Ferratum Bank has been fined €653,637 by the anti-money laundering watchdog for a series of breaches.
Owned by German company Multitude SE, Farretum provides mobile banking services and small business loans.
In a statement, the bank said it will appeal the decision.
“The bank takes its responsibility towards its regulatory and supervisory authorities seriously."
"Considering the lapse of time and enhancements made to the bank’s processes and controls since the conclusion of the compliance examination in 2019, the FIAU’s decision was unexpected," it said.
No 'high risk' customers
In a public announcement on its website, the FIAU this week said that not a single one of the bank’s customers had been rated as posing a high risk.
The bank only designated politically exposed persons and those on sanctions as high-risk customers, however, the watchdog said other factors should also have been considered.
The FIAU also flagged a lack of information on the bank’s customers’ source of wealth and expected source of funds. The same was true of some customers’ value and volume of transactions.
In some cases, the bank did not even collect the customer’s occupation, instead relying on generic information.
No source of wealth information was collected for 96% of mobile banking customers reviewed by the FIAU during two inspections in 2018 and 2019.
An EU law enforcement officer
The FIAU flagged how one of the bank’s customers, a law enforcement officer working outside the EU, received monthly deposits of €2,000-€6,000.
Although the bank had queried the matter with the client, it had ruled out foul play “without any justification as to how it arrived at this conclusion”, the FIAU said.
“The pattern of the transactions taking place was in fact suspicious," the FIAU said.
The FIAU could not understand why an EU individual who was working in a non-EU jurisdiction required a bank account in Malta, and why his salary and that of his wife were being transferred to a Malta account for it to be then withdrawn in cash from ATMs located in the non-EU jurisdiction.
The FIAU said this made it difficult to monitor the activity being carried out since the audit trail of the transactions was disrupted the minute the funds were withdrawn in cash.
“The customer was creating an additional layer in the transaction cycle and eliminating any traceability with the cash withdrawals.”
Jurisdictions on bank's black list
In another case, the FIAU looked into how the bank treated high-risk jurisdictions.
Although the bank indicated that transactions would be automatically blocked if these had to pass to or from countries identified as high risk, the FIAU said this could not be confirmed at the time of the visit.
FIAU officials had identified transactions which had passed to and from jurisdictions that were included in the bank’s own jurisdiction blacklist.
“Therefore, there was not a good level of controls implemented when it came to high-risk jurisdictions,” the FIAU said.
The FIAU said that after its compliance examination, the bank provided a “word/notepad document” indicating that screening on clients was carried out.
However, the unit concluded that this document could not be considered adequate, “both because it was provided following the compliance examination (during the wrap-up meeting) and because its format was not reliable”.