Blog

The first step in risk management is to identify them: while there are some common threats that fintech companies face, not all of them provide the same services or operate in the same markets, which means that each company faces unique safety and prevention challenges. 

Having said that, we recommend that you identify the risks that your fintech faces based on the unique characteristics of its products and services, as well as the unique characteristics of its target audience and environment. 

Consult third-party risk-prevention experts 

During these stages of risk analysis and program development, the assistance of experts in digital security and prevention can result in significant improvements and expand the scope of actions. 

Bear in mind that this process incorporates legal and technological aspects of third party risk management, and its successful development requires the intervention of true specialists in these fields who provide the best resources in accordance with applicable state laws and regulations, while also considering the unique needs of your fintech. 

Adhere to KYC and AML policies and procedures 

Standards and procedures that are widely accepted - and have international application - and aimed at strengthening financial systems' security and fraud prevention are critical pillars of a successful risk management program. 

Among these, KYC and AML stand out: without a doubt, adhering to them will significantly reduce your fintech's vulnerability and enable it to avoid legal, reputational, and financial risks. 

KYC standards, on the other hand, refer to Know Your Customer. As a result, they encompass all actions and measures aimed at eliciting information about the user, particularly those pertaining to the source of their financial assets. 

Fintech companies, like traditional financial institutions, avoid business relationships with criminal organizations and individuals who profit from criminal activity. 

Meanwhile, AML regulations (Anti-Money Laundering) aim to prevent criminals from concealing the illicit origins of their funds and allowing them to circulate freely throughout the financial system. 

As a result, they demand, among other things, that businesses establish regulatory frameworks and commercial parameters that prohibit this illegal activity: in practice, a common restriction is the establishment of low transaction values for new customers who have limited time with a particular account and whose source of funds has not been thoroughly investigated. 

Understand The Security Legislation That Applies to Fintech in General. 

Along with knowledge of and compliance with KYC and AML standards, a strong risk management program requires a firm grasp of the general legislation governing fintech companies, as this avoids legal complications while simultaneously strengthening internal security. 

Join Anti-Fraud Networks 

This aspect entails forming alliances with sector-related businesses, organizations, and public entities dedicated to fraud prevention. 

As with a credit bureau, this system enables organizations to share agreed-upon data and information in order to assist one another and strengthen their security mechanisms. Simply sharing experiences and understanding the dynamics of fraud committed against other fintech companies benefits risk management and prevention significantly. 

Verify a person's background and digital identity 

To comply with KYC and AML principles and, in general, to strengthen risk management, you must optimize your processes for developing new business relationships and customer acquisition from a security and prevention perspective. 

In other words, it is critical to understand the individuals and the source of their funds prior to integrating them into your services and granting them access to your financial platforms' attributes. 

Simultaneously, once these are accepted and have a digital user, authentication mechanisms must be implemented to ensure that criminals and unauthorized third parties cannot conduct fraudulent accesses and transactions. 

Possess cutting-edge technology for prevention 

Similarly, to how cyber criminals and hackers have honed their fraud mechanisms, an increasing number of effective technologies and solutions are emerging that significantly enhance digital security and risk management capabilities. It is critical that your fintech is constantly concerned with having the best technological resources available in these areas, provided by teams of true fraud prevention specialists. 

Additionally, to the points mentioned, establishing a dedicated compliance and risk management department is a necessary step for your fintech if it is growing and does not yet have a robust organizational structure. 

Training security and prevention professionals in these areas, conducting operations investigations to identify deficiencies, and detecting new threats are just a few of the critical tasks that exist within the security and prevention environment. 

These steps will enable businesses to enhance their risk management capabilities and become more efficient operations. This has a positive effect on the bottom line of the business as well. The reduction in risk related damages increases business profits, while the automation of risk management practices reduces operational costs.