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In 2024 payment processors rejected more than 40% of merchant onboarding applications due to weak AML compliance, resulting in losses of billions of euros for fintechs in Europe and Asia. Imagine: your payment service is ready to launch, but a major PSP blocks transactions because of a lack of a risk‑based approach or incomplete sanctions screening — familiar pain? AML compliance determines access to Visa, Mastercard, SEPA and banking corridors, where without KYC/EDD, transaction monitoring and a documented PSP policy, PSPs and banks refuse onboarding. Read this article to the end — I will walk through a step‑by‑step checklist, technologies and a roadmap so you can pass the review in 3–6 months and scale your business without blockages.

AML compliance and connection to payment systems

Payment systems consider AML compliance the number one barrier: without it there is no access to the ecosystem. The COREDO team has repeatedly observed how clients from the EU and Singapore accelerated onboarding by implementing FATF standards in advance.

Requirements for Visa, Mastercard, SEPA, and PSP

COREDO’s experience confirms: without these elements rejection is inevitable, as in the case of a European aggregator blocked for weak screening.

Role of FATF, EU AMLD and local laws

FATF recommendations dictate the Travel Rule for payments and transfers, mandatory for PSPs in the EU and Asia, with AML systems required to be compatible with PSD2 and the EU AMLD. Local laws in Singapore (MAS) and Estonia strengthen PEP screening and watchlist checks. A solution developed by COREDO for a Cypriot PSP harmonized policy with these standards, securing access to several networks.

Trends 2024–2025: real-time screening and the Travel Rule

Elements of an AML program for obtaining approval

PSPs expect a full AML program with evidence. Here is a basic checklist tested by the COREDO team on clients from the Czech Republic and Dubai.

AML policy and governance in the company

Document AML governance; it’s a must-have for audits.

Customer verification and onboarding: KYC, CDD, EDD

KYC for payment providers includes CDD with OCR/biometrics, EDD for PEPs and high-risk, plus an annual refresh.
Checklist: UBO passport, business profile, source of funds.

Transaction monitoring and KYT: rules, red flags

Escalation to case management, with a 24-hour SLA.

Sanctions screening: dynamic OFAC/EU/UN lists

Sanctions screening for merchants against OFAC/UN/EU with dynamic list updates and PEP checks. Respond to matches with real-time blocking.

Reporting and interaction with the FIU: SAR/STR, regulatory reporting

SAR/STR filing within 24–72 hours with regulatory reporting and evidence retention for the FIU. Readiness for e-discovery is key to an audit.

AML architecture for payment systems

An effective architecture combines RegTech with APIs. COREDO integrated such stacks for Singaporean PSPs.

MVP AML stack for rapid onboarding

API integration for real-time screening with KYC document verification technologies (OCR, biometrics) and cloud-native AML platforms. Time to launch: 4 weeks.

Advanced architecture for streaming analytics, XAI and blockchain

Integration of PSPs and banks for instant payments

SLA: <100ms latency for real-time AML for instant payments. API-first providers ensure compatibility.

Scalability and KPIs: alert volume per FTE, MTTR, SAR

Scalability of AML systems via microservices. Optimize false positives according to KPIs: MTTR <2 days, alerts per FTE <500, SAR conversion 5%.

How to organize KYC/EDD and monitoring

Organize processes to match the AML onboarding checklist for merchants. COREDO practice: automation speeds things up by 60%.

Merchant onboarding: step-by-step checklist

1. Document collection (passports, articles of association).
2. UBO/PEP screening.
3. Source of funds.
4. Risk scoring.
5. EDD if high-risk.

SLA: 48 hours.

TPRM and third-party management

Third-party onboarding risk via vendor Due Diligence and AML outsourcing. CaaS maintains control.

Working with high-risk clients: EDD, SLA, documentation

Policy and playbook for payment sanctions

Sanctions response playbook: match → freeze → SAR → report. Lists updated hourly.

Legal risks of non-compliance: what to watch out for

Non-compliance hits revenues. COREDO minimized such risks for Asian clients.

Connection refusals and blocks

Without AML acceptance criteria, access to payment gateways is denied.
Cost of compliance vs onboarding revenue: compliance pays off in 6 months.

Fines and reputational risks

Fines up to 10% of turnover under the EU AMLD. Regulatory risks for international payments include reputational losses.

GDPR PDPA Schrems II: KYC restrictions

Data privacy & cross-border data transfer under GDPR/Schrems II. Localize data for Asia.

ROI and economic model: how much it costs and how to calculate the benefit

ROI calculation: CAPEX 50–200k EUR is recouped by a 30% increase in the approval rate.

CAPEX and OPEX models for AML: software, personnel

In-house: 150k CAPEX + 50k OPEX/year. CaaS: 80k + 20k.

Assessment of benefits: approval rate, blocks, risk of fines

In-house vs CaaS vs hybrid: table

Implementation roadmap: MVP → scaling → audit-ready

Roadmap from COREDO: from MVP to full compliance in 12–18 months.

-3 months: eKYC, sanctions API, merchants

Documents + MVP AML stack. Test on 100 merchants.

Deployment of transaction monitoring and EDD in 9 months

Transaction monitoring + workflow automation. Sign SLAs.

18 months: explainability, advanced analytics, blockchain, audit

Explainable AI + blockchain analytics. Audit readiness.

Common objections and answers for owners

What AML requirements are there for connecting to Visa/Mastercard/SEPA? KYC/UBO, TM, sanctions screening per FATF.
Can AML outsourcing (CaaS) be used to speed up connection to payment gateways and retain control? Yes, with TPRM and audit rights: speeds it up 2x.
How to implement real-time sanctions screening for instant-payments without lags? API with <50ms latency and streaming.

Case studies and practical examples

A European PSP obtained approval within three months.

The European PSP implemented API integration and biometrics: approval rate rose by 40%.

Fintech with a crypto product: integration of blockchain analytics and MiCA/VASP

Singapore fintech integrated blockchain analytics, passing a MAS audit.

Downloadable templates

• AML onboarding checklist for merchants (Excel template).
• EDD triggers matrix.
• Sanctions response playbook.
• KPI/ROI model (Excel-ready with CAPEX/OPEX).

Key takeaways and action checklist

1. Develop an AML compliance policy.
2. Appoint a CAMLO.
3. Implement eKYC + CDD.
4. Set up sanctions screening.
5. Launch transaction monitoring.
6. Define EDD triggers.
7. SOP for SAR/STR.
8. Integrate API for SLA.
9. Test on an MVP.
10. Prepare audit trails.

How to choose suppliers and partners

Recommendations for selecting suppliers and partners are especially important when the stability of key business processes and compliance with regulatory requirements depend on an external vendor. Below are practical criteria for evaluating suppliers and partners that will help compare proposals according to uniform parameters and choose solutions with an optimal API-first approach, transparency, and reliable support.

As CEO and founder of COREDO, I see daily how entrepreneurs from Europe, Asia and the CIS face the challenges of international expansion. Over nine years of our practice the COREDO team supports clients at all stages – from company registration in the EU, including Latvia, the Czech Republic, Cyprus and Estonia, to obtaining financial licenses in Singapore and Dubai, as well as implementing AML systems. Today I will analyze the bank-centric AML model in Latvia, explain why it dominates regulation, and show how your business can effectively scale under it, relying on real cases from our experience.

AML in Latvia: Why bank-centric?

This bank-centric AML model in Latvia focuses on systemically important financial institutions (SIFI), requiring them to hold increased capital buffers and enhanced monitoring. COREDO’s practice confirms: banks here act as the “gateways” for all transactions, performing CDD/EDD, PEP monitoring and sanctions screenings for corporate clients from the EU, Asia and the CIS.

The solution developed at COREDO for an Asian fintech startup illustrates the essence. The client planned payment services through a Latvian bank: we integrated RegTech solutions with machine learning to automate AML/KYC, which reduced verification time by 40%. AML regulation in Latvia emphasizes the role of banks — they are required to calculate a systemic risk surcharge (Systemic Risk Buffer), which can reach 3-5% of capital for large players, increasing the focus on concentration of credit risk.

Bank-centric model: risks and opportunities for business

The model increases the systemic importance of banks, where the N30 standard limits loan concentration to a single borrower to 30% of capital. This directly affects financing: for companies from the CIS seeking loans in the EU, banks introduce differentiated AML requirements, increasing scrutiny for cross-border transactions. Our experience at COREDO showed: one client from Singapore, registering a holding in Latvia, faced delays due to bank liquidity in Latvia — the liquidity buffer (LAT, Liquidity Coverage Ratio) forced the bank to require additional liquid assets.

The COREDO team helped an Estonian client with a crypto license pass an audit by implementing strategic AML risk management strategies. Result: ROI from compliance exceeded 25% due to reduced fines and faster client onboarding. The advantages of bank-centric AML for companies in the EU, in terms of scalability: Latvian banks offer ready-made tools for cross-border AML for EU-Asia business, including automated PEP monitoring.

Comparing with other EU countries, the bank-centricity of AML in Latvia stands out due to sector consolidation — since 2019, 4-5 large banks have dominated, which simplifies partnerships but increases dependency. Comparing Latvia’s bank-centric AML with other EU countries shows: unlike decentralized Lithuania, Latvia focuses on the banking sector under the FCMC, where systemic risk surcharges protect against crises but make loans 1-2% more expensive.

The table reflects data from COREDO’s practice: for Asian firms, Latvia is preferable for stability, despite the risks of implementing AML in Latvian banks for entrepreneurs.

Scaling AML to a bank-centric approach

How does the bank-centric AML model affect business in Latvia for firms from the CIS and Asia? It requires scalability of AML systems for SMBs but opens access to funding. Strategies for scaling a business under bank-centric AML in Latvia include:

• Integrating RegTech: RegTech solutions for AML in Latvia with ML reduce costs by 30-50%. At COREDO we deployed such a system for a Cyprus-based payment company, providing CDD/EDD in a bank-centric approach and sanctions screenings of Latvian banks.
• Liquidity management: Liquid assets LAT AML: key to approval. A client from Dubai opening a branch used our liquidity buffer calculation model, increasing the ROE of banks to 12%.
• Audit and reporting: Avoid the risks of falsifying reports through financial audits and compliance reporting. COREDO’s practice confirms: transparency of retail clients’ liabilities in AML accelerates lending.

How is the systemic risk surcharge calculated in AML in Latvia? The FCMC assesses based on assets, interconnectedness and complexity: for banks with >10% market share – +2-5%. This affects how the N30 rule impacts lending in Latvian banks, limiting concentration of credit risk while increasing resilience.

ROI from compliance with bank-centric AML in Latvian banks reaches 15-30% due to reduced fines (up to €5 mln under EU AMLD6) and access to the EU market. Is it worth investing in RegTech to overcome the bank-centric nature of AML in Latvia from an ROI perspective? Absolutely, if your turnover >€1 mln – payback in 12-18 months.

COREDO cases: registration and licenses

Our experience covers 200+ projects. For a Slovak manufacturer expanding into Asia, the COREDO team registered a company in Latvia with a bank account, implementing bank-centric AML. We overcame the N30 regulation by diversifying loans and obtained a payment license; the business grew by 150% in a year.

Another case: a Singapore trader with a forex license. Latvian bank AML required EDD for CIS partners; COREDO’s solution using machine learning in bank AML provided corporate lending funding without delays. Long-term consequences of bank-centric AML regulation for firms in Asia and the CIS: ROE growth of 10-15% with proper compliance.

Does banks’ liquidity cushion affect the return on investment in AML services? Yes, but managing systemic risks through differentiated buffers increases resilience. How does consolidation of the Latvian banking sector change risk management strategies for AML? It simplifies partnerships with top banks, reducing bank-centric risks for SMB.

Answers to key business questions

• Why does a bank-centric AML model in Latvia increase systemic risks for businesses? Because of dependence on 4-5 banks, although systemic importance add-ons minimize them.
• How do systemic importance add-ons affect lending ROI in Latvian banks? They increase costs by 1%, but RegTech provides +20% returns.
• What are the strategic drawbacks of bank-centric AML for scaling CIS companies in Latvia? KYC delays, solvable by implementing scalable AML processes.
• Is bank-centric AML in Latvia a barrier to entry for Asian firms? No, if you use banks’ liquidity cushions and local substance.
• How to calculate long-term compliance costs? Formula: (RegTech costs + Audit) / (Fine reduction + New turnover): at COREDO we model for your case.
• Which return on equity metrics show AML effectiveness? ROE >10% with N30 <25%.

Bank-centric AML in Latvia is not a barrier but a tool for reliable growth. At COREDO we turn regulatory challenges into competitive advantages, accompanying you from registration to licenses. Contact us – we’ll discuss your strategy personally.

Imagine: 70% of alternative investment funds in the EU spend more than a year obtaining a full AIFMD licence, with compliance costs exceeding €500,000. And if you manage private equity or real estate and are looking for a quick launch in the Czech Republic without a bureaucratic nightmare? ZISIF §15 in the Czech Republic offers a notification regime – a flexible alternative to classic alternative investment funds in the Czech Republic, ideal for qualified investors. This is the “small regime” under Act 240/2013 Sb., where the Czech National Bank (ČNB) reviews the notification in weeks, not years. Practice COREDO confirms: such structures speed up cross-border fundraising from Asia and the EU, minimizing risks. Read on, we’ll explain when ZISIF §15 really works, how to register it and how to avoid the pitfalls.

Quick facts:

• Registration timeline: 2–4 weeks in the ČNB register.
• Investors: only qualified (assets >€500k or income >€100k/year).
• Benefits: notification regime vs full Licensing AIFMD.
• Main risks: lack of substance and AML shortcomings.

ZISIF §15: legal basis and regulatory scope

Legal basis

Registration of ZISIF §15 in the Czech Republic
Registration of ZISIF §15 in the Czech Republic is done via notification to the ČNB: the articles of association, investment memorandum, UBO data and evidence of substance. The notification regime vs licensing speeds up the process to 30 days, versus 6–12 months for AIFs. The ČNB register checks basic compliance, without prudential supervision.

ČNB requirements for ZISIF
ČNB focuses on the ČNB requirements for ZISIF: the presence of an LEI for the fund, risk management and an AML policy. The boundaries of prudential supervision – assets <€500 million exclude a deep audit. The solution developed by COREDO helped the client pass the inspection in 18 days by providing a local office.

ZISIF §15: When a Structure Is Advantageous

Who ZISIF §15 really works for: primarily investors and business structures that already have a clear strategy and a scale of tasks for which such a model provides tangible savings, flexibility and capital protection. Below we will examine the criteria of expediency (when the structure is advantageous) using real cases, from classic private equity and real estate to SPV structures and venture deals.

When is ZISIF §15 advantageous for an entrepreneur?
For SPVs in M&A or venture deals with complex assets: real estate, private equity, crypto-assets. What assets can be held in a ZISIF §15 (real estate, crypto)? Up to 100% of the portfolio in illiquid assets with third-party valuation. Our experience has shown: a real launch in 2 months.

Corporate structure: limited liability company vs. joint-stock company

corporate structure and organizational options determine how the fund will be managed, who is responsible for what, and what risks the founders and investors bear. In practice, the choice between s.r.o. vs a.s. and the format through a management company becomes a key organizational decision when establishing a §15 fund and sets the framework for all subsequent legal and operational processes.

s.r.o. or a.s. – which to choose for a Section 15 fund

Corporate structure ZISIF s.r.o. vs a.s.: choose s.r.o. for speed, as in 80% of our cases.

Is it necessary to have a management company under AIFMD for ZISIF §15? No, self-managed is allowed with a fiduciary director. A management company is optional for scale.

The fiduciary director / fund director bears director’s responsibilities and fiduciary duties: loyalty, due care. COREDO practice: a local director provides substance.

Substance, economic presence and ‘letter-box’ risks

Substance, economic presence and ‘letter-box’ risks today directly affect whether your company is recognized as a real business or merely a shell. To ensure the security of a structure in the Czech Republic, it is important to understand which elements of substance regulators and banks expect: an office, personnel, place of decision-making and accounting.

The need for genuine management (substance)
The need for genuine management (substance) in ZISIF §15 — an office in Prague, 2+ employees (compliance officer, risk manager), local decision-making. Substance / economic presence according to OECD tests.

Checklist of evidence of economic activity

• Local office + lease.
• Director working 20 hours/week.
• Minutes of meetings in the Czech Republic.
• Economic activity test for ZISIF: 70% of operations carried out locally.

Compliance, AML/CFT and UBO: procedures and optimization

Compliance, AML/CFT and UBO disclosure for ZISIF under §15 is no longer an option but a set of mandatory procedures without which it is impossible to open an account, attract investors and legally work with financial institutions. To avoid inflating the internal control budget, it is important from the outset to build the AML/CFT, KYC and UBO processes in a way that simultaneously closes regulatory risks and optimizes ongoing costs.

Compliance and AML for ZISIF §15 under RBA
Compliance and AML for ZISIF §15 under RBA: MLRO, AML/CFT procedures and PEP checks, STR reporting. AML requirements/CFT for alternative funds in the Czech Republic: screening within 24h. Costs: €20k/year.

AML checklist:

• KYC of all LPs.
• PEP screening.
• Transaction monitoring.

UBO and transparency requirements for ZISIF
UBO and transparency requirements for ZISIF: >25% in the register (not public). What are the UBO disclosure requirements for ZISIF §15 in the Czech Republic? ID + address. Privacy: trusts for masking.

KID / key information documents are mandatory for retail (rarely). Reporting and KID for ZISIF §15 investors: quarterly IRR, MOIC.

Tax implications: EU, Asia, CIS

Tax implications and international aspects (EU, Asia, CIS) become a key factor when choosing and structuring a ZISIF §15 fund in the Czech Republic, especially when the structure includes investors and assets from multiple jurisdictions. In practice this directly affects the effective tax rate, the application of EU benefits and CFC rules, as well as which optimization schemes will be permissible and sustainable when dealing with residents of the EU, Asia and CIS countries.

Tax consequences of the ZISIF §15 structure in the Czech Republic

Opening a bank account in the EU for the fund — at ČSOB with an LEI. Sanctions compliance for Asian LPs: screening.

Operational matters: custody, valuation, reporting

Operational matters in investment structures go far beyond the choice of instruments: it is critical to establish transparent asset management, reliable custody, correct valuation and timely reporting to investors. In practice, the rules for the asset class and their portfolio structure determine how custody, valuation and disclosure of information for real estate, private equity and crypto will be organized.

investment strategy and permissible assets
Investment strategy and permissible assets: 100% in crypto/real estate with valuation policies. Custody: a custodian for illiquid assets.

Custodial arrangements / depository + escrow for M&A. Chains for crypto.

Waterfall distributions and carried interest: 2/20 model. KPIs: IRR 15–25%, TVPI 2.5x.

Comparison of ZISIF §15 and AIF/AIFMD: risks and choices

Comparison of ZISIF §15 and AIF/AIFMD allows assessing key risks, advantages and selection scenarios for investors seeking a balance between flexibility and regulation in the Czech Republic. ZISIF §15 offers simplified registration with the CNB without a full AIFMD license and with a low administrative burden up to EUR 100 million in assets, whereas AIF/AIFMD requires a licensed management company and detailed reporting. This comparison will help choose the optimal structure depending on the size of the business and the investors.

Comparison table

How to register ZISIF §15 and launch it

Пошаговая инструкция: как зарегистрировать ZISIF §15 и вывести его на работу (actionable checklist) начинается с блока, где вы заранее продумываете структуру фонда и готовите ключевые документы, чтобы регистрация и запуск прошли без лишних пауз. На этапе предварительной подготовки вы определяете UBO, заказываете LEI, решаете, нужен ли KID, и собираете юридическую и корпоративную базу, без которой ZISIF §15 невозможно корректно вывести на работу.

Preliminary preparation: structure and documents

1. Choose an s.r.o.
2. LEI for the fund.
3. UBO/KID.

How to register ZISIF §15 with the CNB: step-by-step instructions
Как зарегистрировать ZISIF §15 в ЧНБ пошаговая инструкция: 4 недели.

Сколько времени занимает регистрация ZISIF §15 в ЧНБ? 20–30 дней. Замечания: substance.

Наймите MLRO, откройте счёт.

Case studies and short examples

In this section we will examine cases and practical examples (short case studies) to show how legal structures and substance requirements work not in theory but in real projects. Using the example of a venture fund structured through ZISIF §15, we will go step by step through choosing the structure, building up substance, and explain what result this produces for the investor and the fund.

Example: venture fund through ZISIF Section 15 (structure, result)

Example
s.r.o. ZISIF: €20 million from Asia, IRR 22%, substance – 3 employees.

Real estate SPV: DTT saved 10% in tax.

Rejection for letter-box: added an office, approved.

Risks and ways to minimize them (compliance, reputation, sanctions)

Risks and ways to minimize them (compliance, reputation, sanctions) go far beyond the formal requirements of regulators and directly affect the resilience of the business model and access to markets. Understanding the legal and operational consequences, from liability and fiduciary duties to the specifics of offshore structures, is a necessary condition to build effective compliance and proactively reduce reputational and sanctions risks.

Risk mitigation
Liability protection through carve-outs. Trusts and offshore structures — with due diligence.

PEP checks quarterly.

Transfer pricing with local contracts.

Checklist for Owner, CEO, COO

1. Assess assets (<€500 mln).
2. Choose s.r.o.
3. Provide a minimal substance package (office+staff).
4. Appoint an MLRO.
5. Prepare AML roadmap.
6. Obtain LEI.
7. Submit to ČNB.
8. Open an account.
9. Start LP due diligence.
10. Monitor KPI (IRR, DPI).
11. Plan reporting.
12. Reserve €30k for compliance.

Scaling, AIF and exit options

Scaling, the transition to an AIF and exit options – is a stage at which the fund’s structure ceases to be an experiment and begins to operate as a full-fledged European instrument. At this step it is important to understand when to ‘grow into’ AIF/AIFMD status, how to structure a management company in the EU for future scale, and which exit options such an architecture will open up for founders and investors.