When Fast Onboarding Becomes a Fast Track to Trouble: The Compliance Gap in FinTech

The following article has been reproduced with the permission of Erik Wilgenhof Plante  

IN THE WORLD OF FINTECH, SPEED SELLS. Every website, marketing campaign and investor pitch promises "instant onboarding," "same-day account setup," or "banking without the wait." These claims are especially enticing for high-risk businesses that struggle to get service from traditional banks. Think crypto exchanges, adult entertainment platforms, gambling businesses or offshore companies.

But what few people outside the compliance world realise is that fast onboarding of high-risk clients is not just a technical challenge. It is a regulatory minefield. When speed trumps safety, the cost can be immense. Fines, license revocations and even criminal investigations are no longer rare events in FinTech. And the root cause is often the same: onboarding shortcuts that ignore compliance fundamentals.

Why Fast Onboarding Appeals to High-Risk Businesses

Let’s be honest. If you run a crypto company, your options for banking are limited. Traditional banks often say no before you finish your sentence. FinTech companies, with their slick apps and risk-taking investors, seem like a lifeline. They speak your language, they operate online, and most importantly, they promise speed.

Many high-risk businesses are willing to pay higher fees for this convenience. For FinTechs under pressure to grow fast and prove market traction, onboarding these clients is a tempting revenue booster.

But there is a problem. Onboarding a high-risk client is not like signing up for Netflix. It involves layers of checks, regulatory disclosures, and ongoing monitoring. Rushing that process is asking for trouble.

The Regulatory Expectations Are Clear

Whether you're a traditional bank or a flashy new FinTech, the law is the same. Regulators across the world expect financial institutions to do proper due diligence before onboarding clients, and especially so when the client operates in a high-risk sector.

This means:

• Verifying the identity of the client and the beneficial owners;
• Understanding the nature of their business and source of funds;
• Screening against sanctions, watchlists and adverse media;
• Assessing the money laundering and terrorist financing risk; and
• Assigning the appropriate risk rating and escalating when necessary.

If a company is involved in crypto, cross-border payments, adult services or politically exposed persons, the checks must be even more robust. In the EU, this is enshrined in the Anti-Money Laundering Directive. In the UK, the FCA makes it clear that high-risk clients require Enhanced Due Diligence (EDD). In Singapore and Dubai, regulators are even more prescriptive.

Yet many FinTechs either don’t understand these rules or choose to ignore them.

When Growth Obsession Clouds Risk Judgment

Many FinTech startups are built around visionary founders with aggressive growth goals. They are often driven by investor expectations, expansion timelines and the pressure to stay ahead of competitors. In this environment, growth becomes the north star — and everything else is expected to follow.

But when growth is prioritised above risk, problems arise. Founders who dominate the organisation’s culture often demand faster onboarding and wider client acceptance without fully understanding the regulatory implications. Compliance teams may be overruled or sidelined, not because of bad intentions but because risk is seen as a barrier rather than a responsibility.

This is especially dangerous in early-stage FinTechs, where company culture is still forming and governance structures are weak. Sales and product departments push for faster sign-ups, smoother user experiences and less friction. The result is often a race to onboard clients — including high-risk ones — without proper checks, systems or escalation paths.

If the leadership team has never worked in regulated financial environments, they may not even realise the damage they are doing. The consequences, however, are very real.

What FinTechs Get Wrong

There are three main areas where FinTech companies often fail when offering fast onboarding:

1. Underinvesting in Compliance Resources

Hiring a couple of junior analysts and calling it a “compliance team” is not enough. High-risk onboarding requires experience, training and the ability to challenge internal pressures. Compliance staff need to understand the legal obligations and how to apply them in complex, fast-moving environments.

Too many FinTechs hire cheap and junior. They delay building proper compliance infrastructure until regulators come knocking. By then, it is too late.

2. Lack of Scalable Technology

Manual onboarding processes break quickly when volumes grow. FinTechs often promise real-time onboarding without building the backend technology to support it. Key checks like ID verification, document validation and transaction profiling are either skipped or handled by underqualified staff.

Automated systems are expensive. They require investment in vendor solutions, integration with internal systems and continuous maintenance. Cutting corners means accepting unknown risks.

3. Weak or Nonexistent Risk Appetite Statements

A risk appetite statement defines what kind of customers a company is willing to accept and under what conditions. Most traditional banks have clear policies on this. Many FinTechs, especially in the early stages, do not.

As a result, onboarding decisions are made ad hoc. Sales teams push for growth, product teams want users, and compliance becomes an afterthought. Without a clear framework, high-risk clients slip through.

The Illusion of "Fake It Till You Make It"

One of the most dangerous mentalities in early-stage FinTechs is the “fake it till you make it” mindset. In product development or marketing, it can work to build momentum. But in compliance, it is a recipe for disaster. You cannot pretend to have risk controls, onboarding systems or sanction screening in place. Regulators and law enforcement do not care if you're still building. If you onboard high-risk clients without real safeguards, you are not just bending the rules. You are breaking them. The financial system is built on trust, and trust cannot be faked. Especially when dealing with high-risk customers, the gap between pretending and performing can bring the whole company down.

Real-World Consequences

The Payoneer Case

Payoneer, a US-based FinTech, got caught in 2020 for providing services to sanctioned entities. While they were not criminally prosecuted, they had to pay a USD 1.4 million fine and overhaul their compliance systems. The root cause? Lapses in customer due diligence and insufficient controls around high-risk geographies.

Wirecard’s Collapse

Although not a startup by the time it collapsed, Wirecard is a powerful example of what happens when compliance is sidelined. The company processed payments for dubious merchants, including gambling and adult entertainment, without robust checks. It took years before the fraud came to light, costing billions and shaking investor confidence in FinTech altogether.

Revolut’s Delayed UK Banking License

Revolut, one of the poster children of European FinTech, has faced repeated scrutiny over its compliance practices. Reports of weak onboarding checks and internal tensions over compliance culture have led to delays in obtaining a UK banking license. While not an enforcement case per se, it shows how weak controls can stall growth ambitions.

Mistertango and Crypto Onboarding

Mistertango, a Lithuanian FinTech, once marketed itself as a go-to bank for crypto firms. It offered fast onboarding, remote access and minimal friction. But regulators in Lithuania eventually stepped in over concerns about AML compliance. The company’s market reputation took a hit, and customers were left in the lurch.

The Hidden Trap of Onboarding Russian Entities and Individuals

Since Russia’s invasion of Ukraine in 2022, sanctions lists have expanded dramatically. Onboarding Russian nationals or entities without enhanced due diligence has become one of the riskiest moves a FinTech can make. Yet some companies continue to advertise fast onboarding without clearly stating jurisdictional limitations. This has led to situations where Russian clients, some of whom are sanctioned or have indirect ties to blacklisted entities, have been onboarded through automated flows with minimal checks. In one recent case, a European FinTech was found to have provided payment accounts to a Russian shell company with connections to sanctioned oligarchs, triggering an urgent regulatory review. The risk is not just about breaking sanctions law. It is also about reputational damage, potential criminal liability, and losing access to correspondent banks who want nothing to do with sanction breaches. Fast onboarding of Russian-linked clients without robust country screening, ownership checks and sanctions controls is not innovation. It is negligence.

The Risk to Customers

What many high-risk clients do not realise is that onboarding with a non-compliant FinTech can hurt them too.

Accounts can be frozen without notice if the FinTech is investigated or decides to derisk. Funds can be seized if regulators suspect breaches. And reputational damage is real. When a FinTech goes down, customer data is often part of the fallout.

For crypto exchanges, payment processors or adult platforms, this can mean disrupted operations, legal costs and lost business.

The Risk to FinTech Founders

FinTech founders often assume compliance is someone else’s problem. That is a dangerous assumption.

In many jurisdictions, directors and senior managers are personally liable for regulatory failures. If your company onboards a sanctioned entity, facilitates illicit payments or fails to report suspicious activity, you may be held accountable.

Investors also take note. As compliance risks rise, so do questions about your ability to scale responsibly. A licensing delay or enforcement action can kill a fundraising round instantly.

What Good Looks Like

Some FinTechs are doing it right, but they are the exception rather than the rule.

Companies like Solaris (Germany) and ClearBank (UK) have invested heavily in onboarding automation, built strong compliance functions early and maintained open dialogue with regulators. They accept that high-risk clients are welcome only when their risk can be managed properly.

These firms understand that onboarding is not a product feature. It is a core part of their risk management strategy. They also know that compliance is not a blocker. Done right, it becomes a differentiator.

How to Close the Gap

If you are a FinTech company promising fast onboarding, especially to high-risk sectors, here is what you must do:

• Build a real compliance function. That means hiring experienced staff, giving them a voice at the top table and funding their operations properly;
• Automate wisely. Use technology to streamline ID checks, risk scoring and screening, but always have humans in the loop for complex cases;
• Define your risk appetite early. Know what kind of clients you want, what risks you accept, and document the conditions for acceptance or rejection;
• Train your teams. Sales, customer support and product must understand compliance basics. Otherwise, they will accidentally undermine your safeguards; and
• Speak to regulators early and often. Transparency builds trust and reduces the risk of surprises during inspections or license applications.

For Clients: Ask the Right Questions

If you're a high-risk business looking for a FinTech provider, don’t be seduced by speed alone. Ask questions like:

• What due diligence will you perform on us?
• Are you licensed and regulated in your jurisdiction?
• What happens if your regulator requests information?
• Will my funds be frozen if your risk profile changes?
• How do you ensure my data is secure?

A FinTech that cannot answer these questions clearly is not worth your trust.

Conclusion: Fast is Fine, Reckless is Not

FinTech has the power to revolutionise financial access. It can bring services to businesses that were previously shut out. But with great power comes great responsibility.

Fast onboarding should not mean cutting corners. It should mean investing in better technology, smarter workflows and trained people. It should mean aligning growth ambitions with regulatory obligations.

The cost of ignoring this is not just financial. It is reputational, operational and personal.

If you are building a FinTech company, let compliance be your co-pilot. If you are using one, make sure they know where they are going.

The above article has been reproduced with the permission of Erik Wilgenhof Plante 

Managing Director/Authorised Manager (RR) @ 3S Money | Regulatory Oversight, Risk Management

www.linkedin.com/pulse/when-fast-onboarding-becomes-track-trouble-compliance-erik-ifcee/?trackingId=XAJdcjuvp96uQNNET8UgbA%3D%3D