Latest Compliance News: Regulatory Developments, Sanctions, Guidance, Permissions, and New Product and Service Offerings

ABC Projektai, CJEU, Lithuania

The Court of Justice of the European Union (CJEU) has ruled that ABC Projektai, an online payments firm based in Lithuania, can regain its banking license, which was previously revoked by the Bank of Lithuania.

Previously known as Bruc Bond UAB, ABC Projektai had its banking license revoked in April 2020 due to allegations of holding customer funds longer than necessary for online transactions.

The Supreme Administrative Court of Lithuania (SACL) accepted the company’s appeal. The ruling recognized ABC Projektai’s compliance efforts and adherence to regulations, according to a statement from the company last week.

Starting 1 July 2024, the fintech firm will be able to operate under a full banking license once again.

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This case highlights the rare instance where a regulatory decision to ban a financial entity is later overturned by a higher legal authority.

“The court, in agreement with the Court of Justice of the European Union (CJEU), found that the primary allegation against ABC Projektai—exceeding the limits of its payment institution license—was unfounded,” the firm stated.

“This complete vindication is a significant relief as it validates our operational practices and unwavering commitment to regulatory compliance,” a spokesperson for ABC Projektai commented.

The court deemed the initial penalty of permanent revocation excessively harsh and disproportionate under the given circumstances. It also confirmed that there was no evidence of intentional wrongdoing by ABC Projektai.

ABC Projektai noted that it received support from other EU member states, including Germany, Poland, and the Czech Republic, as well as the European Commission.

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Source: wealthbriefingasia.com

The post Compliance Corner: Court Reverses Licence Ban On Lithuanian Fintech appeared first on HIPTHER Alerts.

2024: The Summer of Consent Orders for Smaller Banks

The summer of 2024 is seeing a surge in consent orders for smaller banks. On June 28, Tennessee-based Thread Bancorp became the latest financial institution to come under the Federal Deposit Insurance Corporation’s (FDIC) scrutiny. This highlights the growing importance of managing operational, compliance, and strategic risks associated with third-party partnerships for banks and their FinTech collaborators.

Typically, the FDIC announces enforcement actions on the last Friday of each month. The recent order for Thread, a popular partner bank for numerous FinTechs, is notable for explicitly addressing the bank’s Banking-as-a-Service (BaaS) and Loan-as-a-Service (LaaS) programs.

Dated May 21, the order mandates Thread Bank to implement several corrective measures without admitting or denying any unsafe or unsound banking practices. These measures include establishing a comprehensive third-party risk management program and enhancing due diligence, monitoring, and exit planning for Thread’s FinTech partners. This requirement underscores the regulator’s increasing focus on banks’ relationships with technology firms.

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“Within 120 days of the effective date of this ORDER, the Bank’s BaaS and LaaS program policies and procedures must be thoroughly documented, covering, at a minimum, third-party partner and customer approval requirements, due diligence processes, growth and stress modeling, ongoing AML/CFT compliance monitoring, and steps to unwind third-party business lines, including FinTech partners,” the FDIC stated.

Thread’s FinTech and BaaS partners include Unit, which provides services for Relay, Toolbox, Sequin, Currence, Arpari, and several other platforms.

“When vetting potential fintech clients, both Thread and Unit prioritize maintaining a strong focus on compliance and oversight,” Unit wrote in a 2023 blog post.

“We remain steadfastly committed to collaborating with regulators at the state and federal levels because we believe the regulatory framework is necessary and can help create a strong banking system for consumers and small businesses,” Chris Black, CEO of Thread Bancorp, Inc. and Thread Bank, said in a statement to PYMNTS.

Black added, “We are dedicated to meeting all obligations and have made substantial investments to improve our policies, processes, procedures, and controls over the past three years in collaboration with the FDIC and the Tennessee Department of Financial Institutions (TDFI). We will continue to invest in our teams and services to ensure we meet the needs of, and provide strong protection for, our customers and partners as we move forward.”

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FinTech Risk in Financial Supply Chains

Navigating the complex web of financial regulations is a daunting task, especially for FinTech startups with limited resources. Partnering with established banks allows FinTech companies to leverage their partners’ robust regulatory frameworks, reducing the compliance burden.

The BaaS model aimed to create a shared compliance environment where FinTechs could operate within regulatory bounds while focusing on innovation and growth. However, the reality has been more challenging.

A year ago, on June 6, 2023, the FDIC, the Board of Governors of the Federal Reserve System (FRB), and the Office of the Comptroller of the Currency (OCC) issued final guidance on managing risks associated with third-party relationships.

Since then, the collapse of Synapse’s bankruptcy has tested the interconnected BaaS and FinTech landscape. Adding to the turmoil, Synapse’s primary banking partner, Evolve, suffered a significant cyberattack on June 26, putting its risk controls under scrutiny.

“The regulators are now awake,” Thredd CEO Jim McCarthy told PYMNTS. “Too many people focus on the ‘as a service’ part but neglect the banking part. If you fail at banking, the service piece doesn’t matter.”

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The Middle Falls out of Middleware

A PYMNTS Intelligence report found that 65% of banks and credit unions have formed at least one FinTech partnership in the past three years, with 76% viewing these partnerships as essential to meeting customer expectations. Additionally, 95% of banks aim to use partnerships to enhance their digital product offerings.

Thread Bancorp, previously known as Civis, has a history of regulatory actions. Its recent FinTech partnerships have driven rapid growth, from less than $100 million to over $720 million between the end of 2020 and Q1 2024, according to FDIC call reports.

“With complex ecosystems, you have more partners than ever before,” Larson McNeil, co-head of marketplaces and digital ecosystems at J.P. Morgan Payments, told PYMNTS. This creates new challenges for managing partners and counterparty risk.

The Thread Bank case may indicate how regulators approach the intersection of traditional banking and financial technology. As the financial landscape evolves, the key to leveraging the BaaS model lies in fostering strong, transparent, and mutually beneficial relationships between banks and FinTech firms. By doing so, they can collectively drive the future of banking toward greater inclusivity, efficiency, and innovation.

Source: pymnts.com

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The post Thread Bank Responds to FDIC Enforcement Action appeared first on HIPTHER Alerts.

HONG KONG, July 3, 2024 /PRNewswire/ — Cross-Chain Tokens (ccTokens) has partnered with the Nervos CKB Eco Fund to launch ccBTC on the CKB main network, enhancing Bitcoin liquidity within the CKB ecosystem. Backed by a 1:1 Bitcoin reserve, ccBTC is managed by Cactus Custody, a subsidiary of Matrixport. Cactus Custody is a licensed trust company in Hong Kong that adheres to strict anti-money laundering and regulatory standards while providing digital custody solutions.

Meson Finance, the official cross-chain bridge for the CKB Eco Fund, will enable seamless cross-chain circulation of ccBTC across major blockchains and BTC Layer2 networks. Meson Finance, a leading provider of cross-chain services, supports all major public chains and Layer2 networks and offers users access to assets like BTC, ETH, and stablecoins.

ccBTC leverages the advanced capabilities of Nervos CKB and RGB++ protocols to ensure secure BTC transfers within the Bitcoin ecosystem. This integration will empower decentralised applications (DApps) to utilise Bitcoin assets, including decentralised exchanges (DEX), lending platforms, algorithmic stablecoins, derivatives markets, the Lightning Network, the Nostr social protocol, and other large-scale use cases.

ccBTC is the first compliant and managed token issued on a UTXO platform outside the BTC main network. Users can publicly verify reserved addresses, balances, and transaction records in real time via the ccTokens website. To ensure transparency and reliability, the project employs a multi-party confirmation mechanism for minting, burning, and on-chain verification. The ccTokens governance model emphasises checks and balances through a multi-agency framework, role and rights segregation, and decentralisation to mitigate potential misconduct. Additionally, a blacklist mechanism supports ongoing governance and compliance.

This strategic collaboration aims to strengthen the CKB and RGB++ protocols and introduce securely managed Wrapped BTC assets to the broader Bitcoin ecosystem, revitalising dormant BTC assets.

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About Nervos CKB

Nervos CKB is a pioneering BTC Layer 2 solution using the Cell model and PoW consensus mechanism to address blockchain scalability challenges. Its modular architecture separates transaction execution, consensus, and data availability.

About Meson Finance

Meson Finance is a decentralised cross-chain bridge leveraging Atomic Swap technology for seamless transfers of BTC, ETH, and stablecoins across over 50 public chains and Layer 2 networks. It offers efficient and cost-effective cross-chain services.

About Cactus Custody

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Cactus Custody, a subsidiary of Matrixport, is a Hong Kong-based trust company dedicated to anti-money laundering and regulatory compliance. It provides efficient digital custody solutions. It leads in institutional-grade digital asset custody, supporting over 300 high-profile clients, including miners, exchanges, and funds.

About Cross-Chain Tokens (ccTokens)

Cross-Chain Tokens (ccTokens) are pegged tokens, each backed 1:1 by blockchain assets like BTC. These tokens enable seamless integration of various cryptocurrencies into the decentralised finance (DeFi) ecosystem. All ccTokens are fully supported and protected by qualified third-party custodians or validators.

Disclaimer
The content of this webpage is not investment advice and does not constitute an offer, solicitation to offer, or recommendation of any investment product. It is for general purposes only and does not consider your needs, investment objectives, or specific financial circumstances. Investment involves risk.

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View original content:https://www.prnewswire.co.uk/news-releases/groundbreaking-partnership-cross-chain-tokens-ckb-eco-fund-and-meson-finance-launch-ccbtc-with-11-bitcoin-reserves-on-ckb-main-network-302187856.html

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