Administrative fine imposed on Modulr Finance B.V. for inadequate customer due diligence

Gatekeeper role

Electronic money institutions act as gatekeepers to the financial system under the Anti-Money Laundering and Anti-Terrorist Financing Act (Wet ter voorkoming van witwassen en terrorismefinanciering – Wwft). Among other things, they must continuously monitor transactions, detect unusual transactions and report them to the Financial Intelligence Unit (FIU-NL) without delay. This is essential to prevent misuse of the financial system, as malicious parties can use the services of payment and electronic money institutions to launder proceeds of crime. Once customers are accepted, electronic money institutions have an obligation to monitor all transactions carried out by or on behalf of these customers on an ongoing basis. Failure to comply with this obligation undermines the integrity of the financial system. DNB therefore imposes fines to emphasise the importance of proper compliance. 

Non-compliance

Based on its investigation, DNB concluded that MFBV failed to adequately comply with its obligation to conduct ongoing monitoring of its customers and of transactions carried out by them. 

DNB found that MFBV relied heavily on intermediary partners, including crypto-asset service providers, to perform ongoing monitoring activities. As a consequence, MFBV had insufficient insight into its own customer base, and its ongoing monitoring of customers and transactions was inadequate. For example, very large amounts were received without sufficient clarity as to the origin of those funds. Despite clear indicators of elevated risk, MFBV itself conducted either very limited or no investigations into the transactions at all. MFBV's transaction monitoring system was not sufficiently effective, and important risk indicators, such as transactions involving high-risk countries, transactions by non-resident customers and certain unusual transaction patterns, were not monitored or were monitored inadequately. As a result, large amounts that consisted of multiple transactions went undetected because the applicable thresholds were not exceeded. As a result, signals indicating possible money laundering and fraud were not identified or reported, or were identified and reported too late. These findings point to serious deficiencies in both the management of money laundering risks and the execution of customer due diligence measures. DNB considers these shortcomings to be serious. Given the nature, seriousness and scope of the deficiencies, DNB considers the imposition of an administrative fine necessary and appropriate. 

Amount of the fine

The fine imposed for the violation committed by MFBV has been set at €849.600, in accordance with DNB’s General Fine Policy. In determining the amount of the fine, DNB took into account the fact that MFBV had implemented measures to address the findings and prevent a recurrence of the violation. Prior to DNB's investigation, MFBV had taken steps to terminate or restrict its relationships with three of the four partners in question. During the investigation, MFBV indicated that it would tighten

its commercial strategy and adjust its risk appetite. Since then, MFBV has further enhanced its transaction monitoring framework, strengthened its customer risk assessment and screening processes, and reinforced its oversight of both partners and customers. This demonstrates that MFBV takes compliance with the Wwft seriously and has taken concrete steps to remedy the deficiencies. DNB considered MFBV's cooperation and remedial efforts as mitigating factors when determining the amount of the fine. 

Fine with simplified settlement

DNB and MFBV have resolved this fining procedure through a simplified settlement, in accordance with the AFM and DNB policy rule on simplified settlement of fines. This means that MFBV acknowledges the facts underlying the established violation and accepts the fine. Consequently, MFBV will not lodge an objection against the fine. In return, DNB reduced the fine from €849.600 by 15% to €722.160 and issued an abbreviated fining decision. 

The full decision (in Dutch), excluding confidential information, can be found below. For further information, please contact DNB’s Information Desk at telephone number 0800 - 020 1068 (free of charge) or +31 20 524 9111 (if calling from abroad).