TI: Nearly Half of UK’s E-Money Firms Red Flagged for Money Laundering Risk

Published: 14 December 2021

E PaymentWithout stronger oversight, Electronic Money Institutions (EMI) may become a preferred channel for those trying to launder the proceeds of crime and corruption. (Photo: rupixen, Pixabay, License)

By Zdravko Ljubas

Nearly 40% of the e-payment sector in the United Kingdom, which made more than £500 billion (US$660.2 billion) worth of transactions in 2020/21, have been flagged red — a warning of money laundering risk, a Transparency International UK research published on Tuesday found.

While most e-payment enterprises appear to respect the regulations, the paper warns that without stronger oversight, Electronic Money Institutions (EMI) will become a preferred channel for those trying to launder the proceeds of crime and corruption through Britain — “if they are not already.”

Transparency International UK examined all 261 enterprises in the country that had been granted operating permission by the Financial Conduct Authority (FCA) to operate as an EMI.

The research indicated a risk, “rather than a suggestion of actual wrongdoing by the various… owners, directors or senior members,” of the U.K.-based Electronic Money Institutions (EMI).

“We found 100 EMIs (38%) with potential money laundering red flags including: being named as having poor anti-money laundering controls or processing criminal wealth; having owners, directors or senior members of staff named in money laundering investigations; or owners, directors or senior members of staff having worked previously for institutions alleged or proven to have anti-money laundering failings,” read the report.

These include an EMI run by a man implicated in wrongdoing at the infamous FBME Bank, which was barred from trading in dollars by the U.S. in 2015 following a series of money-laundering investigations, “and another run by the CEO of a cryptocurrency exchange named in the Mueller report as being used by Russian intelligence operatives.”

Transparency International also warned of a worrying trend of EMI licences and accounts being sold to buyers all over the world, including the U.K., EMIs marketing their services specifically to 'high-risk' customers in the Commonwealth of Independent States region, which further reflects aspects of OCCRP-exposed “Laundromat” money laundering schemes, as well as “companies with complex and opaque ownership structures.”

That includes “40 Russian and Ukrainian language corporate services websites offering ready made ‘secrecy packages’ comprised of British EMI accounts and offshore companies for clients who want to hide their identities, and licenced U.K. EMIs advertised for sale on Linkedin and corporate service websites, with prices ranging from £600,000 ($792,844) to £1.5 million ($1.9million).”

Ben Cowdock, Investigations Lead at Transparency International UK, emphasized that the lack of effective controls on the directors and owners of EMIs has resulted in some dubious choices to award licenses to organizations with these persons at the head.

He warned that the government and the Financial Conduct Authority — responsible for overseeing the regulations governing how EMIs must operate in the U.K. — “need to act quickly to avoid a major scandal hitting this sector.”