Fintech 2025

USA Trends and Developments Contributed by: Donald J. Mosher, Kara A. Kuchar, Melissa G.R. Goldstein, Jessica Romano and Adam J. Barazani, Schulte Roth & Zabel LLP

enforcement priority in this space. In that case, the NYAG alleged that Yellowstone Capital was engaged in predatory practices, including mis - leading terms and excessive charges disguised as fees. Yellowstone Capital also entered into a similar settlement in New Jersey two years prior, albeit for a much smaller amount. These actions demonstrate a shift toward stricter oversight of MCA practices at the state level, underscoring the need for providers to prioritise transparency and fair dealing. Countermeasures Against Fraud, AML, and Sanctions Risk The growing sophistication of financial fraud, money laundering and terrorist financing has driven both regulatory agencies and fintech companies to enhance risk mitigation strategies. Leveraging technology solutions will continue to be necessary in 2025 and beyond for fintech companies to meet the transaction-monitoring challenges presented by rising transaction vol - ume and speed, the proliferation of intermedi - ated account relationships, and the increased sophistication of threat actors. Accordingly, we expect to see the continued adoption of advanced technologies, including AI-powered tools, to enhance companies’ anti-money laun - dering (AML) compliance programmes and bol - ster efforts to combat identity theft, account takeovers, and unauthorised transactions. Blockchain analytics-based solutions are also gaining traction for AML and sanctions compli - ance involving digital asset transactions. Mean - while, collaboration between banks and fintechs has become essential in addressing fraud, AML and sanctions risks. To ensure compliance with existing and evolv - ing AML regulations and guidance, companies will need to complement their embrace of tech - nological solutions with robust model validating

and testing. These controls should be aimed at confirming the technologies are operating appro - priately broadly, ie, not suppressing transaction- monitoring alerts that warrant investigation, and appropriately narrowly, ie, winnowing out the “noise” so reviewers can focus on relevant alerts. Companies should also be prepared to describe the parameters of their validation and testing operations to examiners to satisfy regula - tory scrutiny. Additionally, sanctions compliance will remain an area of focus for both fintech companies and regulators. Governments are increasingly deploying sanctions as a geopolitical tool and, in addition to list-based sanctions, imposing industry-, sector-, and investment-based prohi - bitions. As a result, sanctions compliance is get - ting more complex, highlighting the importance of having knowledgeable staff and robust com - pliance resources, including automated controls, to protect against inadvertent breaches. State Money Transmission Licensing Trends Following a strong 2024 legislative year, the state banking regulators and state legislatures have made significant progress in adopting the Money Transmission Modernization Act (MTMA), which aims to streamline the application and supervi - sion process for money transmitters, promoting a standardised regulatory environment across states. This harmonisation supports growth and innovation in fintech including, for example, by facilitating capital fundraising efforts, providing clarity and uniformity as to exempt activities, and streamlining the de novo licence application pro - cess and compliance obligations post-licensure. Over the past year or so, ten states have amend - ed their laws to closely model the MTMA. These states are Illinois, Kansas, Maine, Massachu - setts, Missouri, New Hampshire, South Carolina,

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