Banks accused of denying services to forex competitor Wise

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Wise has also approached each of Australia’s Big Four banks on several occasions since entering Australia in 2015 to open accounts. But none of the big banks agreed to provide services, with most conversations never getting past an early stage.

Wise has been told time and again that the reason it won’t be banked by the big banks is due to general concerns about “compliance.” It is understood that Macquarie does not have a general policy against bank remittances and decisions are made on a case-by-case basis.

Tristan Dakin, Australian CEO of Wise: “The Council of Financial Regulators is an appropriate forum for developing policy responses to what is an anti-competitive practice. Provided

The rejections forced Wise to approach an international bank operating in Australia.

In addition, APRA granted Wise a restricted banking license last November, which will allow it to connect directly to the real-time payment system and clear and settle its own payments without the need for a local bank.

In the government’s payments reform program unveiled on December 8, Treasurer Josh Frydenberg asked the Board of Financial Regulators to report to the Treasury on the underlying causes and policy responses to the bank cut.

Mr. Frydenberg requested that the council’s opinion be delivered by the middle of the year.

“Wise welcomes the government’s investigation into the withdrawal of banking services, which is a major obstacle to innovation and better outcomes for customers,” said Mr. Dakin.

“We believe that the Board of Financial Regulators is an appropriate forum to investigate and develop policy responses to what is an anti-competitive practice, and we look forward to the publication of the terms of reference by the treasurer.”

In a December 16 statement, the Board of Financial Regulators said it has established a task force on debanking in the fintech, remittances and crypto-assets sectors. The group includes APRA, ASIC, RBA, Treasury, ACCC, AUSTRAC and the Home Office.

The Australian Competition and Consumer Commission investigated the issue in 2019, but found no breaches of competition laws. The ACCC said it was difficult to distinguish between accounts that had been closed for legitimate anti-money laundering (AML) and terrorist financing (CTF) reasons and those closed for legitimate anti-money laundering (AML) and terrorist financing (CTF) reasons. anti-competitive.

The ACCC has proposed a due diligence program for international money transfer activities to resolve bank issues, which the CFR will consider in its investigation.

To justify debanking decisions, banks cite not only AML and CTF concerns, but also demands placed on them by “correspondent banks” receiving funds from Australia, reputational risk and business considerations. Notably, the fact that banking some fintechs may not be profitable given the uncertainty about the traction of new business models.

Act “like a cartel”

But AUSTRAC said in a statement on Oct. 29 that AML / CFT requirements should not be used to justify blanket bans on refusing to bank entire sectors, and that the banks’ approach could actually increase the risks of banking. money laundering and terrorism.

“The effect of removing legitimate and lawful financial services companies from banking may increase the risks of money laundering and terrorist financing and negatively impact the Australian economy. For this reason, AUSTRAC continues to discourage the indiscriminate and widespread closure of accounts across all financial services industries, ”the financial crime regulator said.

Wise isn’t the only one who complained to last year’s Senate Special Committee on Australia as a technology and financial center for debanking practices: the crypto exchange Swyftx, the provider of payment services Nium and industry group FinTech Australia said the practice was widespread.

Senator Andrew Bragg, who chaired the committee that recommended the government look into the matter, told an AusPayNet event in December that the debanking allegations suggested the big banks were acting “like a cartel.”

“They sought to make sure that the big margins on things like international remittances and money transfers were protected,” he said. “People have been de-banked and businesses have been de-banked, for very sweet reasons.”

Mr Dakin said that restricted market access to banking competitors is a market failure because it “increases the risk of AML / CTF by pushing consumers towards alternative banking services and, in the case of remittances in particular , the Hawala and the movements of physical species “.

AUSTRAC said it understands banks’ concerns that new and emerging financial services companies, including money transfers, facilitating overseas transactions and new payment models, risk being exploited by criminals. . But it also recognizes the valuable services provided to communities in Australia and abroad.

“These companies vulnerable to exploitation should not automatically close their accounts just to avoid managing risk,” AUSTRAC said in its October statement on shutting down banks.

He called on companies in the sector to improve risk management and ensure they have appropriate systems to help them identify, monitor and disrupt criminal exploitation of the financial sector, which would both strengthen their businesses. and would show a culture of compliance to the banks they seek to partner with.

“While the decision to close an account may remain a necessary risk control, AUSTRAC believes that with appropriate systems and processes in place, banks should be able to manage high-risk customers, including those who operate money transfer services, digital currency exchanges, for-profit organizations and financial technology companies.

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