The financial industry is heavily regulated. Neobanks must comply with legal and regulatory requirements to thrive.

1. Neobanks and the Legal Landscape
Fintechs are neobanks, revolutionizing the access to financial services in the past
few years observed Bahaa Abdul Hussein. Since they disrupt the traditional means of
finance and banking, neobanks pose complex regulatory problems.
Compliance with important regulations like anti-money laundering and data privacy
laws is important. Due to the nature of fintech, the industry evolves frequently, giving
new regulatory and risk management challenges to regulators. The regulators need
to keep up with these developments. They should implement compliance and legal
requirements, and foster a strong risk management framework.
How Can Neobanks Navigate the Legal Landscape?
The financial industry is heavily regulated. Neobanks must comply with legal and
regulatory requirements to thrive. The rapidly changing fintech environment does not
help. To navigate the ever-advancing regulatory landscape, neobanks can take the
following steps:
Data Privacy Regulation Compliance
To comply with data privacy regulations, neobanks should abide by these best
practices:
● Data encryption and data security access control implementation
● Provision of customer transparent privacy policies
● Limited data processing (the minimum amount necessary for rendering
services)
● Seeking explicit user consent to collect and process personal data
Anti-money laundering regulations
Neobanks must prove they are not using their organization for illegal laundering
activities by complying with the anti-money laundering regulations. These are the
best practices to follow in this case:
● Risk level assessment and customer identity verification before doing
business with them
● Tracking suspicious patterns and transactions in customer activity
● AML employee training and internal records implementation for money
laundering detection and prevention
● Informing suspicious activities to regulatory authorities as soon as possible.
Positive Regulator Relationship Management

2. To manage risks efficiently, neobanks will have to collaborate with regulators. That
collaboration must be built on trust and positivity through the following practices:
● Keeping track of latest regulatory guidance and developments
● Transparency in risk management operations and business practices
● Regular compliance audits
● Approaching regulators for advice whenever necessary
Strong Risk Management Frameworks
The best practices to follow for a robust framework of risk management is as
follows:
● Development of risk management procedures and policies
● Regular risk assessments for potential risk identification and mitigation
● Internal records implementation for fraud detection and prevention
● Training employees in best practices for risk management
Conclusion
The constantly changing landscape of fintech is a problem for both neobanks and
regulators. Of all the regulations, anti-money laundering and data privacy pose the
biggest challenge. Regulators and neobanks need to stay up-to-date with the
developments in each other’s industry. Building a positive relationship will help both
parties in navigating the legal landscape better.
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