The Financial Intelligence and Analysis Unit has imposed a €653,637 fine on Ferratum Bank, an international provider of mobile banking and digital loans to consumers and small businesses, distributed and managed through mobile devices.
The bank had already been fined €188,000 by the Malta Financial and Services Authority in 2018.
FIAU reported on the findings of a compliance review carried out between December 2018 and May 2019.
One of the shortcomings of the compliance review was that none of the bank’s customers were classified as “high risk”. Although the bank said high-risk customers fell outside the bank’s risk appetite and were not accepted, it only referred to PEPs and those sanctioned as risky. raised. FIAU insisted on the fact that other factors can also raise the risk to a high level, whether at the beginning of the relationship or throughout it, such as large and unexplained movements of funds, wealthy individuals and material connections to high-risk jurisdictions, among others.
The FIU also found a lack of adequate and complete information on Source of Wealth (SOW) and Source of Expected Funds (SOF), or the expected value and volume of transactions that clients would undertake. In some cases, the bank did not even collect the customer’s occupation or their expected SOF, and only basic, generic information about the customer’s occupation, such as “businessperson” or “self-employed”. No SOW information was collected for 96% of mobile banking customers surveyed.
In the case of an EU individual – a law enforcement officer stationed outside the EU – with a salary range of €25,000 to €50,000, the FIU noted monthly transactions from €2,000 to €6,000, which also included his wife’s salary from an EU bank account which he then transferred to his account with the bank. Since many ATM withdrawals were made in a non-EU country, the bank questioned the customer, suspecting fraud.
“However, the bank has confirmed that in its opinion the withdrawals were not considered irregular, without any justification as to how it came to this conclusion,” FIAU said.
“The pattern of ongoing transactions was actually suspicious. The FIU could not understand why an EU citizen who worked in a non-EU jurisdiction needed a bank account in Malta, and why his salary and that of his wife were transferred to an account Maltese for subsequent cash withdrawal from ATMs located in the non-EU jurisdiction.
FIAU said this made it difficult to monitor ongoing activity since the audit trail of transactions was interrupted the minute funds were withdrawn in cash. “The client was creating an extra layer in the transaction cycle and eliminating any traceability with cash withdrawals.”
Ferratum said he would appeal the decision. “The bank takes its responsibility towards its regulatory and supervisory authorities seriously. Given the lapse of time and improvements in the bank’s processes and controls since the conclusion of the compliance review in 2019, the FIU’s decision was unexpected.
The bank insisted in a company statement that it had since made substantial investments in its internal control processes, three years after the on-site visit.
“[Considering] the non-complex nature of its services and activities, the fact that it does not agree with the decision of the FIU, as well as the increase in the number of human resources dedicated to this area, the Bank considers that the decision of the FIU is disproportionate. said.
The bank, whose directors include former Bank of Valletta CEO Charles Borg, obtained its lending institution license in 2012 and now employs around 180 people. Its services primarily include low value unsecured consumer loans to customers located in the EEA and retail deposits primarily in the German market.
The bank is owned by Multitude SE, which is listed on the Frankfurt Stock Exchange.
“This is the first time that the bank has received an administrative sanction from the FIU for violating any of the provisions of the Financial Crime Prevention Framework. The fine imposed by the FIU on the bank will not have significant impact on the financial or capital position of the bank, which remains well capitalized and profitable.”