies, and customer segments, requiring a fundamental rethinking of their approach to compliance.

Legacy Tool Limitations

The panel also identified several limitations with current AML tools:

• Siloed risk decisioning across different compliance systems

• Legacy systems designed for traditional banking paradigms rather than modern digital-first behaviors

• Data integration challenges across multiple platforms and formats

• Speed mismatches between modern financial crimes (operating at digital speed) and traditional tools (working at "analog pace")
  
  

  

"You need an approach that's both uniform and tailored at the same time," explained Kevin Carr. "Given the fact that we have such a complex and fragmented ecosystem, you need the uniformity to make sure that sponsor banks know what's going on end-to-end at each Fintech partner, but it also has to be tailored. You have to take each Fintech partner, and even down to the customers, and really understand the risk that's present."

Essential Capabilities for Modern AML Solutions

The panel outlined several critical features needed in next-generation AML solutions, emphasizing the importance of a unified, real-time approach. Modern solutions must provide integration across the entire customer lifecycle, with connected monitoring from onboarding through ongoing transactions.

Bajaj emphasized the importance of contextual understanding: "Modern AML solutions must understand the business context of each transaction...It's an international transfer, it's a business transaction, the normal patterns of that specific customer segment, the unique risk of that financial product and the varying regulatory requirement for that jurisdiction."

This unified approach should include:

1. A Unified Platform 

• Integration across the entire customer lifecycle

• Connected monitoring from onboarding through transactions

• Seamless data sharing between different compliance functions

2. Real-time Capabilities

• Pattern recognition before transactions complete

• Dynamic risk scoring that adjusts in milliseconds

• Network analysis during transaction flows

3. Collaborative Features

• Shared case management between banks and fintechs

• Custom risk assessment workflows

• Joint strategy development

"If a sponsor bank and Fintech are working together, they're working on a joint problem right against the attackers," noted Bajaj. "We need to collaborate more as an ecosystem, as vendors, as a community, to fight this."

The Role of AI in AML

The discussion of artificial intelligence revealed both exciting opportunities and important cautions. 

"The use of AI in a compliance context is not purely replacing things quite yet," explained Singleton. "I think it's augmenting existing processes to make them more efficient, or maybe minimize the amount of time it takes to do a certain compliance process."

The discussion highlighted both opportunities and limitations in AI adoption:

• AI shows promise in augmenting rather than replacing human analysis

• Practical applications include alert summarization, SAR narrative generation, and website review automation

• Machine learning has demonstrated significant improvements in detection rates and false positive reduction

• Regulatory considerations require careful implementation with strong model governance

Key Success Metrics

Saurabh Bajaj shared a compelling case study where implementing machine learning technologies demonstrated remarkable improvements in detection and efficiency, including:

• Increased detection rates from 30% to 80%

• Reduced false positive by 90%

• Cut daily caseload from 20-30 cases to less than 5 cases

These metrics underscore a crucial point about modern AML solutions: when properly implemented, they can simultaneously improve detection rates while reducing the operational burden on compliance teams. This dual benefit is particularly crucial for institutions handling high transaction volumes through fintech partnerships.

Final Takeaways

The panel concluded with several actionable insights:

1. Data Quality is Fundamental: Getting clean, properly structured data is the essential first step

2. Embrace Innovation Safely: New technologies should be adopted with proper risk governance

3. Unified Platform Approach: Focus on solutions that provide a single view of customer risk

4. Collaborative Ecosystem: Success requires partnership between banks, fintechs, and vendors

As regulatory scrutiny continues and threats evolve, financial institutions must modernize their AML capabilities while maintaining regulatory compliance. The future lies in solutions that can balance standardization with customization, leverage AI appropriately, and enable effective collaboration between banks and their fintech partners.

Missed the webinar? Get your free on-demand access below.