Daily Dash: EU Unveils New Round Of Sanctions

February 16, 2023
The EU has announced a tenth round of sanctions, Brazil has granted a new payments licence and Bank of Lithuania shuts down e-money firm for suspected anti-money laundering violations.

More Sanctions Coming Russia’s Way, Brussels Confirms

The European Commission has released its proposal for a tenth round of sanctions against Russia.

“For almost one year now, Russia's war of aggression has been sowing death and destruction. Putin is not only waging a brutal war on the battlefield but he is also viciously targeting civilians,” said Ursula Von Der Leyen, the Commission’s president. “The aggressor has to pay for this. Today, we are turning up the pressure.”

New sanctions include further export bans worth more than €11bn to deprive the Russian economy of critical technology and industrial goods. 

There will also be controls on 47 new electronic components that can be used in Russian weapons systems, including drones, missiles, helicopters, as well as on specific rare earth materials and thermal cameras.

For the first time, the EU also looks set to add third country entities to the Russia dual use sanctions. For example, Iran's Revolutionary Guards have been providing Russia with Shahed drones to attack civilian infrastructure in Ukraine and now seven individuals will be targeted with sanctions. 

In addition, Von Der Leyen hinted that there will be more work done to ensure third countries do not help Russia circumvent the sanctions regime.

“Our aim is to have, together with our G7 partners, further significant sanctions in place by February, 24, exactly one year after Putin launched his imperial war,” she said. 


EBANX Wins Payment Initiation Licence In Brazil

EBANX has announced that it received a payment initiation service provider (PISP) licence from the Brazilian Central Bank (BCB).

As a result of the payment initiation licence, EBANX can enable its merchant customers to accept payments using Pix within their own website or e-commerce app.

“As a payment initiator, EBANX can now streamline the payment process, reduce friction and increase transaction security, and the user no longer needs to leave the store's website or app, log into a bank's app or worry about copying and pasting the QR code and checking that everything is correct,” Erika Daguani, vice president of product at EBANX said in an email statement.

“Payment with Pix in digital commerce is much more smooth this way," she added.

Payments initiation was introduced in October, 2021, as the third phase of Brazil’s open finance journey. Currently there are 23 institutions with licences to offer this service.

EBANX is the largest payments platform in the region, with operations in 15 Latin American and three African countries. It has a global network of over 1,000 merchants, including Shopify.


Bank Of Lithuania Shuts Down Crypto.com Partner Due To ‘Gross’ AML/CTF Failures

The Bank of Lithuania (LB) has suspended the e-money services of UAB Payrnet, a former partner of Crypto.com, and ordered its funds to be frozen.

The central bank said that it had taken action before completing an inspection into UAB Payrnet, since there is reason to suspect that the institution is “grossly and systematically” violating anti-money laundering (AML) and terrorist financing rules.

LB also confirmed that it has suspended all services of UAB Mir Lithuania, a company that previously served as an intermediary of UAB Payrnet.

In November, 2020, UAB Payrnet took over as the issuer of the Crypto.com Visa debit card in the UK and EU, replacing Wirecard.

2022 Was A Fintech Fail, Two Reports Reveal

KMPG and Moody’s have revealed bad news for fintech, with reduced investment being made and a diminishing competitive threat being posed to big banks. 

Fintech investment in EMEA dropped sharply, from $79 billion in 2021 to $44.9 billion in 2022, according to KMPG’s Pulse of Fintech report

The consultancy firm found that investment in crypto and blockchain has dropped significantly, noting the role that impending regulation and market failures played in this drop.

However, the report also revealed that regtech investment, by contrast, was on the rise.

Meanwhile, the ratings agency Moody's said that the competitive threat of financial technology companies to big banks had diminished over the past year due to rising interest rates impacting funding. 


US Fed Vice-Chair Brainard Resigns

Lael Brainard, vice chair of the Federal Reserve, has announced her resignation from the central bank to join President Biden’s National Economic Council (NEC) as a director.

Brainard, who was previously considered as a potential candidate for Treasury secretary and Fed chair, has previously spoken about the economic consequences of climate change and supported the Fed’s initiative on climate scenario analysis.

As Fed governor, she led the agency's work to establish the FedNow network and supported studies regarding a central bank digital currency (CBDC) to make sure the US can step in any time it sees the dominance of the dollar threatened in international finance.

She is now set to join the President’s close circle of aides to help the administration implement the substantial economic laws passed during Biden’s first two years.

Announcing the nomination, Biden described Brainard as “a trusted veteran across our economic institutions” who “understands how the economy affects everyday people”.


Republican FTC Commissioner Resigns

Christine Wilson, the last remaining Republican commissioner at the Federal Trade Commission (FTC), announced her resignation from the agency.

In a Wall Street Journal op-ed, Wilson accused FTC chair Lina Khan of abusing power and disregarding the rule of law and due process.

Khan, a Biden pick who has been known for her anti-big tech stance, has aggressively stepped up consumer protection efforts at the FTC. 

Under her leadership, the FTC has been noticeably more active in financial markets too, often coordinating its actions with the Consumer Financial Protection Bureau (CFPB).

“I have failed repeatedly to persuade Ms. Khan and her enablers to do the right thing, and I refuse to give their endeavour any further hint of legitimacy by remaining,” Wilson wrote in the op-ed.

Wilson’s departure means that the FTC leadership will be composed of three Democratic commissioners, including Khan, with the two Republican seats remaining vacant.


Westpac To Launch BNPL Credit Card Addon

Westpac, one of Australia’s ‘big four’ banks, has announced that it will soon launch PartPay, a new facility that will allow credit card customers to pay for purchases in four instalments.

In the “coming months”, Westpac said customers will be able to link their existing credit card to a new PartPay digital card, allowing them to split purchases into an initial instalment followed by three fortnightly instalments.

PartPay is linked to an Australian bank account of the customer’s choosing, from which fortnightly payments will be automatically deducted.

Purchases on the PartPay digital card must be A$100 or more, and customers will receive a reminder three days before the auto payment due date.

No interest is charged to use PartPay, but if a customer misses a PartPay payment, the instalment is transferred to their Westpac credit card balance where standard interest rates apply.


Cambodia Eyes Entry To CIPS, China’s Cross-Border Alternative To SWIFT

The National Bank of Cambodia (NBC) has said it is working towards becoming a member of the Cross-Border Interbank Payment System (CIPS), China’s RMB alternative to SWIFT.

NBC Assistant Governor Chea Serey confirmed Cambodia’s interest in CIPS shortly after Hun Sen, Cambodia’s prime minister, returned from a three-day visit to Beijing, where he met with Chinese Premier Xi Jinping.

“The NBC has been studying in detail the requirements for CIPS membership since the system was first established in 2015, so the NBC knows what they need, which won’t be new for us,” said Serey, as quoted by Phnom Penh Post.

“The leaders of the two countries have discussed and agreed this in principle,” she added. “This will hopefully speed up the process for Cambodia to join CIPS soon.”


Fresh Out Of Prison, Ex-Wirecard Chief Denies All Wrongdoing 

Markus Braun, Wirecard’s former chief executive, has given testimony in a Munich court after two years in prison. 

Braun, an Austrian national, had presided over Wirecard for nearly two decades before the company’s collapse and his arrest. 

In court, Braun expressed “deepest regret” yet said he was unaware of embezzlement or counterfeiting taking place at the company. The trial has been ongoing for two months and is expected to last at least a year. 

While Braun denies any wrongdoing, his former colleague Oliver Bellenhaus has accused him of requests to make retrospective changes to internal accounting data and to create bogus client data. 

FCA Cracks Down On Illegal Crypto ATMs

The UK Financial Conduct Authority (FCA) and the West Yorkshire Police have raided several sites around Leeds on the suspicion that they hosted illegal crypto ATMs.

Crypto ATM operators are considered to be crypto-asset exchange providers, which are required to register with the FCA and comply with the UK Money Laundering Regulations. Currently, no crypto ATM operator has FCA registration.

Detective sergeant Lindsey Brants of the Force Cyber Team at West Yorkshire Police said they first issued warning letters asking the operators to stop using the machines and reminding them that any breach of regulations would result in an investigation under money laundering regulations. The police then shared their findings with the FCA.

“'We are pleased to be able to work in partnership with the FCA in what we believe is a national first here in West Yorkshire,” said Brants.

“Unregistered Crypto ATMs operating in the UK are doing so illegally,” said Mark Steward, executive director of enforcement and market oversight at the FCA. “We will continue to identify and disrupt unregistered crypto businesses operating in the UK.”

India’s Aadhaar Enabled Payment System Hacked Using Cloned Biometrics - Report

Three men have been arrested for allegedly stealing biometric data from users of the Aadhaar Enabled Payment System (AEPS) and using it to withdraw money from their bank accounts.

The trio were arrested in their home state of Uttar Pradesh after being accused of collecting the Aadhaar details of more than 22,000 people and the fingerprint data of more than 100,000 people. 

“The gang allegedly scanned the data and enhanced the quality by reportedly using Photoshop software,” the Kadapa Police said in a statement. “They cloned fingerprints on butter paper by using a polymer sheet and heating it at a certain temperature with a chemical.”

The accused then registered themselves as Customer Service Points (CSP) for e-governance and banking services in Uttar Pradesh. 

The issue first came to light when an Aadhaar user reported that ₹89,550 ($1,080) had been withdrawn from his bank account without his knowledge.

Customer Due Diligence Cannot Be Outsourced, EBA Says In New Q&A

Companies cannot outsource all customer due diligence, a new European Banking Authority (EBA) Q&A has clarified. 

A national competent authority had submitted a question in January 2020 that wanted to know whether third-party providers can carry out due diligence on themselves and remain compliant with the 4th Anti-Money Laundering Directive (4th AMLD).

The competent authority had asked whether they could consult the EBA’s guidance on outsourcing here.

However, the EBA answered that for guidance on the factors financial institutions should consider when assessing whether a third party is "reliable" for the purpose of Section 4 of the 4th AMLD, reference should be made to the EBA’s Guidelines on Money Laundering and Terrorist Risk Factors (EBA/GL/2021/02).

UAE Central Bank Launches Financial Infrastructure Transformation Programme 

The Central Bank of the United Arab Emirates (CBUAE) has launched a new Financial Infrastructure Transformation (FIT) Programme to accelerate the country’s transition towards a digital financial services sector.

The FIT Programme comprises nine key initiatives that the government and central bank believe will enhance the country’s competitiveness and position it as a global financial and digital payments hub.

The first stage includes several new digital payment infrastructures and services, such as the launch of a domestic card scheme, an instant payments platform, and the issuance of a central bank digital currency (CBDC) for domestic and cross-border uses.

The second stage aims to develop and implement a number of digital finance infrastructures, including the establishment of a financial cloud, e-KYC and open finance platforms. The FIT Programme is set to be fully implemented by 2026.

BaFin Issues Crypto Warning Over 'Cloud Mining'

Germany’s financial regulator, BaFin, has issued a warning over the cloud mining of crypto-assets and scams. 

With cloud mining, consumers can rent computing power from a provider to mine crypto-assets themselves. 

If consumers receive an offer for cloud mining from unknown persons, they should become suspicious, BaFin advised, adding that this also applies if consumers independently become aware of the website of a cloud mining service.

“It is possible that the providers do not in fact provide cloud mining, but only want to keep the funds,” BaFin cautioned. “Once invested, consumers then try in vain to get their money back.”

TCH Delays ISO 20022 Migration To Let Market 'Absorb' Changes In Other Jurisdictions

The Clearing House (TCH), the US bank-owned payment infrastructure, has delayed migration to the new ISO 20022 messaging standard on its CHIPS network from November 2023 to April 2024.

CHIPS is TCH’s high-value real-time gross settlement system which clears and settles around $1.9trn in payments every day. In addition, TCH says that 95 percent of payments made across CHIPS are the USD leg of a funds transfer that begins and/or ends in another country.

The organisation said its decision to shift the implementation date was influenced by delays in the migration plans of other global payment networks.

Previously, the European Central Bank (ECB) rescheduled the launch of the new T2 real-time gross settlement (RTGS) system and central liquidity management model to March 2023. This announcement was followed quickly by SWIFT, which also moved its planned migration start to the same date.

TCH argues that the new migration date allows CHIPS participants “to manage and absorb” changes from ISO 20022 conversions in other jurisdictions, including TARGET2, EURO1, Lynx and SWIFT in March 2023, and the UK CHAPS in June 2023.

Fedwire, the US federal RTGS, is planning to adopt the new format on March 10, 2025.

Belgian MEP Latest To Be Charged In Qatargate Scandal

Marc Tarabella, a member of the European Parliament (MEP), has become the latest Brussels lawmaker to be charged with money laundering and corruption. 

Tarabella sits in the centre left Progressive Alliance of Socialists and Democrats faction. 

The Belgian MEP was arrested on Friday (February 10) after MEPs opted to waive his immunity in a plenary session last week. 

He is the second MEP, following the arrest of Greek MEP Eva Kaili in December, to have been detained over the investigation into alleged cash for influence payments from the governments of Qatar and Morocco.

Tarabella has mainly been active in areas such as agriculture and social affairs while an MEP, but records show that in 2014 he did ask the European Commission a question about Mastercard and Visa’s interchange fees. 

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