Introduction:
The United Kingdom’s Treasury has brought to light a regulatory violation by money transfer company Wise Payments, involving an illicit £250 cash withdrawal that contradicted Russia sanctions regulations. This breach came to light as the company allowed a withdrawal for a Wise business customer who had recently been added to the Government’s list of sanctioned individuals in June of the previous year.
Sanction Breach and Oversight:
Wise Payments failed to promptly suspend the debit card of the individual designated under Russia regulations, leading to the release of funds to them. The financial sanctions office of the Treasury confirmed this lapse. The incident raises concerns about the effectiveness of Wise’s systems and controls, particularly concerning its policy for managing debit card payments.
Violation Evaluation and Rationale:
The Office for Financial Sanctions Implementation (Ofsi), part of the UK Government, stated that the breach did not warrant a monetary penalty against Wise. However, OfSi highlighted that Wise’s handling of the situation, including its approach to debit card transactions, was unsatisfactory. This factor contributed to the overall moderate severity of the case, allowing funds to reach a company controlled by the sanctioned individual.
Timeline of Events:
The investigation revealed that the debit card remained active for more than four days after the individual’s sanctions were imposed. It was only after this duration that Wise took action to block the debit card.
Wise’s Response:
A spokesperson for Wise emphasized the company’s commitment to adhering to all sanctions laws. The company promptly suspended its services to Russia upon the enactment of sanctions linked to the Ukraine conflict. Wise voluntarily reported the ATM withdrawal breach to OfSi, immediately reviewed its internal processes, and implemented necessary changes to prevent such transactions in the future.
Additional Measures Taken:
The £250 cash withdrawal in question occurred on the same day the individual’s sanctions were imposed while Wise was already in the process of suspending their business account. To mitigate such occurrences, Wise closed all accounts with registered addresses in Russia from May of the previous year.
Regulatory Landscape and Precedents:
While this breach involved a relatively low monetary value, it raises questions about the adequacy of Wise’s systems and controls. Other companies have faced more substantial fines from OfSi for violating Russia regulations. Notably, in February 2020, banking giant Standard Chartered was fined over £20 million for granting significant loans to Denizbank, which was then largely owned by Russia’s Sberbank.
Conclusion:
The breach involving Wise Payments highlights the need for robust systems and controls, particularly in the context of sanctions and financial regulations. Despite the relatively minor financial impact of this particular breach, it underscores the importance of stringent oversight to prevent funds from reaching entities linked to sanctioned individuals and entities.
