Daily Dash: Binance Woes Continue

August 25, 2023
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Binance has wound down its debit card product in Latin America and the Middle East, while Sweden’s central bank has said its central bank digital currency project is shifting focus.

Binance Axes Debit Cards In LatAm, Middle East

On August 24, the crypto giant announced that Binance Card “will no longer be available to users in Latin America and the Middle East”.

Binance first brought its crypto card to Latin America in August 2022, debuting it in Argentina. In early 2023, the Binance Card expanded to Brazil, one of the largest crypto markets in the region.

It said the change affects only “a tiny portion” of users, that is less than 1 percent of crypto holders in Latin America and the Middle East. They will have until September 21 to use their cards.

The post assured that “where available, users can also shop with crypto and send crypto using Binance Pay, a contactless, borderless and secure cryptocurrency payment technology designed by Binance”.

The news comes as the crypto giant is pulling out of several markets amid increasing regulatory scrutiny.

In June, the US Securities and Exchange Commission (SEC) filed a lawsuit against Binance and its CEO, Changpeng Zhao, alleging multiple counts of unregistered securities violations and fraud.

Since then, Binance has shut down Binance Connect, a fiat onramp service that was designed to help crypto businesses accept payments, has lost its contract with Paysafe, its euro banking partner, and has pulled out from Germany, the Netherlands and Belgium over regulatory concerns.

e-Krona 'Enters New Phase'

Sweden’s Riksbank has said that its pilot project for a central bank digital currency (CBDC) is complete, meaning there will be a shift in what work is being undertaken. 

“The Riksbank's e-krona pilot was launched in the spring of 2020 with the aim of testing technical possibilities for an e-krona and delving into policy issues concerning the issuance of Swedish kronor in digital form, accessible to the public,” said the Riksbank. 

There will be an increased focus on on the design of an issueable e-krona and what changes are required to existing legislation if Sweden’s lawmakers should decide to issue one, the country’s central banksaid. 

The Riksbank has also said that it will put more emphasis on international developments in this space. 

“Within the EU, work is underway on a digital euro, which may also have consequences for Sweden,” the Riksbank said in a press release.

PayPal Appeals Court Designation As 'Payment System Operator' In India

PayPal has filed an appeal at Delhi High Court against a judgment last month which designated the company as a “payment system operator” under Indian law.

Last month, as covered by VIXIO, PayPal was deemed a “payment system operator” under the Prevention of Money Laundering Act (PMLA) 2002, and was therefore ordered to comply with enhanced “reporting entity obligations”.

PayPal’s counsel, senior advocate Mukul Rohatgi, said the order cannot stand in view of Delhi High Court’s ruling on Google Pay earlier this month.

In that case, as covered by VIXIO, Google Pay was deemed a third-party app provider rather than a payment system operator, and was therefore judged to be outside the scope of the Payment and Settlement Systems Act 2007.

Brazil Reports Pix Incident

The Brazilian Central Bank (BCB) has announced a security incident that exposed personal data linked to Pix keys held by Phi Serviços de Pagamentos.

The breach took place on August 14 and 15 and exposed 238 Pix keys, which are users’ unique identifiers such as email addresses, phone numbers or taxpayer IDs. The exposed Pix keys accounted for less than 0.00004 percent of the total 630m keys registered, the BCB said in an email statement.

No sensitive data was exposed, such as passwords, payment history or account balances, and the stolen information does not allow the hackers to transfer funds or access the accounts of the impacted users.

The incident was due to specific failures in the systems of the payment institution and was “greatly mitigated” by Pix's security and monitoring mechanisms, according to the central bank.

The BCB said it is carrying out a detailed investigation of the incident and may use its sanctioning powers.

Pix keys have been exposed four times before, with the last incident taking place in July 2022. Altogether there were 714,000 keys affected in these cases, as per the central bank’s incident register.

Former UK Bank Employee Jailed For £130k Fraud Attempt

Two criminals from London who committed around £130,000 of fraud have been sentenced to a combined total of five years and seven months in prison.

The sentencing follows an investigation and arrest by the Dedicated Card and Payment Crime Unit (DCPCU), a police unit sponsored by the banking industry. 

A bank employee, Nathan Gilbert of North London, was found to have changed bank customers’ account details and fraudulently issued bank passbooks, liaising with another bad actor, Daniel Frank, to defraud several customers.

CCTV footage from the bank revealed that Frank had organised for individuals to attend the bank branches that Gilbert worked at, purporting to be those customers, to withdraw money or make changes to the accounts.

"Gilbert abused his position of trust at the bank, liaising with Frank to callously steal over £130,000 from unsuspecting victims," said Detective Constable Colin Calvert, who investigated the case for the DCPCU. "Fortunately, we were able to identify these criminals and bring them to justice, after working closely with the banking and finance industry."

"This sentencing is a warning to those who believe they can benefit financially from fraud, that they will be caught and punished."

Irish Fintech Funding Takes A Blow In Global Slowdown

The first six months of 2023 were particularly challenging for the fintech market in Ireland as well as globally, according to KPMG’s Pulse of Fintech H1 2023 report.

Both funding and the total number of deals dropped sharply in Ireland from $742m across nine deals in H2 2022 to nine deals worth $59.22m.

The largest fintech deal seen in Ireland during H1 2023 was $53m raised by unified payments company NomuPay.

“It’s not a surprise that fintech funding has declined in the first six months of 2023, given the enormous headwinds pressuring the market at the moment,” said Ian Nelson, head of financial services at KPMG Ireland.

Nelson continued that KPMG’s long-term view is that there are strong business cases for many subsectors within fintech to remain robust, notably within regtech, payments, insurtech and wealthtech. 

“We expect that funding will rebound when market conditions begin to even out, if not necessarily to the record level experienced in 2021.”

US Supreme Court Will Not Hear Red States In CFPB Constitutional Challenge

The US Supreme Court (SCOTUS) has denied a motion of 27 US states, mostly of Republican control, to participate in an oral argument in autumn concerning the legality of the Consumer Financial Protection Bureau (CFPB).

Last October, the Fifth Circuit quashed one of the CFPB’s rules after finding that the agency’s funding structure was unconstitutional and the rule was, therefore, invalid.

The ruling put all of the CFPB’s past actions at risk, including all of its regulations and ongoing enforcement actions, many of which have been halted pending the outcome of the Supreme Court challenge.

The case has sparked large interest divided along party lines. In May, several Democratic politicians and states filed amicus briefs in support of the CFPB, while a group of 132 Republican members of Congress and 27 Red states have asked for upholding the Fifth Circuit ruling.

Separately, the Republican states have also asked SCOTUS to give them ten minutes of argument time “to expound on [their] points at oral argument”.

The case register now shows that on Monday (August 21), the top court rejected that motion. The Supreme Court did not provide further details on the decision.

Hearings in the case are expected to begin in October.

Singapore And Indonesia Begin QR Code Trial

Indonesia and Singapore have begun an interconnectivity trial for their QR code.

This is a follow-up to the international QR code-based payment collaboration between Bank Indonesia (BI) and the Monetary Authority of Singapore (MAS), which was initiated last year. 

BI said that payment connectivity with the QR code between Indonesia and Singapore will be able to facilitate trade between the countries more efficiently, as well as encourage the growth of the tourism sector. 

The MAS and BI have both confirmed plans to introduce the technology into their payment systems before the end of the year.

The plan was originally announced in August 2022 and BI deputy governor Filianingsih Hendarta has said that the project is now halfway to completion with three-quarters of the beta testing completed.

US Securities And Exchange Commission Charges Crypto Advisor Titan

The US Securities and Exchange Commission (SEC) has filed a lawsuit alleging that Titan Global Capital Management used hypothetical performance metrics in advertisements that were misleading.

The charges mark the first violation of the SEC’s amended marketing rule, the regulator said.

The SEC also charged Titan with multiple compliance failures that led to misleading disclosures about custody of clients’ crypto-assets and use of improper “hedge clauses” in client agreements.

Additionally, the SEC alleges that Titan used client signatures without authorisation and failed to adopt policies concerning crypto-asset trading by employees.

"The Commission amended the marketing rule to allow for the use of hypothetical performance metrics, but only if advisers comply with requirements reasonably designed to prevent fraud,” said Osman Nawaz, chief of Enforcement’s Complex Financial Instruments Unit.

"Titan’s advertisements and disclosures painted a misleading picture of certain of its strategies for investors. This action serves as a warning for all advisers to ensure compliance.”

Singapore Arrests Ten In Major Money Laundering Probe

The Singapore Police Force has announced the arrests of ten foreign nationals suspected of using forged documents to launder almost S$1bn through the country’s banks, real estate and luxury goods markets.

Following a joint operation with the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD), 35 bank accounts containing about S$110m have been seized, in addition to cash worth S$35m.

The suspects, who were in possession of forged passports from all over the world, came to the attention of the authorities after suspicious transaction reports (STRs) were filed against their accounts.

They are suspected to be part of a gang that launders the proceeds of scams and illegal gambling activity, and more arrests are expected to be made in future.

German Minister Uses UPI To Make Payment

Volker Wissing, Germany's minister for digital and transport, was videoed over the weekend using the Unified Payments Interface (UPI) to make a payment at a vegetable shop in India's capital.

According to Germany’s embassy in India, Wissing was able to “experience the simplicity of UPI payments first hand and is very fascinated”.

“One of India’s success stories is digital infrastructure,” the embassy tweeted. “UPI enables everybody to make transactions in seconds. Millions of Indians use it.” 

Internationally, countries including France, the United Arab Emirates and Singapore have signed agreements with India, which means that the instant payment solution can be used in their jurisdiction. 

'Don't Kill Cash' Petition With Over 300,00 Signatures Elicits Response From UK Government

Within hours of GB News presenters delivering the network’s "Don’t Kill Cash" petition to Downing Street, both HM Treasury and the Financial Conduct Authority (FCA) issued statements on access to cash.

The petition, which received more than 300,000 signatures, called on the government to introduce legislation that would “protect the status of cash as legal tender” until at least 2050.

On the same day the petition was delivered, the Treasury published a new framework that outlines minimum standards for access to cash. 

According to the Treasury, the “vast majority” of people and businesses are set to be no further than three miles from cash withdrawal facilities under the plans.

Likewise, the FCA published a statement in support of the new framework. 

“Following the Cash Access Policy Statement published by the Government, we will develop new rules to ensure that as cash access services evolve they continue to be provided on a reasonable basis,” it said.

Taiwan Consults On AI Use In Financial Services

Taiwan’s Financial Supervisory Commission (FSC) has opened a consultation on draft principles and policies for the use of artificial intelligence (AI) in the financial industry.

The proposal aims to ensure that financial institutions “make good use of the advantages of AI technology”, while they can effectively manage risks, ensure fairness, protect consumer rights, maintain system security and achieve sustainable development.

To that end, the draft proposes six core principles: establishing a governance and accountability mechanism; emphasising fairness and people-oriented values; protecting privacy and consumer rights; ensuring the robustness and security of the system; implementing transparency and explainability; and promoting sustainable development.

Hong Kong Watchdog Fines Swiss Bank For AML Failures

The Hong Kong Monetary Authority (HKMA) has fined EFG Bank HK$16m ($2.42m) for failures in its anti-money laundering (AML) controls.

The disciplinary action follows an on-site examination and further investigation by the HKMA on the bank's Hong Kong-based systems and controls for compliance with the AML laws.

The investigation identified control deficiencies with customer due diligence (CDD) on customers transferred from another financial institution from February 2016 to January 2018, as well as onboarding CDD and ongoing CDD measures on some other customers between April 2012 and October 2018.  

During the period from April 2012 to October 2018, EFG also failed to establish and maintain effective procedures for complying with local AML laws in relation to CDD and ongoing monitoring of business relationships with customers.

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