Fintech and Anti-Money Laundering Regulation: Implementing an International Regulatory Hierarchy Premised on Financial Innovation

Authors

Nicholas A Roide, Texas A&M University School of Law (Student)Follow

Document Type

Comment

Abstract

Innovations in financial technology (“fintech”) have rippling effects across global markets. Fintech firms utilizing virtual assets and disintermediating blockchain technology continue to rapidly grow in strength and number. As systemic risk mounts due to the inter-jurisdictional nature of fintech, antimony laundering (“AML”) regulators must search for an international answer to maintain global financial stability and protect consumers against illicit activities. A variety of solutions have appeared within local AML regulatory frameworks. These frameworks tend to function as a hierarchy with three ordered objectives: market integrity, rule clarity, and innovation. However, frameworks often place too much emphasis on market integrity and squeeze out the financial innovation inherent in the fintech sector. This Comment argues for an international AML regulatory hierarchy that places paramount importance on the innovative nature of fintech yet still promotes market integrity.

This Comment examines the efficacy of this proposed hierarchy through the AML regulatory frameworks of several offshore financial centers (“OFCs”): Malta, Gibraltar, and Jersey. While OFCs have often been accused of light-touch regulation, they are championing a push into financial innovation with strong regulatory safeguards that maintain market integrity and guard against systemic risk. These AML regulatory frameworks provide support for the Comment’s central argument. The Comment concludes with an examination of methods by which the proposed hierarchy can be implemented. Ultimately, innovation hubs nurture regulatory learning and allow regulators to employ a conglomeration of initiatives such as regulatory sandboxes and mentorship regimes, which can be macro-produced to attain the desired hierarchical outcome.

DOI

10.37419/LR.V9.I2.5

First Page

465

Last Page

495

Recommended Citation

Nicholas A Roide, Fintech and Anti-Money Laundering Regulation: Implementing an International Regulatory Hierarchy Premised on Financial Innovation, 9 Tex. A&M L. Rev. 465 (2022).
Available at: https://doi.org/10.37419/LR.V9.I2.5