Daily Dash: South Africa Legislates To Dodge Greylist

November 25, 2022
South Africa has passed a bill to address the Financial Action Task Force’s concerns, Experian has been chosen to operate Singapore’s buy now, pay later bureau, and the Bank of Japan is rumoured to be launching a digital yen pilot next year.

South Africa Assembly Passes Bill To Avoid FATF Greylisting

On Tuesday (November 22), South Africa’s National Assembly passed a bill that aims to combat money laundering and terrorism financing.

The General Laws Amendment Bill seeks to address deficiencies identified by the Financial Action Task Force (FATF) in a 2021 mutual evaluation report which found South Africa had not complied with 20 of the 40 standards of the global standard setting body.

The bill now amends five pieces of legislation to address the technical compliance deficiencies.

This “represents one half of the exam we must pass”, finance minister Enoch Godongwana said at the parliament, adding that the other “half of the exam” includes improvements to the effectiveness of the country’s anti-money laundering/counter-terrorism financing (AML/CTF) system.

The passage of the bill is “a significant milestone” in South Africa’s efforts to combat money laundering and to address the risk of greylisting, Godongwana pointed out.

Experian To Operate Singapore BNPL Bureau

Experian, the credit reference agency, has been appointed by the Singapore FinTech Association (SFA) to facilitate creditworthiness checks of consumers submitted by all accredited buy now, pay later (BNPL) players in the city-state. 

The appointment follows the SFA’s release of a Code of Conduct for BNPL players in the region, which was created via a specific BNPL Working Group. The SFA’s work has been heralded by local regulators as a solution to regulating the fast-growing payment method. 

“We are very excited to be appointed by the BNPL Working Group to provide the technological infrastructure for the BNPL Working Group and showcase Experian’s technology and expertise in the field,”  said Maria Liu, Experian’s Southeast Asia chief, noting that the company has already been operating BNPL bureaus in the US and UK. 

The SFA welcomed the appointment in statement that read: “To succeed in our mandate, we recognise the importance of working with different facets of the industry, which is why we are delighted to partner with Experian to facilitate creditworthiness checks for consumers and ensure that consumers’ interests continue to be prioritised.”

Bank of Japan To Launch Digital Yen Trials With National And Regional Banks

The Bank of Japan (BOJ) will launch a new digital yen pilot in Spring 2023, according to a report by Japan’s Nikkei news agency.

The two-year pilot will see the BOJ working with three of the country’s largest national banks and multiple regional banks to test central bank digital currency (CBDC) deposits and withdrawals from bank accounts.

Also, according to Nikkei, the BOJ will test whether a digital yen can be used without internet access during an emergency.

Depending on the results of the trial, the BOJ will decide whether to proceed with a full launch of a digital yen as early as 2026.

'Anti-Woke' Challenger Bank Shuts Down After Three Months In Business

GloriFi, a self-described “anti-woke” challenger bank backed by PayPal co-founder Peter Thiel, has announced that it will be winding down with immediate effect.

Less than three months after launching, the company said it had come to the “heartbreaking conclusion” that unwinding was the best option, due to a series of “financial challenges, reputation attacks and the declining economy”.

On Tuesday (November 22), GloriFi published a statement advising customers on how to resolve their accounts, including transferring all funds from the platform and cancelling direct debits.

GloriFi was launched by Republican donors Toby Neugebauer, Ken Griffin and Peter Thiel, who together raised about $50m in start-up capital.

Estonian Citizens Arrested In $575m Crypto Fraud

Two Estonian citizens were arrested on Sunday (November 20) in Tallinn, Estonia, as part of an FBI investigation which alleges they stole $575m in a cryptocurrency fraud and money laundering scheme.

According to US court documents, Sergei Potapenko and Ivan Turõgin, both 37, defrauded hundreds of thousands of victims. 

They convinced their victims to sign fraudulent equipment rental contracts with their crypto mining service called HashFlare and to invest in a virtual currency bank called Polybius Bank.

However, Polybius was never actually a bank, the FBI says, and it never paid out the promised dividends. 

Potapenko and Turõgin then used shell companies to launder the $575m they collected, purchasing real estate and luxury cars.

“The size and scope of the alleged scheme is truly astounding. These defendants capitalized on both the allure of cryptocurrency and the mystery surrounding cryptocurrency mining to commit an enormous Ponzi scheme,” said US attorney Nick Brown for the Western District of Washington.

EBA Releases Remote Onboarding Final Guidelines

The European Banking Authority (EBA) has issued its final guidelines on the remote onboarding of customers. 

These guidelines have been developed in response to the European Commission’s request, which made up part of the 2020 Digital Finance Strategy. 

They set out the steps that credit and financial institutions should take to ensure safe and effective remote customer onboarding practices in line with applicable anti-money laundering and counter-terrorism financing (AML/CTF) legislation and the EU’s data protection framework. 

The guidelines are intended to create common EU standards on the development and implementation of initial customer due diligence policies and processes when remotely onboarding customers. 

This includes setting out the steps financial institutions should take when choosing remote customer onboarding tools, and when assessing the adequacy and reliability of such tools, to comply effectively with their AML/CTF obligations.

FCA Publishes ESG Code Of Conduct

The UK's Financial Conduct Authority has announced the formation of a group to develop a Code of Conduct for Environmental Social and Governance (ESG) data and ratings providers. 

The group will be co-chaired by M&G, Moody’s, London Stock Exchange Group (LSEG) and Slaughter and May, and will be composed of stakeholders including investors, ESG data and ratings providers and rated entities. 

As financial services firms integrate ESG into their activities and expand their ESG-focused products, they are increasingly reliant on third-party ESG data and ratings services, the FCA said.

The regulator also noted that if HM Treasury extends its regulatory perimeter, it is committed to take the necessary steps to develop and consult on a proportionate and effective regulatory regime.  

This would include a focus on outcomes in areas highlighted in the International Organization of Securities Commissions’ (IOSCO) recommendations, such as transparency, good governance, management of conflicts of interest, and systems and controls.

While they await a decision from the Treasury, the FCA has formed the industry-led initiative, and the group will aim to meet for the first time later this year.

US Fintech Promised To Divest Crypto Activities But Instead Expanded It, Senators Say

As part of a condition with US federal financial regulators to support its merger, fintech lender SoFi Technologies had agreed to restrict its crypto-related activities. 

Instead, the company has expanded its offerings, senators claim.

“We are concerned that SoFi’s continued impermissible digital asset activities demonstrate a failure to take seriously its regulatory commitments and to adhere to its obligations,” Democrat senators led by Banking Committee chair Sherrod Brown wrote in a letter.

Earlier in February, the Federal Reserve gave SoFi the green light to acquire Golden Pacific Bancorp on the condition that SoFi divested its digital asset arm by 2024 or conform its crypto trading activities to US banking law.

In addition, the Office of the Comptroller of the Currency, which also gave a nod to the deal, said SoFi must not engage in crypto activities without prior regulatory approval.

Despite the undertakings, SoFi has expanded its offerings since then to allow its customers to invest part of their direct deposit into digital assets.

Lawmakers now say the expansion of crypto services raises questions about whether SoFi can meet its commitments by January 2024 and whether its capital requirements were set appropriately, particularly in light of the recent market crash and meltdowns in the crypto space.

Jump In STRs But Still Low Money Laundering Risk, Says Denmark

Suspicious transaction reports (STRs) have jumped since Q2, Denmark’s criminal prosecution authority has revealed

STRs have jumped from 17,494 in Q2 2022 to 19,098 in Q3. Even fewer were made in Q4 2021, at 16,738. 

STRs, alongside terror financing reports and suspicious activity reports, mainly come from financial institutions, the authority revealed.

These accounted for 16,943, or almost 90 percent of the most recent reports. Meanwhile, 534 came from payments and electronic money institutions, down from 700 in the previous quarter. 

In spite of these findings, the authority insisted that the risk remained relatively low. Denmark is number 118 out of 128 countries on the risk list on the Basel Institute for Governance Index.

Worldline Signs New Open Banking Partnership

French acquirer Worldline has signed a new partnership agreement with Neonomics, a Norwegian-based open banking platform.

"We are very proud to partner with Worldline to expand the significant benefits of open banking much further across Europe,” said Christoffer Andvig, chief executive of Neonomics.

Worldline will now extend its account-to-account payments and data aggregation coverage to the Nordics through Neonomics, including Norway, Sweden, Denmark and Finland.

Neonomics, meanwhile, will benefit from Worldline's position as a preferred partner to many industry-leading companies and from Worldline's open banking network in Europe.

“By working together, we can make open banking an even more pan-European offering that helps to streamline payments and enables access to banking account data,” said Michael Steinbach, head of global business line financial services at Worldline.

Brazil Takes Up Crypto Bill In Wake Of FTX Crash

Brazil’s legislature has pinned the country’s crypto bill on its agenda after the collapse of the FTX crypto exchange highlighted the urgency to adopt a regulatory framework for digital assets.

The bill, which creates comprehensive licensing and regulatory rules for crypto-assets, was approved by the Chamber of Deputies last December and by the Senate in July with a number of amendments.

Discussions were put on ice in light of recent elections, but the current turmoil around the collapse of FTX has created an urgency for lawmakers to address the unregulated sector in Brazil, where crypto adoption has seen a large uptake.

The Chamber of Deputies has now announced that lawmakers will discuss the bill in the plenary sessions taking place between November 22 and 24.

Dutch Bid For AMLA Deserted

The Netherlands' bid to host the EU’s new Anti-Money Laundering Authority (AMLA) has been abandoned, the country’s finance minister has announced.

Sigrid Kaag said that the “goodwill” of other countries to enable the Netherlands to host AMLA is low, despite its capabilities having been proven through hosting other EU and international organisations. 

“The government has established that, also in view of the expected fierce competition, an intensive lobbying campaign with full commitment would be necessary to convince the other member states,” said Kaag in a letter to the country’s parliament.

The Hague had previously been touted as a good location for the new authority, alongside other possible host cities including Frankfurt, Paris and Vienna. 

“I am confident that other candidates will be able to make a strong offer to locate AMLA in a location that meets the authority's needs to function quickly and properly, in the interest of European citizens,” she said. 

The EU’s AMLA was proposed as part of its 2021 AML/CTF package, which included a new directive, a proposal for a single rulebook and the implementation of the crypto travel rule.

Jamaican Central Bank Strikes Partnership With eCurrency For CBDC Rollout

eCurrency, a company set up to support central banks’ digital currency work, has entered into a long-term partnership with Bank of Jamaica to provide technology services for the national rollout of its central bank digital currency (CBDC) — the JAM-DEX.

The bank announced the national rollout after a successful CBDC pilot last year with eCurrency.

“JAM-DEX will be a game changer in the country's digital transformation, by enabling unbanked and underbanked citizens to be a part of the formal financial system thereby enabling access to other financial products," said Natalie Haynes, deputy governor at the central bank. 

This follows the country becoming the first to recognise its CBDC as legal tender in June this year, when the Jamaican parliament passed amendments that certify that the central bank is the sole issuer of the CBDC.

New Lloyds Feature Helps Customers Limit Gambling Spend

Customers at Lloyds Bank, one of the UK’s largest retail banks, can now set a personal monthly limit on gambling spend when using a debit card.

These limits can be set or changed via the bank’s mobile app. 

The feature, which is one of the first of its kind offered by a UK high-street bank, allows customers to set a monthly debit card gambling limit of any amount to the nearest whole pound, when spending online, in person or over the phone.

The news has been greeted by Anna Hemmings, GamCare’s chief executive, who said that it will “give those most vulnerable to gambling harms an important means of controlling their gambling”.

Research from the UK Gambling Commission shows that approximately one in three UK adults participate in gambling, excluding lotteries, and up to 3 percent of UK adults are estimated to be at some risk of harm due to their gambling, of which 0.3 percent is considered to be "problem" gamblers.

UPDATE: CFPB Asks Supreme Court To Rule On Its Constitutionality, Again

The US Consumer Financial Protection Bureau (CFPB) has filed a petition with the US Supreme Court (SCOTUS), challenging the Fifth Circuit decision that said the agency’s funding structure was unconstitutional.

In mid-October 19, the Fifth Circuit Court ruled that the CFPB’s funding structure is unconstitutional because it is not funded with periodic congressional appropriations.

Although this is not the first time the CFPB’s structure has been questioned and found unconstitutional, the case is unique in the sense that judges annulled a CFPB rule on the ground that it was the product of an unconstitutional funding scheme.

Following the court decision, a number of companies, including remittance giant MoneyGram, have argued in their respective disputes with the CFPB that their cases should be dropped in light of the Fifth Circuit decision.

Instead of asking for a full panel judgment at the appellate court, the CFPB has now appealed directly to SCOTUS asking the highest court to rule on the constitutionality of the agency and the validity of its actions.

Bank CEO Avoids Fine, Gets Telling Off, From UK Regulator

The Financial Conduct Authority (FCA) has publicly censured Mohammad Ataur Rahman Prodhan, the former chief executive of Sonali Bank (SBUK), for anti-money laundering (AML) failings.

According to the FCA, between 2012 and 2014, Prodhan failed to take reasonable steps to assess and mitigate the AML risks arising from a culture of non-compliance among SBUK’s staff. 

He also failed to ensure that there was a clear allocation of responsibilities to oversee SBUK’s branches, and he failed to properly oversee, manage and resource SBUK’s money laundering reporting officer (MLRO) function.

Although the FCA had originally intended to impose a financial penalty, it has said that this no longer appears fair and has resolved the matter with a public censure. 

“While a financial penalty was appropriate in this case, prolonged litigation to enforce a penalty that is unlikely to be paid against a person who may not be able to travel to the UK to explain himself in person to the Upper Tribunal is neither practical nor fair,” said Mark Steward, enforcement and market oversight chief at the FCA.

“In these exceptional circumstances, a public censure is an appropriate resolution of the case.”

Payroll Firm Deel Expands Wise Partnership, Adds Ten New Currencies

Deel, a payroll firm for multinational workforces, has added ten new currencies to its platform after expanding its partnership with Wise, a global money transfer service provider.

In addition to USD, GBP and EUR, Deel’s Wise integration has now been expanded to include AUD, CAD, JPY, SGD and several others, bringing its total available currencies to 19.

“Wise’s new feature allows even more Deel customers to use their local currency and local payment system,” said Dan Westgarth, COO at Deel.

Additionally, Deel clients can now make payments with Wise using only an email address, removing the need to input bank details and other identifiers.

Late Night Automated Clearing House (ACH) Goes Live In US

Nacha, the US Automated Clearing House (ACH) Network, has publicly announced that its new Late Night ACH service is now live.

Operated by the Federal Reserve and The Clearing House, the new service delivers late night ACH files to all receiving financial institutions in the ACH Network by 11:30pm Eastern Time on business days.

This means that ACH payments that would otherwise be received on the next business morning can be received on the same business day.

In a statement, Nacha described Late Night ACH as the “latest phase” in the acceleration of ACH payments, following its increase of the Same Day ACH dollar limit to $1m, an upgrade that went live in March this year.

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