Maxxup Ltd

✅ 1. What Is a Risk-Based Approach? A risk-based approach means a firm must identify, assess, and understand the risks it faces — and apply controls that are proportionate to those risks. You spend the most time and apply the strongest controls where the risk is highest. It avoids: *“one-size-fits-all” controls, *unnecessary friction for low-risk customers, *regulatory blind spots for high-risk business. ✅ 2. What It Practically Means for a Fintech Let’s go through each area where the RBA is applied and what it means operationally. 🔹 2.1. Customer Onboarding (KYC/KYB) A fintech must classify customers into risk tiers (e.g., low, medium, high) based on factors such as: *Geography (high-risk jurisdictions, sanctioned countries) *Nature of activity (crypto, gambling, FX, money remittance) *Product usage (cross-border payments, high volumes) *Ownership structure (complex corporate entities) *Delivery channels (non-face-to-face onboarding) *Adverse media or PEP status 🔹 2.2. Transaction Monitoring The RBA requires fintechs to tune their TM rules based on customer behaviour and risk exposure. Practical application: *High-risk industries → tighter thresholds, faster reviews *Low-risk retail customers → more lenient thresholds *Risk signals (velocity, volume, geolocation) dynamically influence rules *Use of typologies aligned with the product (APP fraud, money mules, layering, authorised payments) RBA also supports: *avoiding excessive false positives, *focusing resources on genuinely suspicious patterns. 🔹 2.3. Product & Market Risk Assessment When launching new products or entering new markets, an RBA means: *Conducting a New Product Approval (NPA) assessment *Assessing ML/TF, fraud, operational and regulatory risks *Mapping risks to controls (e.g., additional screening, licensing requirements) *Ensuring customer disclosures match risk level *Implementing mitigations before go-live For example: Entering a cross-border payments corridor to Turkey or Nigeria will require: *increased sanctions screening, *transaction limits, *dedicated monitoring rules. 🔹 2.4. Ongoing Monitoring & Reviews A risk-based approach requires frequency of review to match risk level: *Low risk → review every 2–5 years *Medium risk → 1–2 years *High risk → 6–12 months Triggers for earlier reviews: *Changes in customer behaviour *Changes in ownership *Alerts or SARs raised *Adverse media or sanctions updates Fintech implication: Your onboarding and monitoring systems must automatically flag changes that require risk rating to be updated. 🔹 2.5. Safeguarding & Operational Risk *Safeguarding: Higher operational risk → stronger reconciliation and segregation processes. *Technology risk: High-risk APIs, payment rails, or third-party integrations → deeper due diligence and monitoring. *Fraud risk: Customer cohorts with higher exposure → friction added (CoP, MFA, behavioural analytics). #fintech #aml #risk #compliance #RBA #operations #payments

🔹 What Is Confirmation of Payee (CoP)? Confirmation of Payee (CoP) is a name-checking service designed to reduce misdirected payments and authorised push payment (APP) fraud. It verifies that the account name entered by the payer matches the account name held by the payee’s bank or PSPbefore a payment is executed. Introduced by Pay.UK and regulated by the Payment Systems Regulator (PSR), it currently applies to payments made through Faster Payments and CHAPS systems in the UK. 🔹 Purpose CoP aims to: *Prevent APP fraud, where victims are tricked into sending money to fraudsters using similar or fake names. *Reduce misdirected payments caused by human error. *Increase customer confidence in online and mobile banking. 🔹 How CoP Works (Process Overview) When a payer initiates a payment: They input the name, sort code, and account number of the payee. The PSP sends an API request to the payee’s PSP (via Pay.UK CoP service). The payee’s PSP checks its account database and returns one of the following responses: ✅ Match: Account name matches exactly. ⚠️ Close match: Name is similar (e.g., typo or abbreviation). ❌ No match: Name and account do not correspond. The payer’s PSP displays a message prompting the payer to confirm or amend the details. The payment proceeds only if the payer confirms. 🔹 Who Must Comply Currently, all major UK banks and building societies are required to offer CoP. However, payment institutions, EMIs, and fintechs joining FPS or CHAPS directly or indirectly are also expected to: *Implement CoP (either as a CoP Participant or through a sponsor bank), and *Integrate CoP into their payment journeys. 🔹 Key Takeaways ✅ CoP is mandatory for UK banks and expected for fintechs offering FPS/CHAPS access. ✅ It helps prevent APP fraud and misdirected payments. ✅ Fintechs should: *Integrate CoP API or rely on sponsor bank, *Embed checks in user journeys, *Update policies, disclosures, and MI, *Train teams accordingly. please contact Maxxup if you require assurance review or enhancements to your CoP framework: maxxup@icloud.com #CoP #fraud #compliance #regulations #payment #fintech #psp

🔹 What “U.S. Nexus” Means A U.S. nexus exists when a transaction, person, entity, or activity has a connection to the United States that gives U.S. law — and specifically OFAC jurisdiction — a legal basis to apply. That “connection” can be very broad. It doesn’t require the firm to be incorporated in the U.S. or have physical offices there. Examples include: 1. Use of the U.S. financial system *Any transaction that clears or settles in U.S. dollars (USD) through a U.S. correspondent or intermediary bank. *Even if both counterparties are non-U.S. entities, a wire routed through a U.S. bank (e.g., JPMorgan, Citi, Bank of New York Mellon) creates a U.S. nexus. 2. Involvement of a U.S. person *Any U.S. citizen or U.S. permanent resident (even abroad). *Any company incorporated in the U.S., or its foreign branches. *Any U.S. employee of a foreign firm, even if acting outside the U.S. 3. Transactions using U.S. infrastructure or platforms *Using U.S.-based cloud providers, servers, or payment processors may create a nexus (OFAC interprets this broadly). *For example, if a fintech platform runs on AWS (a U.S. company), processes USD payments, or relies on Stripe or PayPal (U.S.-based PSPs), the risk of U.S. nexus is present. 4. Goods, software, or technology of U.S. origin *Providing U.S.-origin software or technology (including encryption, SaaS, or APIs) to sanctioned jurisdictions can trigger OFAC jurisdiction. 🔹 Why It Matters OFAC sanctions apply to: *All U.S. persons (anywhere in the world), *All entities organized under U.S. law, including foreign branches, *Any transaction with a U.S. nexus, even between two non-U.S. parties. This means that non-U.S. fintechs can face OFAC enforcement if their transactions touch the U.S. financial system. Example: A UK-licensed payment firm sends USD transfers between two EU clients. ➡️ Funds clear through a U.S. correspondent bank. ➡️ The bank identifies a sanctioned counterparty or jurisdiction. ➡️ OFAC considers that a prohibited transaction because the payment passed through a U.S. institution. Even if your firm is not in the U.S., OFAC could request information or block the transfer. Please contact us if you require assistance with building robust sanctions compliance framework or an assurance review of your current one: maxxup@icloud.com #sanctions #ofac #compliance #aml #regulations #assurance #fintech #payments #crossborder

🧭 1. What “Open Banking” Means — and Why It Matters for AML/CTF Open Banking refers to the regulatory framework (under the UK Payment Services Regulations 2017 (PSRs 2017) that allows third-party providers (TPPs) to access customers’ financial data and initiate payments via secure APIs — with the customer’s consent. There are two key categories: *AISPs (Account Information Service Providers) – access account data for aggregation or analytics. *PISPs (Payment Initiation Service Providers) – initiate payments on behalf of customers directly from their bank accounts. If your firm provides the infrastructure layer (e.g., APIs, SDKs, or connectivity solutions) to other fintechs, you’re acting as a technical service provider or regulated intermediary, which carries unique compliance risks. 🧩 2. Why MLROs Must Pay Close Attention Unlike traditional PSPs or EMIs, open banking infrastructure providers often: *Don’t have direct customer relationships, *Yet handle, process, or transmit sensitive data and payment instructions, and *Sit in a complex chain of regulated and unregulated entities. This creates layered AML, fraud, and data-risk exposure where responsibility boundaries are blurred. Your job as MLRO is to ensure: *Risks are identified and mitigated even when your firm is not the “front-facing” institution. *Responsibilities are clearly contractually allocated between your firm and clients (other fintechs). *Monitoring, reporting, and escalation mechanisms are embedded in the technical architecture. 💡 3. Practical Tips for the MLRO *Embed AML-by-design into the product — don’t treat compliance as external. *Maintain a joint incident protocol with partner fintechs for suspicious activity and data breaches. *Test API behaviour for fraud patterns (e.g., test invalid tokens, duplicate payment requests). *Set transaction caps for new or unverified partners. *Conduct periodic compliance audits of your clients (as part of risk-based approach). *Keep documentation ready for FCA inspection — they increasingly ask how open banking firms prevent misuse of access. Get in touch if you require assistance with design of effective compliance framework or review of controls and risk assessment: maxxup@icloud.com #openbanking #aml #compliance #fraud #fintech #regulations

Let’s go through the practical steps you should take when a transaction (or linked transactions) amounts to €10,000 or more, covering your regulatory duties, red-flag analysis, and escalation process under the UK Money Laundering Regulations and Proceeds of Crime Act 2002. 🧾 1. Why €10,000 Matters Under the MLR 2017, firms must perform customer due diligence when: *Carrying out an occasional transaction amounting to €10,000 or more or *Several linked transactions that together exceed this threshold The €10,000 mark should trigger enhanced monitoring, as it may indicate higher risk or structuring. 🧠 2. MLRO’s Practical Workflow Step 1️⃣ — Automated Alert or Frontline Escalation Ensure your transaction-monitoring system automatically flags: *Single transactions ≥ €10,000 *Multiple smaller payments in quick succession (linked transactions) *Cross-border transfers near the threshold These alerts must flow to your Financial Crime Team queue for review. Step 2️⃣ — Verify Customer Identification (CDD/KYC) Confirm that full CDD has been completed and remains up-to-date: *Verify the customer’s identity and beneficial ownership *Confirm the source of funds (SoF) and source of wealth (SoW)  *Check that all documents are current and authentic If the relationship was onboarded with simplified CDD, escalate to full CDD before processing the payment. Step 3️⃣ — Conduct Enhanced Due Diligence if Risk Factors Exist: *Customer is non-resident or operates in a high-risk third country. *Transaction involves complex structures, shell entities, or unusual patterns. *Payments are routed through multiple EMIs or PSPs. *Customer or counterparty is politically exposed (PEP) or related. EDD should include: *Gathering detailed SoF/SoW evidence *Senior management approval before execution *Recording rationale for proceeding Step 4️⃣ — Screening and Sanctions Checks against: *UK OFSI, UN, EU, and OFAC sanctions lists *Adverse media databases and PEP registers Document the outcome and retain evidence of the screening result. Step 5️⃣ — Transaction Review and Pattern Analysis Assess whether the transaction: *Matches the customer’s declared purpose and profile *Involves known counterparties *Fits expected transaction frequency, size, and destination *Could be structured to avoid reporting thresholds If inconsistencies exist → escalate for MLRO assessment. Step 6️⃣ — Suspicion Assessment If, after analysis, there are reasonable grounds to suspect that: *The transaction involves criminal property, *Is part of money laundering or terrorist financing, or *Is inconsistent with the customer’s legitimate business, Then you must consider filing a Suspicious Activity Report. *If the firm must complete or release the €10,000 transaction, request a Defence Against Money Laundering *If funds can remain frozen or on hold, submit an ordinary SAR instead Never tip off the customer — maintain strict internal confidentiality. #payments #aml #mlro #fintech #sar #emi #compliance

Let’s go through a clear and practical information on reportable thresholds under the UK Money Laundering Regulations  — specifically focusing on what payment companies must monitor, report, or act on. 💷 1. Understanding “Thresholds” in AML The UK Money Laundering Regulations 2017 (MLR 2017), set certain financial thresholds that trigger specific obligations — such as due diligence, record keeping, or reporting. In the context of payment and e-money firms, the relevant thresholds usually fall under: 1. Customer Due Diligence (CDD) thresholds 2. Occasional transaction thresholds 3. E-money thresholds and exemptions 4. Cash transaction thresholds (limited relevance to EMIs) 5. Cross-border reporting thresholds 🧾 2. Customer Due Diligence (CDD) — When It’s Required Under Regulation 27 of the MLR 2017, a firm must apply CDD when: *Establishing a business relationship; *Carrying out an occasional transaction of €10,000 or more (approx. £8,500); *There is suspicion of money laundering or terrorist financing (regardless of amount); *There are doubts about previously obtained customer identification. 💡 “Occasional transaction” An occasional transaction means a transaction outside an ongoing relationship — e.g., a one-off payment or transfer by a walk-in or unregistered customer. For these, CDD must be performed if: The transaction (single or linked) amounts to €10,000 or more. Linked transactions mean those that appear to be connected and together exceed the threshold — e.g., several smaller transfers structured to avoid detection (smurfing). 🌍 4. Cross-Border Payments and Transfer of Funds Regulation (TFR) For cross-border wire transfers, the UK Wire Transfer Regulation 2017 (which implements the FATF “Travel Rule”) imposes obligations irrespective of amount, but has simplified requirements for small payments: Full payer and payee information must accompany cross-border transfer: €1,000 (approx. £850) or more 🏦 5. Cash Transactions Although payment and e-money institutions rarely handle physical cash, the MLR include specific thresholds for High Value Dealers: *CDD must be applied to any cash transaction ≥ €10,000 (single or linked). If your payment business accepts cash deposits (e.g., via partners or agents), this threshold applies. 📈 6. Suspicious Activity Reporting — No Threshold Crucially, there is no monetary threshold for filing a Suspicious Activity Report (SAR) to the NCA. If a transaction of any amount gives rise to suspicion of money laundering, terrorist financing, or sanctions evasion, a SAR must be filed. ⚙️ 7. Ongoing Monitoring Thresholds Even after onboarding, firms must implement transaction monitoring systems to detect unusual or suspicious patterns. *Unusually high/frequent payments; *Transactions inconsistent with customer profile; *Rapid movement of funds through multiple jurisdictions At Maxxup we can help you to set up your AML framework right: maxxup@icloud.com #aml #fintech #payments #startup #compliance

🧾 How to File a SAR - UK perspective SARs must be submitted to the UKFIU via the NCA’s secure online SAR portal. A good SAR should include: *Who? (the subject(s) involved) *What? (the activity, transaction details, account numbers) *When? (dates/times of activity) *Where? (geography/jurisdictions involved) *Why? (why it’s suspicious — clearly and factually stated) *How? (how it came to your attention, internal red flags triggered) *Always avoid speculation, focus on facts, and don’t tip off the customer. 🔍 Internal Escalation Process Before submitting a SAR, fintech firms must have a clear internal escalation and decision process: Frontline Staff identify a red flag → escalate to MLRO. MLRO Review: assess evidence, context, and available data. Decision: *If suspicion is unfounded → document rationale (no SAR). *If suspicion is valid → submit SAR or DAML SAR to the FIU. Recordkeeping: retain all documentation, communications, and rationale for at least 5 years (per MLR 2017). No tipping off: customers must not be informed that a SAR has been submitted. Let us know if your financial crime team requires an external assurance review or support: maxxup@icloud.com #aml #sar #financialcrime #daml #nca #fiu #mlro #compliance

💡 3. What Constitutes a “Suspicious Activity” Suspicious activity means anything inconsistent with a customer’s known, legitimate business or personal activities. Fintechs, PSPs, and EMIs are exposed to a wide range of suspicious behaviour — including both external and internalred flags. Common Types of Suspicious Activity: 🧩 A. Suspicious Customer Behaviour *Inconsistent KYC/KYB data or reluctance to provide documents. *False, forged, or stolen identity documents. *Frequent changes of address, phone numbers, or directors. *Complex ownership structures with no clear commercial rationale. *Account used by unrelated third parties or non-beneficial owners. 💸 B. Suspicious Transaction Activity *Large transactions inconsistent with customer profile or declared business purpose. *Rapid in-and-out fund movements through multiple accounts (layering). *Incoming funds from unrelated third parties followed by instant withdrawals. *Use of multiple payment methods (cards, crypto, wire transfers) to obscure origin. *High-risk jurisdictions involved (e.g., FATF grey/blacklist countries, sanctioned regions). *Frequent microtransactions (possible smurfing). *Round-dollar transactions or structured deposits just below reporting thresholds. 🏢 C. Corporate / Business Accounts *Shell companies or dormant entities suddenly becoming active. *Use of multiple merchant IDs or payment processors for same business. *Unexplained movement of funds to unrelated firms or individuals. *Business activity inconsistent with transaction patterns (e.g., consultancy firm processing gaming-related payments). 🌍 D. Cross-Border Risks *Repeated transfers to/from offshore jurisdictions with weak AML regimes. *Complex payment chains through multiple EMIs or PSPs. *Foreign clients using UK payment accounts without clear UK nexus. 👥 E. Internal / Insider Suspicion *Employee collusion or unusual system overrides. *Unauthorised data access or manual transaction approvals. 🚫 F. Terrorist Financing Indicators *Donations or transfers to high-risk charities, NGOs, or regions. *Small, frequent transfers to high-risk jurisdictions (may fund logistics or recruitment). Please let us know if you require assistance with a review or establishment of your financial crime framework: maxxup@icloud.com #aml #financialcrime #ctf #compliance #MLRO #suspiciousactivities

🧠 MLRO Responsibilities – UK Overview 1. Legal and Regulatory Basis The MLRO is the nominated officer under Regulation 21 of the MLRs 2017. They are personally responsible for the firm’s compliance with AML/CFT (Anti-Money Laundering / Counter-Terrorist Financing) obligations — including reporting suspicions, maintaining controls, and ensuring staff awareness. Regulators: *FCA (for regulated financial firms) *HMRC (for certain non-financial businesses) *NCA (for suspicious activity reporting) 2. Core Responsibilities A. Receiving and Assessing Internal Disclosures *Receive internal suspicious activity reports (SARs) from staff. *Review and determine whether a Suspicious Activity Report must be filed to the NCA under POCA 2002 or Terrorism Act 2000. *Maintain a secure SAR log and evidence of rationale for each decision. 📌 Key principle: The MLRO must form a “reasonable suspicion” test before deciding to file or not file a SAR. B. Submitting External SARs *Submit SARs promptly via the NCA’s SAR Online Portal. *Include adequate details to identify the parties, transactions, and reasons for suspicion. *Apply for a Defence Against Money Laundering (DAML) when necessary to continue a transaction. Failure to report can lead to criminal liability under s.331 POCA. C. Maintaining the AML/CTF Framework *Responsible for the design, oversight, and effectiveness of the firm’s AML systems and controls, including: *Customer due diligence (CDD/KYC) procedures *Ongoing monitoring processes *Sanctions screening and proliferation financing controls *Record-keeping systems *Internal audit of AML processes *Policies and procedures consistent with SYSC 6.3 (FCA Handbook) D. Risk Assessment *Oversee the firm’s Business-Wide Risk Assessment (BWRA) — identifying exposure to ML/TF/PF risks. *Ensure customer risk assessment models and EDD triggers are aligned with regulatory expectations. *Review new products, delivery channels, and geographic expansion for financial crime risks. E. Training & Awareness *Deliver or approve regular AML training for all relevant employees Ensure staff know: *What constitutes suspicious activity *How to escalate concerns internally *Consequences of non-compliance *Maintain training attendance logs and testing outcomes. F. Senior Management & Board Reporting *Provide periodic AML reports to the Board or senior management These should include: *Number of internal and external SARs *Key AML incidents and trends *High-risk customers and jurisdictions *System or policy breaches *Training and audit results *Remediation plans G. Liaison with Authorities Act as the firm’s primary contact for: *NCA  *FCA / HMRC  *OFSI *Law enforcement 3. FCA Expectations: *Sufficient seniority and independence to challenge management decisions. *Be fit and proper under the SM&CR. *Possess adequate resources, authority, and knowledge of business operations. *Ensure AML systems are proportionate to the firm’s size, complexity, and risk exposure. #mlro

🧭 What Is Proliferation Financing (PF)? Proliferation financing is the act of providing funds or financial services that are used — or could be used — to support the development, acquisition, manufacture, possession, transport, transfer, or use of nuclear, chemical, or biological weapons (Weapons of Mass Destruction – WMD) and their means of delivery (e.g., missiles). In simple terms: PF = financing activities that directly or indirectly help states or entities build or acquire weapons of mass destruction. ⚖️ The Legal & Regulatory Framework 🔹 International Level UN Security Council Resolutions (UNSCRs) — impose binding sanctions on countries and entities involved in WMD proliferation (notably North Korea and Iran). Financial Action Task Force (FATF) — sets standards in Recommendation 7 and Interpretive Note requiring countries to implement targeted financial sanctions related to PF. 🔹 UK & EU Framework In the UK, proliferation financing controls are implemented through: Sanctions and Anti-Money Laundering Act 2018 (SAMLA) UK Financial Sanctions Regulations (particularly the North Korea and Iran regimes) Money Laundering Regulations 2017 (as amended) — PF is explicitly referenced as part of the risk-based approach to AML/CTF/PF compliance. FCA, HM Treasury (HMT), and the Office of Financial Sanctions Implementation (OFSI) oversee compliance. 🏦 Key PF Risks for Fintechs & Payment Firms Indirect Exposure: *PF rarely involves obvious keywords like “missile parts” — it’s hidden within legitimate trade transactions, dual-use goods, or layered financial flows. *Cross-Border Transactions: Global payments, digital assets, and cross-jurisdictional operations can unintentionally facilitate PF through weakly regulated intermediaries. *Customer Base: Entities involved in high-risk jurisdictions (e.g., North Korea, Iran, Syria, or countries with limited export controls) or complex supply chains. *Digital Asset Exposure: Virtual assets can obscure fund origins, making them attractive for PF evasion via crypto exchanges, DeFi protocols, or peer-to-peer transfers. 🧩 Typical PF Red Flags *Trade-Related: Transactions involving dual-use goods (e.g. electronics, chemicals, metals). *Deals with companies in high-risk jurisdictions (e.g. DPRK, Iran, Syria). *Complex or inconsistent shipping routes (e.g. unnecessary trans-shipment). Unclear end-users or lack of transparency around the ultimate consignee. *Corporate/Customer-Related: Customers using front or shell companies for international trade. *Entities with nexus to sanctioned persons or entities. *Payments inconsistent with the customer’s profile or declared business. *Frequent small payments structured to avoid scrutiny. *Financial Indicators: Third-party payments with no clear connection. *Unusual letters of credit or trade finance structures. * High-value asset purchases in jurisdictions near sanctioned countries. #ProliferationFinancing #aml #compliance #regulator #fintech #payments