5 Compliance Mistakes Fintech Startups Should Avoid

1. Treating Sanctions Screening as a Checkbox

Why it happens: Early-stage fintechs often implement minimal screening solutions designed for local use. These systems may not capture name variations, handle multilingual data, or update lists dynamically. As cross-border transactions grow, these gaps become significant.

How to fix it: Understand where your risk truly lies: in which markets, currencies, and customer types you handle. Use screening tools that automatically update lists, account for spelling variations, and re-check existing clients regularly. Most importantly, test them often.

2. Letting Alert Backlogs and Reporting Delays Build Up

Why it happens: Transaction monitoring systems often lag behind business growth. The rules and tools that worked during the pilot phase quickly become insufficient as volumes and transaction types multiply. Without automation and proper resourcing, alerts accumulate, reports are delayed, and critical activity can be missed.

How to fix it: Plan for growth before it happens. Build monitoring capacity around projected transaction volumes, not just current levels. Use automation to handle simple, low-risk alerts, and design clear processes for investigating the complex ones. Dashboards tracking turnaround times and alert volumes help teams stay proactive.

3. Onboarding High-Risk Customers Without Proper Checks

Why it happens: Fintech startups often prioritize frictionless onboarding to drive growth. Temporary workarounds—such as manual exceptions or limited ID verification—can become systemic weaknesses once customer volumes increase.

How to fix it: Define what “high risk” really means for your business and enforce those rules through your systems. High-risk profiles should automatically trigger enhanced checks and require dual approval before activation. Training staff to spot suspicious patterns, like duplicate identities, helps catch issues early.

4. Expanding into Crypto with Outdated Controls

Why it happens: Many fintechs entering the crypto or digital asset space rely on traditional fiat-era controls that don’t address new risks such as wallet tracing, asset provenance, or exchange partner due diligence.

How to fix it: Before launching any crypto product, assess where risks come from, asset types, markets, or partners. Integrate blockchain analytics to trace suspicious wallets and detect connections to sanctioned entities. Train compliance teams to investigate crypto activity confidently and record clear rationales for their decisions.

5. Having Weak Governance and Documentation (The Invisible Failure)

Why it happens: Fast-growing fintechs often focus on expansion, product development, and fundraising—leaving compliance documentation and governance as afterthoughts. As a result, key decisions, investigations, and risk assessments go unrecorded, creating major challenges during audits or regulatory reviews.

How to fix it: Build compliance governance into your culture early. Hold regular oversight meetings, track key metrics, and keep your policies current. Use systems that automatically log who made each compliance decision and why. Running internal “regulatory fire drills” helps teams respond confidently if an audit comes up.

Your 90-Day Action Plan

Improving FCC doesn’t take years, but it does take focus. Here’s where growing fintech startups should start in the next three months:

• Check your sanctions setup. Make sure your screening covers all relevant names, includes variations, and re-checks existing customers.
• Plan for scale. Compare your current alert volumes to projected growth, and ensure you can manage spikes without delays.
• Strengthen onboarding. Embed enhanced checks for high-risk customers into your systems so they can’t be bypassed.
• Tighten governance. Build simple dashboards showing key metrics, customer volumes, alerts, reports filed, and quality checks, for leadership oversight.
• If you work with crypto: Integrate blockchain analytics into your monitoring tools and document how you assess risks tied to digital asset partners.