UK E-Money Giant Shuts Down Following AML Concerns

Prominent UK-based electronic money company Transactive Systems Ltd will cease operations after a decision by regulators to revoke its licence amid rising concerns over money laundering.

The move comes after a rigorous investigation over the past few years by regulatory bodies into the firm’s anti-money laundering (AML) practices.

Last year, the Bank of Lithuania, which had granted subsidiary company Transactive Systems UAB its operating licence, fined the payments firm €280,000 and revoked its licence for “seriously and systematically” infringing AML and counter-terrorist financing requirements.

Among its failures, Transactive Systems UAB failed to properly identify clients, their representatives and beneficiaries, enabled the opening of anonymous accounts, failed to ensure adequate monitoring of business relationships and transactions, and did not have any control measures to detect cases of terrorist financing.

The Financial Conduct Authority’s (FCA) decision to revoke the payment services licence is the final blow to the company’s operations and future prospects.

Transactive’s CEO, Daniel Edwards, said the company has no plans to continue operating the business after regulators froze client accounts, making it impossible for the company to service clients or generate income, according to a report by Bloomberg.

“We have no intention of operating the business going forward,” Edwards wrote in an email to the global news organisation.

At its peak in 2022, Transactive was processing €1billion (more than £850m) of payments every month, demonstrating the rapid growth of lightly regulated electronic money institutions (EMIs) in Europe.

However, concerns about fraud and inadequate anti-crime measures within the sector led regulators to reevaluate their oversight of EMIs, according to a report by Bloomberg.

An investigation in 2023 found that Transactive had obtained its licence despite having a compliance official who faced criminal charges in Nevada and a founding investor who was jailed for healthcare fraud in Florida, said the report.

In February 2023, the Bank of Lithuania limited Transactive’s operations, saying the company could not take on new customers or provide services to finance or cryptocurrency clients until the bank completed a review.

However, these concerns were not adequately addressed, and the Bank of Lithuania revoked the electronic-money institution’s operating licence in June last year. The case further highlights the many challenges the financial industry faces in the fight against money laundering. As regulatory bodies, not just in the UK but across the world, continue to tighten AML controls, financial institutions must adapt by enhancing their compliance protocols and ensuring they stay on top of compliance requirements to detect and prevent illicit activities.

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