Sweden’s Financial Supervisory Authority has given Trustly Group and ClearOn payments processors fines and warnings for “severe” anti-money laundering (AML) deficiencies, with Trustly’s violations involving gambling infractions.
Trustly was fined SEK130m (€12.3m) and ClearOn was fined SEK14m (€1.3m), the authority said on Tuesday (February 22).
The regulator found Trustly had “deficiencies in its risk assessment, risk assessment of customers, procedures and guidelines for customer due diligence, customer due-diligence measures and monitoring of customers”.
The “severe” deficiencies were found in its largest business area, gambling, “which is associated with a high risk of money laundering and terrorist financing”, the authority said.
“Trustly’s role in the payment chain between the gambling industry and a large number of banks makes it possible for the company to see flows that are not available to other market participants,” said Erik Thedéen, director general of the financial authority.
“A company that has chosen fast and simple as its business concept in the gambling industry needs to be very thorough in its work to prevent money laundering,” he said. “We have identified in our investigation that this has not been the case.”
ClearOn had deficiencies in “risk assessment, risk assessment of customers, procedures and guidelines for customer due diligence and customer due diligence measures”, the regulator said.
“ClearOn has not identified when a business relationship arises and thus has not taken sufficient measures to be able to manage the risk of money laundering that these business relationships imposed on the company,” according to the authority.
“Cash continues to be an important tool for criminals since it makes it more difficult to trace the money,” Thedeen said. “It is very serious that ClearOn, which handles considerable amounts of cash, has not taken powerful measures to prevent the company from being used for money laundering.”
Last May, Trustly postponed a $9bn initial public offering after Swedish regulators raised concerns about the Stockholm-based company’s due diligence on customers.
Trustly serves the online gambling industry, considered higher risk than online retail, but a Trustly executive told the Financial Times at the time that the company only works with licensed operators.
The regulator said it was satisfied that the warning and fine were sufficient punishment because “Trustly has stated that it has taken and plans to continue taking measures to address all deficiencies”.
The regulator said it “currently has no cause to assume anything other than that the violations observed during the investigation will not be repeated”.
Trustly said that it believed the key to the regulator’s case was the fact that Trustly Europe previously interpreted financial regulation to suggest that end users should not be treated as customers of Trustly, but as customers of the merchants to whom services are provided.
“The end users who pay with Trustly have already undergone the usual customer due-diligence measures carried out by their respective banks,” the company said.
Last November, the company had already started to adapt its policies to conform with the regulator’s preliminary assessment on end users, chief executive Johan Tjärnberg said.
"It is good that we now have clarity on the issue of who the [regulator] believes we should treat as a customer,” Tjärnberg said.
ClearOn said that shortcomings identified by the regulator were the result of differing assessments in interpreting financial regulations.
The company has implemented an action plan to correct those shortcomings, a plan which “entails changes in routines and processes for the work with risk assessments and in the processes to acquire customer knowledge and to risk classify customers”, ClearOn said.
ClearOn, also Stockholm-based, works with Swedish retailers.