Daily Dash: FCA Looks For Answers On De-Banking

August 11, 2023
The UK’s banking watchdog has sent out a request for account closure data, while the Bank of England is on a recruitment drive for academics to help with its digital pound work.

UK Watchdog Probes Banks Over De-Banking Cases

The UK’s Financial Conduct Authority (FCA) has sent an information request to the largest banks and building societies over instances of de-banking.

“In recent years, we have seen a significant increase in the number of bank accounts being Closed,” the FCA says in a letter to firms.

 “This may reflect increased monitoring by firms to tackle financial crime, including fraud. However, it is less clear the extent to which banks may be terminating accounts for other reasons, which may be unjustified.”

This follows high-profile cases, including former EU parliamentarian Nigel Farage having his account at Coutts shut down and Chancellor Jeremy Hunt being refused an account with Monzo.

Firms have until August 25 to provide information on the number of customers that have been terminated, the number of customers suspended, the number of customers denied services, the reasons for this and the number of complaints that banks have received on this issue. 

This will include asking if accounts have been closed because of expressions of political or other opinions.

The FCA has further said that it is engaging with large payments firms on this matter.

“We’re asking about both personal and business customers, including pawn brokers, charities and political parties,” said the FCA. “We will analyse the results and provide an initial assessment by mid-September.”

“We’re undertaking this work to better understand the scale of account closures and the reasons behind them,” said the FCA.

Bank Of England On Lookout For Academics To Support Digital Pound Work

In conjunction with HM Treasury, the Bank of England is creating a new Academic Advisory Group (AAG) to provide expertise during the design phase of the digital pound.

It is hoped that the AAG will bring together experts from a range of disciplines related to regulatory work on the digital pound. This includes monetary policy, finance, competition economics, industrial organisation, behavioural science, law, innovation theory, marketing and business.

According to the Bank of England, the AAG will encourage diverse ideas, open debate and perspectives that “challenge prevailing wisdom” in relation to the digital pound.

Experts now have until September 3 to apply to be part of the group. 

“To ensure an informed and comprehensive approach, we believe that engagement with academia is crucial,” the Bank of England said. “The AAG will serve as a platform for knowledge exchange and research collaboration, and as a multidisciplinary group, it will provide a wide-ranging and nuanced view on the key questions on CBDCs.”

Barclays Becomes Latest Bank To Tell Social Media Companies To Take On Scammers

Tech platforms are the source of 87 percent of all scams, according to Barclays data, as the retail banking giant joins others such as Lloyds in calling for social media companies to up their scam prevention efforts. 

Scams have surged by 24 percent in the last quarter, compared with the same time last year, Barclays says. Purchase scams, where people buy goods which never arrive or are not as advertised, are the most common, accounting for two-thirds of all scams. 

According to Barclays, 78 percent of people surveyed agree that tech companies need to do more to prevent scams on their platforms, and another three quarters (76 percent) are keen to see the UK government do more to hold tech companies to account. 

The bank is now pushing for the government to make preventing scams mandatory, and make tech companies liable for scams. 

Barclays has also called for tech firms to publish their scams data to inform consumers of the risks involved in using their platforms.  

The bank said that media watchdog Ofcom should make tech companies publish data on the scams happening on their platforms, and the Payment Systems Regulator should require payment service providers (PSPs) to publish their data on the sources of scams. 

“Without the joint help of tech organisations, the government, and regulators, we risk enabling the unchecked growth of what is now the most common crime in the UK, hurting countless individuals, and costing our economy billions each year,” said Matt Hammerstein, CEO of Barclays. 

“We can only drive back this epidemic — and protect UK competitiveness — by stopping scams at their source, preventing the flow of funds to organised crime.”

UK Government Explores Open Banking Use Cases For Public Services

The UK government will explore the use of open banking-payments for public services. This includes extending the use of GOV.UK Pay, which already offers Apple Pay and Google Pay for central government digital services, to local authority services for people who are paying for government services, such as Clean Air Zone charges.

Amanda Dahl, the government’s head of digital services, confirmed that this will happen later this year, with the government investigating how GOV.UK Pay might offer open banking.

“This means that people will have the option to pay for services conveniently using their own banking app,” she said in a blog post. 

GOV.UK Notify is also launching the ability to add attachments and QR codes to letters, which will enable more government services to use the product to communicate to citizens, Dahl said. 

Payments innovation in public services has emerged as a success story for the civil service. For example, HM Revenue & Customs has collected £123m in self-assessment payments from more than 94,000 taxpayers via the HMRC app since its launch in February 2022.

GOV.UK Pay also launched a new Recurring Card Payments function, initially with Kent County Council but with more public services to follow, which enables local residents to save their payment details for use in ongoing regular payments.

US Fed Launches Supervisory Programme For Fintech, Crypto Partnerships With Banks

On Tuesday (August 8), the Federal Reserve Board announced that it has set up a programme to supervise “novel activities” in the banks it oversees. 

Novel activities include technology-driven partnerships with non-banks, as well as activities that involve crypto-assets and distributed ledger or blockchain technology.

“The goal of the novel activities supervision programme is to foster the benefits of financial innovation while recognizing and appropriately addressing risks to ensure the safety and soundness of the banking system,” the Fed said in an accompanying release.

The programme will be risk-focused and complement existing supervisory processes.

New Name, New Look For Brazil’s Upcoming CBDC

The Brazilian Central Bank (BCB) has announced that the country’s central bank digital currency (CBDC) will be called Drex.

In the new brand, "d" and "r" refer to the digital real, "e" stands for electronic and "x" implies the idea of ​​modernity, connection and the use of distributed ledger technology (DLT) for Drex, “continuing the family of solutions that Pix started”, the BCB said. 

In addition to the new name, the digital fiat got a new look with green and blue colours, where the transition from blue to light green signals the occurrence of a completed transaction.

Brazil is aiming to launch its CBDC by next year. In May, the BCB said it would start onboarding pilot participants in mid-June, including Visa, Microsoft and Nubank, and would carry out testing and further developments until February 2024.

MAS Offers Funding For Innovation In Financial Sector 

The Monetary Authority of Singapore (MAS) has announced that it will commit up to S$150m ($111m) over three years through the regulator’s renewed Financial Sector Technology and Innovation Scheme.

Abbreviated as FSTI, the scheme will focus on areas including fintech partnerships and environmental, social, and governance (ESG) innovations.

Previously, the scheme supported innovation in areas such as artificial intelligence and regtech solutions.

Transformative technology projects that the MAS has piloted with the industry include Project Orchid, a CBDC-focused initiative, and a cross-border payment linkage with Thailand. 

“FSTI 1.0 and 2.0 helped strengthen the digital capabilities of financial institutions which served them and their customers through the COVID pandemic,” said Ravi Menon, managing director of the MAS. 

“With FSTI 3.0, we look forward to continued collaboration with the industry to advance purposeful financial innovation.”

Diebold Nixdorf Restructuring Confirmed By US Bankruptcy Court

Diebold Nixdorf, the world’s largest ATM maker, has announced that a US bankruptcy court has confirmed its reorganisation based on a comprehensive debt restructuring plan.

In a statement, Diebold Nixdorf said the confirmation is “one of the final steps” in the restructuring that will allow it to keep operating and work its way out of debt. The company aims to complete its debt restructuring process in Q3 this year.

“We are committed to emerging from our debt restructuring proceedings as a fundamentally stronger company, better positioned to serve our customers, employees and partners,” said Octavio Marquez, chairman, president and CEO of Diebold Nixdorf.

In April, as covered by VIXIO, Diebold Nixdorf filed for bankruptcy in the Southern District of Texas with debts of $2.7bn.

US Senators Warn Against Crypto Use To Circumvent Sanctions In North Korea

A group of US senators, led by Elizabeth Warren (D-Mass), have sent a letter to Brian Nelson, under secretary for terrorism and financial intelligence at the Treasury, and Jake Sullivan, national security advisor, raising concerns about North Korea’s use of crypto to circumvent international sanctions.

The senators also claim that North Korea is using the proceeds to fund its illegal weapons programmes.

The letter follows comments by White House deputy national security advisor for cyber and emerging technology Anne Neuberger, who has said that half of North Korea’s missile programme was funded by cyberattacks and cryptocurrency theft.

She has also claimed that the use of these tactics are increasing.

“Given the pressing nature of this threat, we ask the Administration to provide details on its plan to stop North Korea and its ‘digital bank-robbing army’ from using digital assets ‘to evade harsh sanctions and support its ambitions to project geopolitical power through nuclear weapons and ballistic missiles,” the lawmakers wrote.

US intelligence reported in 2019 that North Korea had been shifting to attacking crypto exchanges since 2016 to generate financial revenue.

Since these assets are harder to trace and are less exposed to government oversight, they could be used for North Korean programmes to develop weapons of mass destruction. The Department of Justice estimated that between 2016 and 2019, North Korea generated proceeds as high as $2bn from these activities.

UK Unveils Sustainability Disclosures 

The UK government has released its Sustainability Disclosure Standards (SDS).

According to the government, the SDS will set out corporate disclosures on the sustainability-related risks and opportunities that companies face.

It will form the basis of any future requirements in UK legislation or regulation for companies to report on risks and opportunities relating to sustainability matters, including risks and opportunities arising from climate change.

UK SDS will be based on the International Financial Reporting Standards (IFRS) SDS issued by the International Sustainability Standards Board (ISSB). 

The secretary of state for business and trade Kemi Badenoch will consider the endorsement of the IFRS version to create UK SDS by July 2024. 

It is expected that the UK endorsed standards will only divert from the global baseline if absolutely necessary for UK specific matters.

Following endorsement, the UK SDS may be referenced in any legal or regulatory requirements for UK entities. 

Decisions to require disclosure will be taken independently by the UK government, for UK registered companies and limited liability partnerships and by the Financial Conduct Authority (FCA) for UK listed companies.

Bitfinex Hacker And Wife Plead Guilty To Launder Billions In Crypto

Ilya Lichtenstein and Heather Morgan have pleaded guilty to money laundering arising from the hack and theft of approximately 120,000 Bitcoin from global crypto exchange Bitfinex.

The New York couple was arrested in February 2022 after US officials seized 95,000 of stolen Bitcoins in the value of $3.6bn. 

It was the largest ever Bitcoin asset seized by US authorities, as reported by VIXIO. Since then, the government has seized another $475m tied to the hack.

Lichtenstein pleaded guilty to conspiracy to commit money laundering, which carries a maximum penalty of 20 years in prison.

In addition to the money laundering charges, Lichtenstein also admitted carrying out the hack on Bitfinex. This is the first time it has been publicly revealed that Lichtenstein was the hacker.

The guilty pleas in this case “mark a dramatic milestone in an investigation that spanned seven years and involved billions of dollars in assets”, said Ari Redbord, global head of policy and government affairs at TRM Labs.

At the time of the breach, the nearly 120,000 Bitcoins were valued at approximately $71m. By the time of seizure, the stolen funds were valued at over $4.5bn due to the increase in the value of the crypto asset, Redbord pointed out.

Card Payments Affected By Outage In Netherlands

A nationwide outage caused problems for debit card payments in stores in the Netherlands on Thursday, with many payments failing to process. 

Local press coverage also suggested that there were problems with withdrawals from Geldmaat ATMs.

The failure was relatively short lived, having first been reported at 11:30am on Thursday and resolved later that afternoon. 

The Dutch Payments Association said the PIN malfunction was the result of a temporary problem on the internal network at a Netherlands' transaction processor.

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