Daily Dash: UK's Starling Bank Reveals Active FCA Investigation Into Alleged AML Failures

June 14, 2024
Another UK neobank has revealed that it is facing an anti-money laundering probe, while the US consumer financial regulator is moving to block medical bills from appearing in credit reports.

UK's Starling Bank Reveals Active FCA Investigation Into Alleged AML Failures

Starling Bank has revealed in its 2024 annual report that it is under investigation by the Financial Conduct Authority (FCA) for potential anti-money laundering (AML) failures.

The report, published this week, contains details about the investigation in the small print of a "Contingent Liabilities" section.

“On 24 November 2023 the FCA opened an investigation into the Bank’s compliance with UK money laundering regulations and the FCA’s rules and principles for businesses,” it said.

“The Company continues to engage and co-operate fully with the FCA. The potential impact of the investigation is currently unquantifiable but could be material.”

Starling is the second UK neobank to publish details of an AML probe in its 2024 report. Last week, as covered by Vixio, Monzo revealed that a criminal investigation into AML failures at the bank was dropped by the FCA in November 2023.

However, Monzo remains under civil investigation for potential breaches of FCA Principles for Businesses and related AML rules.

CFPB Proposes New Rule To Remove Medical Bills From Credit Reports

The Consumer Financial Protection Bureau (CFPB) has proposed a rule to remove medical bills from most credit reports, which it says will boost privacy, improve credit scores and prevent debt collectors from using credit reports to coerce payments.

"Medical bills on credit reports are often inaccurate and don't predict loan repayment," said CFPB Director Rohit Chopra. "We're ending the practice of using credit reports to pressure patients into paying unowed medical bills."

The proposal would ban the sharing of medical debts with lenders and would stop lenders from using medical information, closing a loophole from the 2003 Fair and Accurate Credit Transactions Act that allowed lenders to consider medical debts.

Stakeholders have until August 12 to respond.

Philippines Getting Closer To FATF Greylist Removal, Says IMF Official

The Philippines is making “significant progress” towards improving its anti-money laundering (AML) controls, and may soon be removed from the Financial Action Task Force (FATF) greylist.

According to Elif Arbatli Saxegaard, mission chief at the International Monetary Fund (IMF), the Philippines government has demonstrated an “all-hands-on-deck” approach in its efforts to secure its removal from the greylist.

“They are really committed,” said Saxegaard, as quoted by local media. “It’s hard for us to know what the FATF will decide, but our hope is that the Philippines gets off the list, building on this reform process that they’ve already initiated.”

In June 2021, FATF added the Philippines to its list of jurisdictions under increased monitoring, also known as the greylist. Greylisting can have significant negative impacts on foreign investment and cross-border payment flows.

FCA Imposes Restrictions On Motmaen Limited

The UK's Financial Conduct Authority (FCA) has placed restrictions on Motmaen Limited, a small payment institution, preventing it from providing money transfer services.

The FCA imposed restrictions on May 15, according to a bulletin on the regulator's website, requiring the firm to inform all customers that it has ceased payment activities.

The City watchdog also required Motmaen, a licensed institution since 2019 handling money remittances, to settle all liabilities to its customers by May 22, 2024, ensuring the return of any money received for uncompleted transactions.

Central Bank Of Argentina Updates Rules For Payment Service Providers

The Central Bank of the Argentine Republic (BCRA) has issued a new circular that introduces significant changes to the regulations governing payment services providers offering payment accounts (PSPCPs) and similar entities.

Effective from June 7, the update eliminates the requirement for PSPCPs to pay interest on customer funds held by these providers, in a move that is aimed at streamlining financial operations within the sector.

The new communication revokes Communication "A" 7825 and reiterates that PSPCPs must keep customer funds available on demand in an account with an independent financial institution in pesos. 

It also requires PSPCPs to inform customers that they are not financial institutions and that customer funds do not have the same protections as those held by registered financial institutions.

FinCEN Seeks Comment On Renewal Of Due Diligence Rules Under BSA

The US Financial Crimes Enforcement Network (FinCEN) has issued a request for comment on a proposed renewal, without change, of existing information collection requirements under the Bank Secrecy Act (BSA).

The rules require certain banks, brokers or dealers and mutual funds to establish and maintain due diligence programmes for foreign financial institutions and for private banking accounts.

These programmes should include appropriate, specific, risk-based and, where necessary, enhanced policies, procedures and controls reasonably designed to enable the covered financial institution to detect and report money laundering.

The focus of the reporting is on correspondent accounts established, maintained, administered or managed by covered financial institutions in the US for a foreign financial institution.

Written comments are open until August 14 and must be submitted to the Office of Management and Budget.

US Treasury Seeks Input On AI Risk In Financial Services

The US Department of the Treasury has issued a request for information (RFI) regarding the uses, opportunities and risks of artificial intelligence (AI) in the financial services sector.

The authority has said it wants to gather public comments to better understand the current applications and potential of AI within financial services.

“Treasury is proud to be playing a key role in spurring responsible innovation, especially in relation to AI and financial institutions,” said Nellie Liang, under-secretary for domestic finance. “Our ongoing stakeholder engagement allows us to improve our understanding of AI in financial services.”

Key areas of interest include identifying obstacles to responsible AI use by financial institutions, assessing the impact of AI on consumers, investors, businesses and regulators, and recommending improvements to legislative and regulatory frameworks.

“The Biden Administration is committed to fostering innovation in the financial sector while ensuring that we protect consumers, investors and our financial system from risks that new technologies pose," said Liang.

FDIC Issues Warning To Neobank Users: Funds May Not Be Protected

The Federal Deposit Insurance Corporation (FDIC) has issued a warning to users of neobank and fintech apps, highlighting that deposits to these platforms may not be protected.

Increasingly, consumers are choosing to open accounts through non-bank companies that may or may not have business relationships with banks.

“If and how a bank is involved is key to understanding whether or not your money is protected by deposit insurance,” said the FDIC. “However, in some cases, it is not always clear to consumers if they are dealing directly with an FDIC-insured bank or with a nonbank company.”

The regulator noted that nonbank companies themselves are “never” FDIC-insured. “Even if they claim to work with FDIC-insured banks, funds you send to a nonbank company are not eligible for FDIC insurance until the company deposits them in an FDIC-insured bank and after other conditions are met,” it said.

“If the nonbank company deposited your funds in a bank, then, in the unlikely event of the bank’s failure, you may be eligible for what is referred to as “pass-through” FDIC-deposit insurance coverage. However, the nonbank company must take certain actions for your funds to be eligible for FDIC insurance.”

BIS, Central Banks Launch Multi-Currency CBDC Platform: Project mBridge

The central banks of Hong Kong, the United Arab Emirates (UAE), China and Thailand have launched a minimum viable product (MVP) version of Project mBridge, a multi-currency central bank digital currency (CBDC) platform for wholesale cross-border payments and settlement.

Developed under the leadership of the Bank for International Settlements (BIS) Innovation Hub in Hong Kong, Project mBridge is the first multi-CBDC platform to reach the MVP phase, and is now ready for use by early adopters. 

Separately, the Saudi Arabian Monetary Authority (SAMA) announced that it has joined Project mBridge as a participant. There are also more than 26 entities signed up as “observing members”, according to the BIS.

A number of UAE licensed financial institutions (LFIs) have been onboarded onto mBridge, with collaborative efforts underway to accelerate its adoption.

Onboarded LFIs are now ready to initiate and process cross-border CBDC payments with their counterparts of the participating jurisdictions.

The UAE’s participation in Project mBridge hit a milestone in January 2024, when the UAE central bank made its first cross-border Digital Dirham payment to China worth AED50m ($13.6m).

Dutch Regulator Updates Anti-Money Laundering Guidelines

The Dutch Authority for the Financial Markets (AFM) has released updated guidelines on the Money Laundering and Terrorism Financing (Prevention) Act (Wwft) and the Sanctions Act (Sw). 

The reason for the update is due to research findings, increased attention on sanctions regulations and a further explanation of the risk-based approach.

The updates include detailed measures for identifying and verifying UBOs, enhanced guidance on sanctions regulations, and clarifications on risk-based approaches to AML, covering risk assessments, policy integration and customer due diligence.

The AFM also announced that it will begin supervising crypto-asset service providers (CASPs) under the Wwft and Sw at the end of 2024. This means that it will publish a supplement to the Wwft/Sw guidelines specifically for CASPs in the near future.

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