USA LAW AND PRACTICE Contributed by: Margo H.K. Tank, Michael Fluhr, Era Anagnosti, Kristin Boggiano, David Stier, Liz S. M. Caires, Adam Dubin, Emily Honsa Hicks, Kathleen Birrane and Chezelle McDade, DLA Piper LLP
12.2 Areas of Regulatory Focus Key areas of concern currently are frauds that impact consumers, enable money laundering, or jeopardise market integrity. Examples include account takeovers, synthetic identities, and identity theft, including AI- enhanced fraud such as deepfakes. Fraud detection remains a growing concern for fintechs, and the allo - cation of liability in cases of third-party fraud against consumers and/or their financial institutions is an area of concern. Although federal regulatory oversight has shrunk significantly in the past year, recent regulatory focus includes oversight of the systems that help fintechs mitigate and reduce fraud – eg, transaction monitor - ing and customer due diligence in AML programmes, sanctions violations, and third-party risk management.
12.3 Responsibility for Losses Fintech service providers may be held liable for cus - tomer losses. For example, if a provider fails to deliver services as agreed or does not meet the performance standards in their contract, it may be responsible for financial losses and other contractual damages. Additionally, failure to comply with obligations under applicable financial regulations, such as data protec - tion laws, can result in compensation for damages such as identity theft due to data breaches. Engag - ing in deceptive practices, such as false advertising or UDAAP can lead to refunds and compensation for financial losses. Further, fintech providers may be held accountable under federal or state law and by contract for losses resulting from fraud and security breaches. If their platform is compromised, leading to unauthorised transactions or account takeovers, they may need to reimburse customers for losses and costs like legal fees, particularly if they employed inadequate secu - rity measures. Finally, fintechs may be liable for neg - ligence if they fail to exercise due care in providing services and their failure results in customer losses.
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