Daily Dash: FCA Delays PEP Review Until After General Election

• FCA Delays PEP Review Until After General Election
• US Treasury Penalises Italian TV Channel For Transacting With North Korea
• Aussie Payments Industry Agrees To Split Costs Of Cash-In-Transit Business
• UAE's New Sandbox Regulation For Financial Services Goes Live
• Ethiopia Moves Towards Legal Framework For CBDC Launch
• Monaco Faces Potential Greylisting By FATF
• FinCEN Issues New Advisory On Procurement Of Fentanyl Precursors
• Liechtenstein Regulator Publishes Guidance On MiCA, DORA Compliance
• Iran’s CBDC Cleared For Soft Launch In July
• Evolve Bancorp Penalised In US For Fintech Risk Management Failures

FCA Delays PEP Review Until After General Election

The UK Financial Conduct Authority (FCA) has confirmed that its review of the treatment of politically exposed persons (PEPs) will not be published by the end of June.

Instead, the regulator will wait until after the general election to publish its findings.

“We had been on track to publish the findings from this review in line with the end of June deadline set in the Financial Services and Markets Act 2023,” it said.

“However, we do not think it is appropriate to publish the review during the pre-election period. We will now publish it in July once Parliament has returned.”

Last year, the FCA launched a review of the treatment of domestic PEPs by financial services firms following the closure of Nigel Farage’s Coutts bank account.

US Treasury Penalises Italian TV Channel For Transacting With North Korea

A popular Italian TV channel has entered a settlement with the US Treasury’s Office of Foreign Assets Control (OFAC) after being accused of making payments to North Korea.

Mondo TV, which specialises in animated TV shows, has agreed to pay $538,000 to settle its potential civil liability for apparent violations of OFAC sanctions.

Between May 2019 and November 2021, OFAC said that Mondo remitted approximately $537,939 to a studio owned by the North Korean government as payments for outsourced animation work.

“In doing so, Mondo caused US financial institutions to process wire transfers that contained the blocked property interests of the government of North Korea and to export financial services to North Korea,” said OFAC.

“The settlement amount reflects OFAC’s determination that Mondo’s apparent violations were not voluntarily self-disclosed and non-egregious.”

Aussie Payments Industry Agrees To Split Costs Of Cash-In-Transit Business

A coalition of major banks, retailers and the Australian Banking Association (ABA) have reached a cost-sharing agreement with Armaguard, a struggling provider of cash-in-transit services.

Under the terms of the agreement, the signatories will collectively provide around A$50m ($33m) in funding to Armaguard over the next 12 months, subject to monthly key performance indicators (KPIs).

The financial support will assist Armaguard while it restructures its business following its merger with global cash management firm Prosegur, which was announced in September last year.

The agreement, which requires approval from the Australian Competition and Consumer Commission (ACCC), also includes a commitment from all parties to work together on developing an independent pricing mechanism to support sustainable cash delivery in future.

UAE's New Sandbox Regulation For Financial Services Goes Live

The Central Bank of the United Arab Emirates (CBUAE) has announced that its Sandbox Conditions Regulation for the financial services sector is now in effect.

The regulation outlines specific conditions that must be met by regulatory sandbox participants, including start-ups, fintechs and established businesses from within the UAE and from overseas.

The central bank said its sandbox scheme is aimed at financial service firms that are looking to test innovative products, services and business models within a controlled regulatory and supervisory framework.

The Sandbox Conditions Regulation also contains licence exemption criteria that covers participants on a temporary basis.

“These conditions allow the CBUAE to proactively and effectively assess and respond to these innovations as part of its supervisory activities, and enable participants to understand how best to structure their respective business in a regulatory compliant manner,” said the central bank.

Ethiopia Moves Towards Legal Framework For CBDC Launch

Ethiopia’s Council of Ministers has approved two draft bills that could pave the way for the launch of a central bank digital currency (CBDC).

Earlier this month, the council approved the National Bank Ethiopia (NBE) Proclamation and the Banking Business Proclamation, both of which will now be referred to the House of Representatives for review.

The draft NBE Proclamation establishes a “legal framework for introduction of central bank digital currency, as necessary”.

In November 2023, the NBE announced that it had partnered with German currency solutions firm Giesecke+Devrient on exploring a potential CBDC.

An Ethiopian CBDC would be the second CBDC to go live in Africa, after Nigeria’s e-naira.

Monaco Faces Potential Greylisting By FATF

The Principality of Monaco is at risk of being added to the international "greylist" for money laundering, according to reports.

Despite recent improvements to financial transparency, Monaco remains under scrutiny, primarily due to substantial illicit money flows originating from neighbouring Italy and France. 

The principality's real-estate sector and casino industry have been identified as key vulnerabilities.

A critical report by Moneyval in 2023 highlighted several shortcomings, notably deficiencies in Monaco's judicial system. 

The prospect of greylisting for Monaco has the potential to trigger adverse economic repercussions, such as heightened regulatory scrutiny for firms operating in the microstate and a possible downturn in investment.

FinCEN Issues New Advisory On Procurement Of Fentanyl Precursors

The US Financial Crimes Enforcement Network (FinCEN) has published a supplemental advisory “urging vigilance” of payments destined for fentanyl precursor suppliers.

As the opioid epidemic worsens, the advisory offers a follow-up to FinCEN’s 2019 advisory on illicit financial schemes related to the trafficking of fentanyl and synthetic opioids.

The latest advisory highlights how Mexico-based transnational criminal organisations (TCOs) purchase fentanyl precursor chemicals, pill presses, die moulds and other manufacturing equipment from suppliers in China.

These payments may be conducted in single or multiple transactions from Mexico and the US, and may be structured through multiple senders and beneficiaries to evade Bank Secrecy Act (BSA) reporting requirements, the advisory notes.

FinCEN has identified the use of shell and front companies; money transfers through banks, money services businesses (MSBs), and online payment processors; and payments in virtual currency as financial typologies associated with Mexico-based TCOs.

Separately, the US Treasury has also imposed new sanctions on eight “top leaders” of Mexico’s La Nueva Familia Michoacana drug cartel.

Liechtenstein Regulator Publishes Guidance On MiCA, DORA Compliance

The Liechtenstein Financial Market Authority (FMA) has released guidance pages for financial intermediaries on two significant and incoming EU regulations: the Markets in Crypto-Assets (MiCA); and the Digital Operational Resilience Act (DORA).

The guidance for MiCA aims to help financial companies prepare for the regulation's implementation, which is due to be February 1, 2025. 

This guidance covers regulated activities, the relationship between crypto-asset services and the country's Token and Trusted Technology Service Provider Act (TVTG), and the interplay between MiCA and Directive 2014/65/EU on Markets in Financial Instruments (MiFID II).

For DORA, the guidance is designed to ready financial companies for its future implementation. It provides updates on recent developments, answers frequently asked questions and outlines the framework and reporting requirements. 

The exact date for DORA's entry into force in Liechtenstein is yet to be determined, pending decisions related to its European Economic Area (EEA) membership.

Iran’s CBDC Cleared For Soft Launch In July

The Central Bank of the Islamic Republic of Iran (CBI) has announced that the digital rial, a retail central bank digital currency (CBDC), will be launched into circulation on a limited basis in July.

Initially, the digital rial will launch exclusively on Kish Island, a holiday resort and free trade zone in the Persian Gulf, which is home to about 140,000 residents.

The digital rial will be available to both Iranian nationals and foreign tourists, and can be used for person-to-merchant (P2M) payments using a QR code.

The CBI said the launch of the digital rial follows several periods of experimentation supported by the country’s commercial banking sector, beginning in 2021.

It also said the launch of the digital rial will lay the groundwork for a modern digital economy in Iran and will serve the payments needs of merchants and consumers.

Evolve Bancorp Penalised In US For Fintech Risk Management Failures

The US Federal Reserve Board has issued an enforcement action against Evolve Bancorp for deficiencies in its anti-money laundering (AML), risk management and consumer compliance programmes.

Evolve partners with fintechs who provide access to banking products and services to Evolve’s end customers.

Examinations conducted in 2023 found that Evolve engaged in “unsafe and unsound” banking practices by failing to have in place an effective risk management framework for those partnerships.

In addition, Evolve did not maintain an effective risk management programme or controls sufficient to comply with AML and laws protecting consumers.

The Federal Reserve Board is requiring the bank to improve its policies and programmes in those areas, in addition to requiring other remedial improvements.

Evolve must implement appropriate oversight and monitoring of its fintech partnerships and enhance its record-keeping for compliance purposes.