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European regulators reprimanded Wise, the London-listed fintech, over its anti-money laundering controls and forced the payments group into a formal recovery plan, according to five people familiar with the matter.
An investigation by the National Bank of Belgium, which oversees Wise in Europe, found in early 2022 that the fintech lacked proof of address for hundreds of thousands of customers, three of the people said.
As a result, Wise put in place a recovery plan, approved by the regulator, that required it to contact all customers within weeks to request proof of address, the three people said. The plan also called for freezing the accounts of customers who failed to submit documents on time, she added.
The research highlights the challenges for fast-growing fintechs looking to increase their capabilities in combating financial crime while balancing user experience with adequate risk management. Wise, formerly known as TransferWise, allows customers to send fast payments across borders at a cheap rate. Many of its clients use the service to send large sums of money across borders to buy real estate.
Wise said it “took very seriously its responsibility to protect its customers and prevent money laundering.”
“In 2021, the National Bank of Belgium conducted a routine review of Wise Europe as part of a market-wide exercise in the wake of Brexit. We have worked closely with our regulator in Belgium and have fully implemented their recommendations.”
The Belgian bank declined to comment.
To cope with the magnitude of the task, Wise transferred some of its customer service staff to the anti-financial crime division and experienced a jump in the number of customer inquiries, said two people familiar with Wise’s efforts.
“About a third of our global team is dedicated to fighting financial crime and helping to ensure we meet the requirements of the more than 65 regulatory licenses we maintain around the world,” said Wise.
Wise implemented the recovery plan in the weeks that followed Russia’s invasion of Ukraine, which led to the EU imposing sanctions on many individuals linked to Russian President Vladimir Putin’s regime. One person familiar with the process said the company received the investigation’s findings before the start of the war.
Later that year, Wise was fined $360,000 by the United Arab Emirates’ financial regulator for deficiencies in anti-money laundering controls, including due diligence for high-risk customers.
In 2023, the UK Office of Financial Sanctions Implementation announced that Wise had allowed the account of a company owned by an individual on the country’s Russian sanctions list to transfer £250.
The group also halted onboarding of its UK and European corporate clients last year, with then-interim chief executive Harsh Sinha telling the FT that Wise had not anticipated the level of extra due diligence that would be required following the wave of sanctions as a result of the Russian measures. invasion of Ukraine.
Wise listed in London in 2021 at a valuation of £9 billion, a move hailed as a vote of confidence in the British market, which has long struggled to compete with New York as a destination for fast-growing tech companies.