The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM), an influential free zone financial center in the United Arab Emirates, has fined Wise Nuqud, the local subsidiary of the London-based fintech company Wise (formerly TransferWise), a penalty of $360,000 for breaches in anti-money laundering (AML) regulations. This enforcement underlines the regulator’s commitment to maintaining robust AML controls within its jurisdiction and sends a clear compliance message to international financial service entities operating in the region.
Background of the Fine and Regulatory Findings
The FSRA found that Wise Nuqud did not establish or maintain adequate AML systems and controls necessary to fully comply with the regulator’s AML requirements. Specifically, the regulator identified several deficiencies: the failure to appropriately identify and verify the sources of funds for customers flagged as high risk; neglecting to consider customer nationality as part of their risk-based customer evaluation process; and insufficient senior management approval processes for establishing business relationships with high-risk clients. Despite these gaps, the FSRA’s investigation did not uncover any actual instances of money laundering or financial misconduct linked to these failings.
The fine was originally set at $450,000 but was discounted by 20% because Wise did not contest the regulator’s findings and chose to settle promptly, bringing the total penalty to $360,000. This timely cooperation granted Wise a reduction in the penalty, a standard regulatory practice encouraging firms to acknowledge and promptly remediate compliance issues.
Wise’s Response and Commitment to Compliance
Wise has publicly acknowledged the fine and emphasized the seriousness with which it treats its AML obligations. In a statement responding to the penalty, the company reiterated its commitment to safeguarding its customers and preventing money laundering. Wise also noted that neither the FSRA nor the company had discovered any evidence of actual money laundering or financial impropriety related to the identified AML control lapses.
Wise further committed to continuing its investment in enhancing and maintaining AML systems and controls to meet the “highest standards” globally, highlighting collaboration with regulators worldwide as part of this effort to ensure compliance and prevent financial crimes.
FSRA’s Position on AML Enforcement
The FSRA, as the Abu Dhabi Global Market’s financial supervisory authority, has stressed its dedication to ensuring that all regulated entities uphold stringent standards to mitigate money laundering risks. The regulator’s action against Wise reflects its proactive stance on safeguarding the integrity of its financial ecosystem. The FSRA acknowledged that Wise had made significant strides in addressing the identified compliance gaps, including conducting gap analyses on its AML policies, systems, and controls to align with Federal AML standards under the regulator’s remit.
Context in Financial Regulatory Landscape
The fine against Wise Nuqud fits into a broader global narrative of increasing regulatory scrutiny over AML compliance, especially within fintech companies operating cross-border payment platforms. Regulators worldwide are intensifying enforcement measures to close AML loopholes, requiring firms to implement rigorous controls around customer due diligence, transaction monitoring, and risk-based assessments.
This enforcement follows a pattern where financial authorities globally are imposing substantial fines for AML shortcomings, emphasizing that even when no actual money laundering is detected, failure to maintain adequate systems is taken seriously. For example, recent penalties in other jurisdictions have included substantial fines on institutions with control deficiencies that could potentially facilitate illicit financial flows.
Wise’s Business Growth Amid Regulatory Challenges
Despite the regulatory fine and compliance review, Wise continues to show strong business performance. As of the latest reporting period ending September 30, 2022, Wise supported 5.5 million active customers, marking a 40% increase year-over-year. The company moved over £51 billion for customers globally over the first half of the fiscal year 2023—a 49% increase compared to the previous year—which contributed to a 55% rise in revenues to £397 million. Their adjusted EBITDA increased by 52% to £92 million, representing a healthy margin of 22%. Profit before tax saw a significant rise of 173% to £51.3 million in the same period.
This resilience highlights that Wise’s operational growth has continued unabated while it focuses on strengthening its compliance infrastructure.
Summary and Implications
The $360,000 fine imposed by the Abu Dhabi FSRA on Wise Nuqud for AML control breaches underscores the intensifying regulatory environment for fintech entities in global financial hubs. It serves as a reminder of the critical importance of adhering to AML obligations and maintaining rigorous risk-based controls around high-risk customers, including understanding their source of funds and nationality.
Wise’s quick cooperation and commitment to rectifying identified deficiencies, alongside its pledge to uphold high AML standards, is a positive step toward ensuring continued compliance within highly regulated markets like Abu Dhabi Global Market.