Daily Dash: Merrill Lynch Fined $12m Over SARs Failures

July 14, 2023
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Merrill Lynch has been fined $12m for AML compliance failures, and Cambodia’s central bank has signed a QR code agreement with UnionPay and has also launched a financial transparency partnership with Singapore.

Merrill Lynch Fined $12m For Not Filing Suspicious Activity Reports

The US Securities and Exchange Commission (SEC) has fined Merrill Lynch for failing to file hundreds of suspicious activity reports (SARs) between 2009 and late 2019.

According to the SEC, the company reported suspicious transactions above a $25,000 threshold instead of the $5,000 threshold required by law.

The suspicious activities that went unreported involved transactions where Merrill Lynch could not identify a suspect of criminal activities, including unauthorised debit card withdrawals, forged or altered checks, account intrusions, identity theft and phone or internet scams.

Over the course of the decade, the firm failed to file nearly 1,500 such reports.

Merrill Lynch, which is the wealth management division of Bank of America, agreed to pay a $6m penalty to settle with the SEC and a further $6m to settle with the Financial Industry Regulatory Authority (FINRA).

UnionPay International Signs MoU with Cambodia's Central Bank

UnionPay International (UPI), the Chinese bank card company, has signed a new memorandum of understanding (MoU) with the National Bank of Cambodia.

According to the MoU, both parties have agreed to promote QR code interoperability to facilitate cross-border mobile payments for residents of both countries. 

With this collaboration, Cambodian residents can make payments with e-wallets from their home country in UnionPay's global QR code network. 

UnionPay payment information will be integrated into the Cambodian QR code so that local merchants can take payments from the UnionPay App and from Chinese banking apps connected to the UnionPay App Network Payment Platform.

Singapore And Cambodia Establish Financial Transparency Corridor 

The Monetary Authority of Singapore (MAS) and the National Bank of Cambodia (NBC) have signed a memorandum of understanding (MoU) to collaborate on a Financial Transparency Corridor (FTC) initiative.

The initiative aims to establish supporting digital infrastructures to facilitate trade and cross-border financial services between small and medium-sized enterprises (SMEs) in Singapore and Cambodia.

Sopnendu Mohanty, chief fintech officer at the MAS, said the corridor will enhance financial trust data for financial services between Singapore and Cambodia.

It will also support financial institutions’ loan assessments for trade financing and SME compliance with AML rules, to mitigate risks and potential trade disputes.

“This will lead to closer partnerships between our financial centres for better products and innovative solutions, and stronger growth together for our economies in the global digital economy,” said Mohanty.

Spanish, UK, Australian Banks Test Cross-Currency Instant Payments

Banks in the UK, Spain, Australia and Brazil have taken part in a pilot programme that carried out dozens of payments using different currencies.

Participating banks included BBVA, Santander and CaixaBank in Spain, Lloyds Banking Group in the UK, ANZ and National Australia Bank (NAB) in Australia and Itaú Unibanco in Brazil.

The pilot was carried out in anticipation of the European Payment Council’s (EPC) One-Leg-Out Instant Credit Transfer (OCT Inst) scheme, which will enter into force on November 28.

The cross-currency transactions were sent through the SWIFT GPI Instant service that can process, settle, and credit payments in a matter of seconds.

According to Iberpay, Spain’s payment system operator, the pilot included a first-of-its-kind integration of its instant transfer platform with SWIFT's GPI tracker, and provided end-to-end visibility of payment status and greater transaction transparency.

Payoneer Latest Company To Make Layoffs

Payoneer, a New York-headquartered fintech, has become the latest to announce a round of staff cuts. 

The cross-border payments platform will cut 200 employees in a bid to “enhance productivity and efficiency” and “streamline the company’s organisational structure to better align operations with its growth objectives”.

The admission was made in a regulatory filing with the US Securities and Exchange Commission (SEC), and the cuts will be enacted by the end of the year. 

The company, which was recently granted an e-money licence in the UK, joins others such as GoCardless and N26 in making recent cutbacks.

France's Financial Market Blacklists Now Easily Accessible Via Open Data

France’s Financial Markets Authority (AMF) has confirmed that blacklisted entities can now be viewed at data.gouv.fr, the French government’s public data platform.

The blacklists date back to 2010 and include the URLs, email addresses and names of companies identified by the AMF as offering unauthorised financial investments to French residents.

The blacklists are still available on the AMF website under the "Retail Investors" heading, but using data.gouv.fr makes it easier for the lists to be bulk downloaded and used in warning and prevention systems.

The AMF said it will gradually expand the scope of data that can be downloaded at data.gouv.fr.

Interactive dashboards based on AMF data are being developed for public access, as are whitelists of AMF-approved providers.

FCA Raids More Crypto ATMs Across UK

The UK Financial Conduct Authority (FCA) has inspected 18 new locations during May and June this year, as part of its crackdown against unregistered crypto ATMs.

Firms offering crypto ATM services in the UK must be registered with the FCA and comply with the UK Money Laundering Regulations.

According to the FCA, none of the ATMs inspected in the latest sweep were provided by registered firms, making them illegal.

Since the beginning of 2023, the FCA has visited and inspected 34 locations across the UK disrupting 26 machines, the regulator said. Previous inspections included sites in East LondonLeedsExeter, Sheffield and Nottingham.

“If you use a crypto ATM in the UK, you are using a machine that is operating illegally and you may be handing your money over to criminals,” said Steve Smart, joint executive director of enforcement and market oversight at the FCA.

“You will not be protected if something goes wrong, and you could lose your money.”

Shell Wins In 'Fill Up & Go' Payment System Dispute

Shell Oil has successfully defended itself in a patent infringement case brought by Ensygnia, a UK-based mobile payments and payment gateway provider.

The complaint centred on Fill Up & Go, Shell’s QR code payment system for paying directly at the pump when using Shell service stations.

Among the claims in the complaint, Ensygnia had accused Fill Up & Go of infringing on its own Onescan process — a method and system for identifying a user via QR code and allowing them to access a registered service.

In her ruling at the UK High Court, Judge Charlotte May (KC) found no patent infringement, with most of Ensygnia’s claims invalid.

Bahamas Shares Sand Dollar Update

The Central Bank of the Bahamas has confirmed that the country’s mobile app for the Sand Dollar, a central bank digital currency (CBDC), is set to be updated in September. 

This will include new features and a better user experience, the regulator said. 

The enhanced mobile app will provide a number of self-service tools, ranging from self-onboarding to secure wallet recovery.

An optional memo field will also be added, which allows additional transaction details that will aid reconciliation.

Additionally, the updated Sand Dollar app will feature a list of frequent contacts with whom wallet-holders regularly transact. 

The central bank has also completed developments allowing all Sand Dollar wallet-holders to top up their wallets from commercial bank accounts. 

This feature is available for all Sand Dollar-enabled wallets and, therefore, includes basic, premium and merchant wallets that operate on the island. 

According to the central bank, there are $1.93m Sand Dollars in circulation since its launch in 2020. There are currently 106,147 active consumer wallets and 1,608 active merchants wallets.

Revolut Insiders Say Fraudsters Stole Over $20m Through Refund Loophole

Multiple sources have claimed that Revolut lost more than $20m to fraudsters who discovered a transaction refund error on the US platform in late 2021 and 2022.

Due to a “payment system error”, declined transactions were wrongly refunded to customers from Revolut’s own corporate funds, the sources said.

Fraudsters exploited the loophole by making expensive purchases that would be declined, and then cashing out the refunds via ATM withdrawals.

According to sources who spoke to the Financial Times, Revolut’s total losses from the refund error amounted to almost two-thirds of its annual net profit in 2021. 

UK Chancellor Denied Monzo Account

UK chancellor Jeremy Hunt has revealed that he was denied a bank account by Monzo.

Hunt, who is one of the most senior politicians in the UK, told the Financial Times that he believed he was denied this due to his status as a politically exposed person (PEP).

“If the price of going into public life is that you find it really hard to set up a bank account, then we need to make sure that we remove barriers where we can,” he said. “I think that’s why I was declined by Monzo for an account last year.”

Hunt’s revelation follows that of broadcaster and former EU lawmaker Nigel Farage, who said that high-net-worth bank Coutts had shut down his account. 

Hunt’s colleague, Andrew Griffith, who is the UK financial services minister, has written to the UK Financial Conduct Authority requesting it to speed up plans for a review of the PEP regime. 

UK Regulator Probes 'Don’t Kill Cash' Campaign

The UK Office of Communication (Ofcom) has opened an investigation into GB News following a complaint about its recently launched "Don’t Kill Cash" campaign.

GB News launched the campaign last week to raise concerns about the risks of going cashless, as shops, cafes and pubs are increasingly accepting card payments only in the wake of the COVID-19 pandemic. 

The campaign calls on the government to introduce legislation to protect the status of cash as legal tender, also known as a Payment Choice Act, until at least 2050.

In the six days after its launch, the campaign had collected more than 192,000 signatures, which is almost double the 100,000 threshold needed for the parliament to debate a topic.

Ofcom said UK regulations require broadcasters to ensure that their programmes exclude all expressions of the views and opinions of the person providing the service on matters of political and industrial controversy or current public policy.

Chinese Authorities Fine Ant Group

China’s financial regulators have fined Ant Group 7.1bn yuan ($994m) for failing to comply with consumer protection and corporate governance laws. 

Ant Group had additionally broken laws relating to payments and anti-money laundering, the China Securities Regulatory Commission, the People’s Bank of China and the National Financial Regulatory Administration said in a joint statement.

“We will comply with the terms of the penalty in all earnestness and sincerity and continue to further enhance our compliance governance,” Ant Group said in a statement. 

Meanwhile, Tencent, along with its payments subsidiary Tenpay, have also been fined approximately 2.99bn yuan ($410m) by the Chinese central bank for “its past regulatory breaches in relation to the provision of payment services in the mainland of China”, the company said on Friday (July 7).

UK Finance Says No To £20,000 'Britcoin' Holding Cap

In its response to the Bank of England (BoE) consultation on a UK central bank digital currency (CBDC), also known as "Britcoin", UK Finance took aim at the proposed holding limits of £10,000 to £20,000 per person.

UK Finance said the proposed limits were one of the issues that generated “the most discussion” among its members, due to fears of bank disintermediation should the new currency be adopted.

“Many members believe the Bank’s current proposals do not strike the right balance between functionality/usability and mitigation of risks to financial stability and credit creation,” said UK Finance.

“Given the character of the digital pound ‘for everyday payments needs’, it should be designed to reflect this objective (and not as a store of value) by alignment to the average daily payment needs of UK citizens.”

Instead, UK Finance proposed limits of £3,000 to £5,000 per person, in line with similar proposals for the digital euro in the EU.

Digital Dollar Could Improve Domestic And Cross-Border Payments, New York Fed Says

The New York Innovation Center (NYIC) of the Federal Reserve Bank of New York has found that wholesale central bank digital currency (wCBDC) could improve domestic and cross-border payments and support payment innovation.

The announcement concludes a proof of concept (PoC) that explored the feasibility of an interoperable network for wholesale payments operating on a shared multi-entity distributed ledger.

"From a central banking perspective, the proof of concept was conducive to exploring tokenized regulated deposits and understanding the potential functional benefits of central bank and commercial bank digital money operating together on a shared ledger," said Per von Zelowitz, director of the New York Innovation Center.

Although existing payment systems function effectively, certain frictions remain, particularly around speed, cost, accessibility and the settlement process.

Participating institutions now say the tests proved that a shared multi-entity distributed ledger could deliver improvements in the processing of domestic payments and could be used to create a global, near-real time, 24/7, dollar payment system.

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