Terms Beginning With 'f'


What is Fintech?

Our digital world is expanding, continuously evolving and enabling businesses to become customer-centric. Just until a few years back, nobody would have believed if someone said they could transfer money from their phone only within seconds. The world is participating in a revolutionary experience, and we may not even know it.

With the financial institutions providing their services online, the emergence of fintech has changed the financial dealings by 360 degrees. In simple words, Fintech refers to describing a technology which is integrated into providing financial services.

Whether you are paying a credit card bill or buying a coffee at a local coffee shop or applying for a loan, fintech is with us all the time. And believe or not, it is just the beginning.

Technology has entered every aspect of the world. Words like EdTech, MedTech, FoodTech are now a part of our regular vocabulary.

From cashless payments apps to financial institutions providing services online to even virtual currency, the financial technology sector is growing exponentially.

With integrating the latest technology in financial services, fintech is making life easier for the consumers and also for the providers.

The term fintech includes a varied range of products, technologies and also innovative business models. These innovations are disrupting the traditional financial systems and changing the industry. The conventional financial services and new technology companies are now crossing each other's lanes to meet the demand from the consumers and stay relevant in the developed market.

Hundreds of fintech companies emerging every day and changing the way consumers pay and borrow money. Investors are also showing keen interest in fintech companies.

GOOD READ: Which are the top Fintech companies in Australia?


How is the global fintech market performing?

The global fintech market consists of technologies driving the change in the financial ecosystem. The services offered in the sector provide applications, processes and products for money transfer and payments, savings and investments, borrowing and also insurance.

According to the Mordor Intelligence global fintech market report, the fastest-growing markets in the fintech industry are the Asia Pacific, and the largest market is in North America.

A big chunk of traditional global banks, insurance companies and investment management companies are planning to integrate their services with the financial technology companies in the next three to five years.

2019 KPMG's report on the FinTech investment landscape shows that the investment reached a new record in 2018 with a whopping US$112 billion pumping into the fintech industry. In 2017 it was US$51 billion.

The fintech market report by The Business Research Company states that the fintech industry market value is expected to reach US$309.98 billion through 2022.


DO READ: Things You Need to Know About Fintech Financing Model: Majors in Action 

What are the common fintech examples that we use in everyday life?

Banking: Current technology has completely changed the way conventional Financial companies use to function. Before fintech, traditional banks offered essential services such as funds transfer, loan payments, bank account overview etc. by physically visiting a bank. The fintech startups, however, have not only made the offering of these traditional services easier and faster, but the competition has led the conventional system to increase the number of services they offer.

Apart from the necessary services banks these days are also offering AI chatbots, anti-money laundering systems and credit score information. These services are enhancing the user's experience.

Another exciting area is Neobanks. These digital app-based banks are growing much faster than we thought. Neobanks operate online, and they do not have branches like traditional banks. They offer services in finance management by using big data and artificial intelligence.

Mobile payment apps: Some of the biggest companies such as Apple, Amazon and Alibaba, have entered the mobile payment market with enormous investments. The reason is that the consumers are adopting fintech very fast. Applications such as Apple pay, Google Pay, Paypal, Amazon Pay are providing customer-friendly payment services to the consumers. They offer innovative strategies and cross-promotions with other companies, such as cashback, discounts on particular purchases etc.

Insurance: Fintech has disrupted the traditional insurance market just as it has disrupted the traditional banking market. The fintech insurance startups are getting innovative and staying ahead of the traditional insurance companies. Insurtech companies are providing third party insurance, phone insurance, car insurance to home insurance to data protection.

Credit monitoring platforms: Many countries, such as the United Kingdom and Australia, have complex credit score systems. Various companies offer services in order to maintain adequate credit score as for a layman building or improving credit score can get tedious and confusing. Fintech companies in this area have simplified this process. Financial technology business Clearscore provides individuals with an exact credit score, and it is also for free. There are many such startups successfully operating in this field.

Robo-advisors: Robo-advising applications use technologies and algorithms to provide information on asset recommendation. These applications also help investors build and manage their portfolio and have managed to increase efficiency in the trading sector and even with lower cost. Fintech technology enables investors to manage their wealth and investment on their own. Individuals looking for investment managers to manage their assets are now often turning to fintech applications. Apart from robo-advisor services, the fintech in the trading industry has changed the way traditional trading is conducted. Investors now can buy and sell shares from their mobile phones.

Virtual currencies: Cryptocurrency such as bitcoin, litecoin, and blockchain are one of the best examples of fintech. Cryptocurrency exchanges such as Coinbase and Gemini allow the users to buy and sell the cryptocurrencies on online platforms. Blockchain technology offers services such as smart contracts which utilises computer programs to automatically execute agreements between buyers and sellers or Ethereum, a distributed ledger technology (DLT) which maintains records on a network computer but has no central ledger. These technologies have practically transformed the investment world.

DID YOU READ: Opportunities and Challenges for Neobanks in the Present Scenario

What is the future of fintech?

With fintech infiltrating every part of our financial world, it is difficult to ignore the benefits its financial technology is providing. The sector is not just helping the consumers but also putting pressure on the traditional financial system to evolve and deliver the best services to the consumers in better and faster ways.

Fintech, however, like any other technology is falling prey to cybercrime. Now that fintech has proven its capabilities, the future of the industry relies heavily on providing security to its users. Most of the companies are engaged in creating awareness among consumers in order to avoid getting trapped in cybercrimes, such as financial fraud or  identity theft. OTP (one-time-password), fingerprint or face recognition is trying to solve the problem. With cybercriminals staying a step ahead, financial technology companies will have to strengthen their cybersecurity to survive in the market.

ALSO READ: Fintech Drives The Banking Sector: Barclays Employs Third Tech Tool

What is Online Banking?  Online banking is a process of undertaking banking transactions via the internet; hence it is also known as internet banking or net banking or web banking or digital banking. Through the electronic payments system, users are enabled to access and perform a wide range of financial and non-financial transactions without the need to visit the financial institution's branch. GOOD READ:  Australian Banking Space Amidst Virus-Induced Volatility; Digitalisation Turning Over a New Leaf What is the Significance of Online Banking Viz-a-Viz Traditional Banking? Online banking offers most of the services which are traditionally offered at the local branch. Users can check account details, access fund transfer and undertake tax payments. Apart from the essential services, users can also avail PPF and other insurance-related facilities, credit card and other such payment services, government schemes, etc.  All these services are available on internet banking outside the regular banking hours, which is why online banking seems to be most convenient for the users. Net banking is considered more comfortable and often less expensive as well.  Most of the brick-and-mortar banks now offer online services. Besides, the online-only banks or Neobanks are also growing in number and popularity because of the increase in demand. Moreover, for any user, it is essential to understand if the net banking experience is right for the needs and specifications. ALSO READ: Banking And Fintech Collaboration: Does The Road Less Travelled Hold Potential? How Does Online Banking Work?  Online banking can be undertaken via:  Accessing the official website of the particular bank on desktop/ computer or smartphone/ tablet Downloading the official mobile application of the bank like any other Android app or iOS app  Unlike traditional banking, users can avail online banking services as per their convenience. There is no need to visit the bank's branch physically. With the fast-moving life, online banking has turned out to be time saving as it can be done from the home, office or on the go - anywhere and anytime.  Below are some key steps involved in leveraging online banking benefits: To begin the services, the bank user needs to go on the bank website or download the mobile app.  Users need to register themselves on the website or the application using the unique id and password. Once the account is created, users can start accessing all the services it offers.  Banking services offered online may vary from bank to bank. Most banks provide the necessary services such as fund transfer, bill payments and viewing account details. Some banks also offer the customers to apply for credit card and avail insurance investment services which they have. Customers can also check the account balance without even logging in. Applying for a loan or making the loan payment can also be done through online banking.  What are the Benefits of Online Banking?  With the substantial growth of internet, everything has shifted to the electronic version. Just like one can shop online or trade online, users can bank online. People have access to various electronic gadgets such as laptops, phones, iPads, which make the banking experience one click away to conduct financial transactions.  Below are some of the key advantages associated with digital banking: The most significant advantage of net banking is - convenience. A lot many services can be availed anywhere, anytime, instead of going to the bank physically.  Online banking can also be done on holidays, which is something impossible in case of traditional banking.  Users can make a transaction without going to the bank counter. No need to fill the forms to deposit and withdraw money.  No need to abide by the working hours of the bank or worry about the weekend. Through online banking, the bank account and relative services are accessible 24x7.  Users only need the electronic device, internet connectivity and account details to access the services.  Banks also share the transaction summary and spending overview onlind. Users can understand where and how much money they have spent. It's easier to track the money trail and summarise the funds that come to your account and funds you are spending category wise.  The transactions are immediately updated and reflected, therefore making the experience very fast. Through net banking, users can also add multiple accounts of the same bank and keep track of them all simultaneously.  Bill payments can also be made online, which saves a lot of time for the users to go to individual entities to make the payments. Users can save on heavy penalties for not paying bills on time. With net banking, credit card bills can be paid on just one click.  The user-friendly experience makes net banking very painless and un-challenging to use.  Most banks have advanced encryption systems and robust cybersecurity in place, which makes online banking very safe to use.  What are the Risks Involved in Online Banking?  Online banking is not full-fledged banking; hence there are limitations with the services it provides. Especially for the first-time online banking customers, the systems may present a few challenges, which is why some people prefer transactions with the help of branch officers.  The baby boomer generation is not very technology friendly, hence they find net banking challenging.  Although most of the banks have robust banking security in place, they still face cybercrimes such as hacking and ransomware. Additionally, online banking is dependent on internet connectivity. Therefore, users who have the internet are only able to access the net banking. Low connectivity issues also make it challenging to conduct banking transactions successfully.  Because of the less awareness, users also fall prey to the online financial fraud and identity theft.  While accessing net banking, banks advise consumers to use their data plan instead of using public Wi-Fi networks to prevent unauthorized access and further damage. Besides, additional security measures are important to be considered while relying on digital banking. ALSO READ: Technology has changed the way we work amid the COVID-19 crisis: A look at in-demand technologies What are the Non-Traditional Neobanks?  Neobanks are the financial institutions which operate purely online. Neobanks are also referred to as smart banks. The growing demand for digital banking has paved the way for neobanks. These banks are accessed through their applications on smartphones/computers.  Traditional banks have branches, but neobanks do not have a physical infrastructure apart from their office. Neobanks also have a different technology from the conventional banks as they solely operate online such as they are based entirely on the cloud, and the technology is built from scratch.  It is essential to understand that the traditional banks which offer online/ net banking services are not neobanks. Neobanks are entirely different entities and operate exclusively online.  GOOD READ: A look at Neobanks and tale of this Self-Styled Neo-lender, Wisr

What is Fundamental Analysis? Fundamental Analysis is a method to evaluate the intrinsic value of a business through evaluating the financial, economic, qualitative and quantitative factors. It is usually applied when investors seek to invest in a business for a long-term. However, special situation investing, such as buy backs, rights issue, merger and acquisition, etc. also call for using knowledge of fundamental analysis to make profit in the short-term. Just like groceries don’t come with a fixed price, equities are similar. Fundamental Analysis helps an investor to mute the short-term noises around the company and emphasise on the long-term prospects. A person who is practising fundamental analysis has various sources of information, including historical data of the company, announcements released by the company, industry insights, economic projections related to the economy, in short both microeconomic and macroeconomic understating. While daily information flows may affect the share prices, not everyone in the market is a trader because many believe in long term investing as well. The process of fundamental analysis requires understanding of accounting, business, and mathematics. One should also understand the business models and how the business makes money and how the business is impacted by the underlying changes in the industry as well as in economy. Do Read: Understanding Different Kinds of Fintech Businesses Consider you know onions are sold around $2 a kilogram, but when buying the seller asks you $4 for a kilogram. Either you will not buy from that seller, or there must be a reason behind the price hike like shortage of onion supply. Fundamental Analysis will help find such reasons with respect to share prices. Since the fair value of bonds and equities is the discounted value of expected future cash flows, the cash flows of bonds are predetermined but not in equities, where cash flows fluctuate over the course of investment period. To know more on bonds read: Fixed Income Securities – A look Into Bonds Equity is a perpetual investment and non-redeemable, therefore, the emphasis of Fundamental Analysis remains on future earnings and estimates of growth in future earnings. There is a wide perception around fundamental investors that share price should reflect intrinsic value over the long-term despite mispricing in the short-term. Moreover, returns on stock not only reaped from picking good stocks but also investing at the right price. Just like when buying groceries, you ask how much, it is also favourable to ask when investing in stocks. Readers should understand that, shares are a right to a part of business and not just a piece of paper. Fundamental Analysis contradicts the Efficient Market Hypothesis, which argues that share prices incorporate all relevant information. More on buying cheap stocks: Investment Strategy Of Picking Undervalued Stocks Top-down approach: It includes analysing macroeconomic indicators such as GDP growth rates, interest-rates, inflation, unemployment, currency exchange rates etc. One usually looks at industries that are in a favourable position based on macroeconomic indicators. For more on this approach read: A lens over Top-Down Investing Strategy Bottom-up approach: Industry analysis further requires research into the state of the industry like growth rates, competition, regulatory development, new entrants, disruptive technology, structural change. But more attention is given to individual businesses and potential effects as a result of underlying changes. Good read: Which Parameters Should Be Looked at While Selecting Stocks?   What is Economic, Industry and Company (EIC) analysis? Economic Analysis: In this analysis, the investor seeks to evaluate microeconomic as well as macroeconomic factors. Within microeconomic factors, the emphasis is on behaviour of individuals and their spending decisions at given price levels. Consumer demand is also analysed while microeconomic also includes study of firm, including costs, profits, competition. To Understand behaviour of individuals understanding Behaviourial economics is paramount. Under macroeconomic study, the analyses of the trend in unemployment rates, growth rates, inflation, investment rates, savings rate, consumption, income and other major macroeconomic variables that could impact the potential investments is undertaken. Here in this article, global energy consumption is discussed: EIA Anticipates 50 per cent Surge in Global Energy Consumption It also includes study of fiscal policies developed by the Government as well as monetary policy by the Central Bank. And, the analysis also extends to international trade, exchange rates, trade deficits, geopolitical environment, global economy, especially nations with close relations. More on this read: Monetary Policy vs. Fiscal Policy Industry Analysis: Under this analysis, the investor emphasises on the trends in a particular industry and their impacts on individual companies. Industry analysis allows to gain valuable insights about the industry and understand the position of an individual company compared to its peers. Read: Birds Eye View on Australian Transport Industry Michael Porter’s five forces model is a widely used template to study an industry. These five forces include: threat of new entrants, threat of established rivals, bargaining power of buyers, threat of substitutes, bargaining power of sellers. Political, Economic, Socio-cultural, Technological, Legal and Environmental (PESTLE) Analysis is also widely used when evaluating an industry from an investing perspective. As the name suggests, this analysis is related to the study of all those areas that could affect the business. Read: How Are Market Analysts Eyeing The Impact Of Election Over Equity Market? Investors also monitor the regulatory developments in an industry because it is crucial to know the rules of the game. Also, there remains a possibility that change to regulatory environment can have a material impact on companies. On the topic of regulation: Banking regulator tightens dividend paying capability, Fitch downgrades Banks Company Analysis: In the analysis, the investor conducts research on an individual company and emphasises on specific details like business models, strength, competitive advantages, risks, opportunities etc. Read: Why Competitive Market Strategy Brings A Tough Time For Certain Players - Credit Corp Faces The Heat It is important to know the cash-generation intensity of the business as well as how the company makes profit or what are margins of the business. What are the products or services of the company and who are the customers of the business. Further, it also include research on the quantitative aspects of the company, including net income, operating expenses, assets, debt, liabilities, cash flows, earnings as well as growth history of the business. On ROE: Interpreting ROE: A Quick look at Dupont Analysis Some basic valuation techniques Dividend yield: Dividend yield is one of the basic valuation techniques to express, in percentages, the amount of dividends paid by a company in a given annual year relative to its current price. Dividends are paid by companies after meeting their necessary obligations, including taxes, interest costs, suppliers etc. Good Read: Tips For Scanning Attractive Dividend Stocks Amidst The Current Volatile Market Also Read: 5 Tips for finding sustainable dividend yield stocks Earning yield: Expressed in percentages, it is the earning of a company in a given annual year in relative to its current price. Earnings or net income of the business is the amount of money the business has made as per accounting principles since actual cash realised could be otherwise. Price-to-earnings ratio: P/E ratio is one of the widely used valuation techniques to indicate the premium given by the market to the company based on its earning potential. It is calculated as the current price of the stock/earnings per share. Good read: Understanding Price-Earnings Ratio Price-to-book ratio: P/B ratio is calculated by dividing the price of the stock by the book value per share of the company. It is primarily used to evaluated stocks based on their premium over the book value or discount over the book value. Good fundamental analysis entails reading and synthesising lot of material and using a balanced approach to come to an investment decision. Seasoned investors read a lot of material including Annual reports, industry reports, newspapers, business journals, conference call transcripts, to name a few. Having a circle of competence is essential and for building a solid circle of competence one should also consider learning ideas from other domains to become a rounded thinker which is essential for good long-term fundamental analysis. Read: An Annual Report a Day Keeps the Losses Away; Get the Most from Reading an AR Read: Understanding Darwin Theory; Analogy with Businesses and Investors

What is a Stockbroker?  Stock Market The stock market is a virtual marketplace where there a huge number of buyers and sellers coming together to buy or sell the already issued securities of the listed companies or to buy securities before the companies get listed. These transactions can happen between individuals or companies on the respective stock exchange of the country. Stockbroker A stockbroker is a registered entity or an institution that is authorized by the affiliated exchange to facilitate the transaction of other individuals. The very basic job of a stockbroker is to handle all the transactions from its clients for buying or selling of securities. It is not possible for an average individual to directly transact through the exchange. However, high net worth individuals or Proprietary trading firms can do so after becoming registered members themselves. In a nutshell, a stockbroker acts as a middleman between the buyers/sellers and the exchange and facilitates the execution of transactions. Why the need for a stockbroker arises? In the nascent stage of the stock market, probably a few centuries back, the stock exchanges were open for all individuals to come in and tract for their respective transaction. The scenario was okay as there was a minimal crowd of individuals who were dealing in the stock market, and the exchanges could handle the traffic easily. Image Source: © Kalkine Group As the financial markets grew with overall economic growth and development, this crowd started to grow manifold and eventually became very difficult to handle. This is where the need generated to have a mechanism in such a way that the ever-growing crowd could be facilitated but at the same time it reduces the burden on the exchanges. This is where the idea of a “Stockbroker” emerged. Functions and duties of a stockbroker The primary function of a stockbroker is to facilitate the transaction on behalf of its clients. But due to the ever-growing demand from the clients, mandatory measures to be taken from a legal perspective and rapid advancement in the fintech space, today brokers are doing much more than their primary function and providing more services and higher value to the investment community. Some of these functions and duties are    Smooth facilitation of securities transaction When an individual or an institution wants to transact any listed security, a broker’s job is to provide a robust infrastructure to facilitate a smooth transaction of securities without any technical errors of glitches. This becomes even more important for High-Frequency Trading (HFT), intraday traders etc. Even the slightest error in the broker’s terminal or infrastructure can cause millions of dollars of losses. Investment advisory With the growing popularity of stock market among young retail individuals, the demand for good advisory service has also increased. Not every individual is equipped with the right knowledge and experience to deal in the stock market, and many of them don’t even have time to do research on their own. This is where the broker comes in with its large and well-equipped research team to cater to these individuals. Some brokers even do it for free. Fraud or scam reporting In order to protect the interest of the investors and maintain a general faith in the workings of the stock market, the broker should constantly keep an eye on any unusual activity that may result in a scam or a fraud. If a broker from its client is noticing any suspicious activity, he should immediately investigate the matter or report to the exchange. Provides leverage A broker's primary business comes from the brokerage that is being generated through transactions. In order to increase the business, brokers are also allowed to provide margin or leverage to the clients. This does two benefits as on the one hand, the brokerage business improves, and on the other, the liquidity in the system also improves, which is important for the growth of the financial markets. For example, If a broker provides leverage of 50%, then a person with $100 can transact up to $150, pumping in additional liquidity worth $50. Adheres to the legal regulations The financial industry is one of the most regulated industries around the world for obvious reasons. Everyday transactions worth millions of dollars take place, and it is not just the duty but the obligation for all the participants to proceed legally. For the brokers, they have to have KYC information of the clients, shouldn’t provide leverage beyond the exchange defined guidelines as that can create a systematic risk as we have seen in March 2020 crash. Many brokers who went beyond their margin limits ultimately went bankrupt within a couple of months. Full-service VS Discount broker Initially, there was only one type of broker, the full-service broker (traditional one). But with the exponential growth in the technological infrastructure and higher than ever penetration of internet, there is another class of brokers that have emerged over the past few years, the discount brokers. The very basic difference between the two is their cost structure because of a different business model. As earlier, it was not feasible for a retail individual with small capital to invest because of the very high brokerage. Image source: © Kalkine Group   This primary issue has been taken care of by the discount brokers. Due to the lower cost, generally, the discount brokers do not provide additional services which a traditional broker does like investment advisory service or personalized relationship managers.   The major cost-cutting is done due to extensive emphasis on online presence and procedures, therefore saves a lot of cost on the physical infrastructure. Whereas a traditional broker has a slightly less online presence but can provide better-personalized services at the physical branches   All in all, there are both pros and cons of both types of stockbrokers, and majorly the differentiating factor is cost and services which the investor can pick according to his preference.             

What is Anti-Money Laundering (AML)? Anti-money laundering (AML) encompasses laws, regulations, procedures, and policies meant to discourage violators from indulging in financial crimes and money laundering activities. AML is incorporated within the system of national and local government with an aim to monitor a potential violator or fraudulent activities. Countries have different AML policies which have to be followed by the companies. To ensure compliance with AML regulations, organisations have created AML department to address non-compliance. Non-compliance often leads to government scrutiny. What is the objective of Anti-Money Laundering? Criminals attempt to introduce illicit money into the financial system and hide the sources of illicit funds. Anti-money laundering aims to deter such criminal activities and detects the true source of the funds. AML is generally employed by the compliance, legal, and financial sectors to introduce or develop control systems that an organisation should implement with an aim to identify and then stop the activities which can result in money laundering. The need for AML policies and procedures leveraged as customers have moved to online products and services. Since the products and services are exchanged through online platforms, it has become easy for the violators to introduce illegitimate money into the system. If an organisation complies with the stated AML guidelines, the chances of money laundering can be reduced significantly. AML regulatory benefits are not only limited to money laundering minimisation but also help the organisation to undertake its operations in an effective and efficient manner. It has become a minimum requirement to follow the AML practices to commence business activities at the global level. Compliance with AML regulations is mandatory for all organisations. The banking and FinTech sectors have to strictly follow the same, otherwise, hefty penalties are lived on them by regulatory bodies. RegTech (Regulatory Technology) and compliance officers are deployed to ensure that institutions meet the regulatory requirements and create a positive image in the open market. How is Money laundering done? Money laundering stands for the methods which are used to legalise the funds which have been obtained from illegal activities. By money laundering, violators aims at hiding the crime and source of funds. A study by Teichmann (2017) indicated that raw diamonds, jewelery, gold, real estate projects, art, antiquities, banks of Dubai, Mergers and acquisition, consulting firms, currency exchange, private cash, and deposit boxes are the major methods employed for money laundering. To identify the money laundering sources and minimise its negative impact, AML regulations are introduced for global, national, and local regulators. These regulations keep on evolving as per the changing trend of fraudulent activities. To illustrate: AML regulations were changed in 2020 because the cases of fraudulent activities increased significantly after the COVID-19 pandemic. What is the process of Money Laundering? Money laundering is undertaken to convert a large amount of illegal funds into clean money. Significant amount of risk is involved in the process as banks have to report to regulators when a large transaction takes place or other suspicious activity is observed. Therefore, a procedure is adopted by criminals to enter the illegal cash into the banking system. Chiefly, three steps are adopted, that is, Placement, layering, and integration. Placement: The cash is introduced into the financial system through different methods. Layering: The source of cash is concealed by conducting numerous transactions and each layer has a legal participation. Integration: It is the final stage in which the criminal withdraws the clean money and utilises the same for different purposes. Copyright © 2021 Kalkine Media Pty Ltd There are various techniques to launder money. For example, an organisation manipulates (inflate) its financial records and the balance is used for introducing funds in the system. What are the techniques of Anti-Money Laundering? Numerous procedures are introduced by regulators to achieve AML goals and they have to follow the stated procedures. The United Nation Office on Drug and Crime (UNODC) specifies the techniques and procedures to be adopted by the organisations to spot and prevent transactional crime like money laundering. Furthermore, commitment to UNODC includes the adoption of frameworks for law cooperation, and legal assistance. It also focuses on the technical assistance and training for upgrading the capacity of regulators. Know-your-customer is incorporated by the organisations to prevent money laundering. It involves learning about the customers and continuously monitoring their financial activities. On the basis of the evaluation of financial behaviour, red flags are raised when a deviation is observed in the behaviour of the customer. Non-compliance with the KYC norms results in financial terrorism and hefty penalties by the regulators. Financial institutions keep records of all the transactions and combined them with the potential of artificial intelligence (AI) to identify suspicious activity. Softwares have the potential to categorise the customers on the basis of suspicious activities and the actions are taken accordingly. Furthermore, technological development, like integration of big data, AI, or integration of AI, and Blockchain technology, helps in identifying suspicious activities at the integration stage. Many banks have the policy of holding period, that is, banks hold the money for a specified time (usually 5 days). The holding period allows banking institutions to tackle the risk of money laundering. How to design a corporate AML Compliance Program? An organisation can create a compliance program, which will help to identify and evaluate impending risks and legal obligations a company is exposed to. A compliance program should be designed on the basis of following 4 foundation blocks. Designated Compliance executive: An experienced compliance officer should be appointed, who will have the authority to supervise effectively the execution of AML policies in a company. The Officer should have the capability to effectively communicate with management and auditors. The AML policy recommendations required to make the process more effectively and de-risk the company. Regular review of AML processes: The Anti-Money Laundering program should regularly evaluate the company’s policies and procedures to ensure AML program is effective. The company should make its employees aware of their roles and responsibilities for them to adhere to compliance and follow proper business due diligence process. Awareness of AML procedures to Employees: Organisations should provide tailored training to employees whose work requires heavy compliance adherence. Working knowledge of AML processes by employees is a necessity for the compliance program to run effectively. Every amendment should be duly communicated to employees. Maintaining a log of training provided also helps in creating a sound AML compliance program. Third-party Audits: An organisation should engage a qualified and experienced third-party company to evaluate the AML compliance program yearly. However, companies operating in high-risk areas should evaluate their AML compliance program more frequently.

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