This Month in Compliance: July 2022
Each month, we take a look at the latest compliance news and insights to keep you on top of what you need to know from across the industry.
In July, momentum continued to gather behind the ‘metaverse’. At Money 20/20 in June, there were many insightful discussions surrounding the digital world, and the FinTech community has continued to explore this at length.
New UK sanctions have been placed on Belarus following the public support of the Russian invasion on Ukraine.
The Covid-19 pandemic has revolutionised countless elements of our everyday life, predominantly with the power of technology. This includes the virtual world known as the ‘metaverse’ – a digital universe built on blockchain technology and thought to be the internet’s next evolution. In the Fintech and compliance space, this is of great interest due to the potential impact on cyber safety, financial crime and general business.
Although the metaverse is not yet widely used enough to be a prime target for large crime, compared to that of crypto, the increasing volume of activity also increases the scope for money laundering. High valued items such as digital real estate is a perfect example of an attractive avenue for financial crime.
Is it possible to regulate the metaverse? It is clear that there is a need for compliance within the digital space, and the activity must be regulated in order for the space to succeed and remain secure enough for people to trust. It has been suggested that compliance practitioners should get involved with the shaping of the metaverse whilst it is still in its initial stages to help ensure the security of businesses and future consumers.
The development and adoption of the metaverse is likely to be rapid. It is therefore important that we involve ourselves in the conversation at the outset.
Revolut Compliance Chiefs Resign
Revolut is a British fintech company operating as an e-money institution. Popular amongst the younger generation, like Monzo, Revolut seemed to be gaining a lot of customers and positive endorsement. However, in July, the company saw multiple resignations from UK risk and compliance chiefs including UK chief risk officer, Victoria Stubbs; UK Head of Regulatory Compliance, Justine Wootton and UK Money Laundering Reporting Officer (MLRO) Mathew Seneviratne.
Reports suggest that the initiative behind these resignations correlates with ‘heightened tensions with regulators and delays to the firm’s banking licence’ – CityA.M. The UK Data Protection officer and UK Deputy MLRO have also resigned, leaving a supposedly regulated e-money business without a regulated money laundering officer.
This is a huge knock to the fintech company as they are now desperate for a UK banking licence as well as authorisation to provide crypto services – made harder to achieve after countless executives have left the business. The tensions between current Revolut boss, Nik Storonsky, and the FCA have made their way into the media after Storonsky made publicly clear he did not approve the lack of movement from the regulator on its banking licence. He suggested that the ‘principle-based’ process was too slow and would be more efficient as a ‘rule-based’ system, comparing international equivalent institutions.
New UK Sanctions Against Belarus
The UK government recently announced new sanctions against Belarus due to its public support of the Russian invasion in Ukraine. These sanctions include transport, economic and new trade. Import and export bans have been actioned, meaning no luxury products, oil refining materials, advanced technology, or Belarusion iron and steel can be imported. These goods have an estimated value of around £60 million.
The government has stated that “the Belarus regime has actively facilitated Putin’s invasion, letting Russia use its territory to pincer Ukraine – launching troops and missiles from their border and flying Russian jets through their airspace.”
The government continues to be active in sanctioning any Russian affiliated companies, maintaining transparency with the public support of Ukraine. Another example is the online news site United World International that has also been sanctioned by the UK due to their promotion of pro-Russian disinformation.
Under these sanctions, UK financial firms are required to immediately freeze any assets that trace back to any people and businesses that have been sanctioned, as well as reporting them to the government.