What wealth firms should look for in AI tools & Are financial institutions struggling to keep up with modern sanction and PEPs lists?

Top Story of the Week

How wealth firms can find the right AI for the job?- With the proliferation of AI, it is easy for wealth management firms to get overwhelmed by the choice. There are countless solutions in the market all promising various benefits, so finding the right one for the job can be tough. FinTech Global spoke to several WealthTech leaders to offer some guidance on what to look for.

Read the full story here.

Research highlight

Germany drops to Europe's third most active FinTech country as deal activity declines in Q1 2024

Key German FinTech investment stats in Q1 2024:

• German FinTech companies raised a combined $224m in Q1 2024, a 24% reduction from Q1 2023
• German FinTech deal activity totalled at 33 transactions in Q1 2024, a 32% drop YoY
• WealthTech was the most active FinTech subsector with six deals

In the first quarter of 2024, German FinTech firms collectively secured $224m in funding, marking a notable 24% decrease compared to the same period in 2023. Concurrently, the deal landscape also witnessed a decline, with a total of 33 deals recorded, reflecting a significant 32% drop YoY. Germany dropped to Europe's third most active FinTech country with a 11% share of total deals, behind the UK and France.

Solarisbank, an embedded finance platform, had the largest German FinTech deal during Q1 2024 after raising $63m in their latest Series F extension, led by SBI Group. Solaris says it will use the new funds to onboard the ADAC (Allgemeiner Deutscher Automobil-Club) credit card programme and further invest “in the resilience of its platform”. In December 2022, the Federal Financial Supervisory Authority of Germany, BaFin, issued directives to Solaris, mandating improvements in risk management and anti-money laundering protocols, alongside the appointment of a special representative to oversee their implementation. Additionally, the company was instructed to obtain regulatory approval before engaging in any new business ventures. Earlier in the year, Solaris faced a €6.5 million fine from BaFin for delayed submission of suspected money laundering reports. Despite these challenges, the company recently announced new funding, following a €38 million Series F round closure less than a year prior.

WealthTech was the most active FinTech subsector with six deals, an 18% share of all finding rounds. Banking Infrastructure was second with five deals, a 15% share, and InsurTech and PropTech were joint third with four deals each.

After the Wirecard insolvency exposed extensive fraud, the German government prioritized maintaining financial market integrity. Implemented in stages from 2021 to 2022, the Act on Strengthening Financial Market Integrity (FISG) led to revisions in several German laws. Key changes include imposing stricter liability on auditors, with increased caps for negligence. For instance, auditing non-capital market-oriented companies functioning as credit institutions now carries liability caps of €4 million for simple negligence and €32 million for gross negligence, with unlimited liability for intentional wrongdoing. The FISG also introduced a maximum 10-year audit mandate term and expanded BaFin's supervisory duties and powers, particularly regarding regulated entities' balance sheets. Institutions must now maintain registers documenting all outsourced functions and ensure third-country firms appoint a local agent for process service. BaFin has been granted explicit authority to issue directives directly to outsourcing firms to address infringements, aligning with EBA guidelines on outsourcing arrangements integrated into BaFin's administrative regulations.

Weekly FinTech deal roundup

CyberTech & PayTech dominate this week’s FinTech funding rounds - A total of $679.3m was raised across 31 FinTech funding rounds this week, with CyberTech and PayTech companies leading the charge.?

Read the full story here.

RegTech news

• Strategic insights for mastering 2024’s regulatory landscape - FinTech Global recently spoke to RegTech firm Alessa to take a deeper dive into the regulatory landscape of 2024 and the strategic insights that financial firms can take away from it. Read the full story here.
• Are financial institutions struggling to keep up with modern sanction and PEPs lists? – Part 1 - The war in Ukraine has underscored how quickly sanction and PEPs lists can change. Since 2022, the US, UK, EU, Australia, Japan and Canada have imposed over 16,500 sanctions on Russia, according to the BBC. The current turbulent geopolitical scene means financial services firms need to be ready for regular, and often sudden, changes to PEPs and sanction lists. FinTech Global recently spoke to several industry players to ask whether financial institutions are keeping up with the modern sanction/PEPs landscape. Read the full story here.
• KYC Portal CLM: Enhancing GRC frameworks with advanced risk management technologies - In today’s business landscape, marked by extensive regulatory demands and significant operational hazards, establishing strong GRC (Governance, Risk Management, and Compliance) frameworks is crucial for maintaining organisational integrity and achieving success. Read the full story here.

InsurTech news

• Unlocking insurer success: The power of data integration with hx Renew - In the evolving landscape of insurance, the adage “knowledge is power” has never been more pertinent. This is especially true in an era where data acts as the lifeblood of decision-making processes.?Read the full story here.
• Novidea secures $30m boost from HarbourVest to revolutionise InsurTech - Novidea has recently announced a significant development in its growth trajectory, securing an additional $30m in funding from HarbourVest Partners. Read the full story here.
• Australian FinTech startup, Honey Insurance, raises $108m to enhance smart home safety - Honey Insurance, an Australian home insurance startup, has just announced a significant boost in its journey to redefine the home insurance landscape. Read the full story here.

Don't Miss Out - Global InsurTech Summit will be hosted on 17th April 2024!

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WealthTech news

• Navigating the new era of compliance: AI innovations in wealth management - In the latest episode of Napier AI's podcast series, the spotlight shines on the transformative power of automation in the compliance processes within the Wealth & Asset Management sector. Read the full story here.
• Avenir secures $530k to revolutionise WealthTech with cutting-edge personalisation - Avenir, a UK-based WealthTech firm, has successfully secured $530,000 in pre-seed funding. Read the full story here.
• How ByAllAccounts is empowering wealthtechs, wealth management firms and data providers to connect their data infrastructure - Wealth management is built on data, but the modern digital ecosystem has made it tough for firms to effectively leverage their datasets.? Read the full story here.

CyberTech news

• StrikeReady secures $12m in Series A for AI-driven cyber Innovation - StrikeReady, an innovative early-stage startup based in Palo Alto, California, has successfully raised $12m in a Series A funding round. Read the full story here.
• HUB Cyber Security nabs $8m in strategic financing to propel growth - SydeLabs, a startup specialising in security and risk management for Generative AI, has announced a significant milestone in its journey. Read the full story here.
• Dave Luber steps up as NSA’s cybersecurity director with US defense plans - The NSA, a pivotal entity in the realm of cybersecurity, has officially appointed Dave Luber as its new cybersecurity director. Read the full story here.

ESG FinTech news

• Unravelling CSRD: A complete guide to value chain sustainability reporting - The Corporate Sustainability Reporting Directive (CSRD) introduces a landmark shift in sustainability reporting. Read the full story here.
• Watershed eyes ESG reporting transformation with new CSRD compliance tool - Watershed, a leader in science-driven sustainability data management, has unveiled its latest innovation: Watershed for CSRD. Read the full story here.
• Nations rally for sustainability with ISSB standards adoption - In a move towards greater sustainability, nations across continents are laying the groundwork for a new era of financial transparency. Read the full story here.

Other FinTech news

• goFlux raises $6m to expand digital freight services across the Americas - goFlux, a leader in the digital and financial integration of agricultural freight in Brazil, has successfully completed a Series A funding round, raising $6m. Read the full story here.
• The comprehensive guide to sanctions compliance in international trade - Sanctions compliance involves adhering to laws, regulations, and standards from national and international bodies to prevent dealings with sanctioned entities. Read the full story here.
• Enhancing financial compliance: How control room software transforms trading rooms - In the fast-paced environment of financial trading control rooms, balancing a myriad of tasks is crucial. These control rooms serve as the nerve centre for compliance activities, tasked with managing sensitive information and preventing conflicts of interest. The advent of compliance control room software has marked a significant shift in how these tasks are approached, offering a way to automate conflict management and streamline the review process of investment deals. Read the full story here.