Amsterdam-based challenger bank bunq announced on Tuesday that it has won a landmark case against the Dutch Central Bank (DNB). The Dutch neobank had taken the DNB to court over the central bank’s anti-money laundering policies.
The DNB called bunq’s method of screening private customers for the anti-money laundering rules as inadequate since all banking transactions go through its app.
On the other hand, bunq explained how their method, based on artificial intelligence, works and why it minimises money laundering risks.
The Trade and Industry Appeals Tribunal (CBb) ruled in favour of bunq on the appeal. The CBb has ruled that DNB has not proved that the screening method used by bunq is contrary to the law.
“DNB has also not proven that bunq obtained insufficient information from business customers who already had an account when opening the account. DNB has not made clear why bunq has to ask these customers additional questions about the purpose and use of their account. This means that DNB has also failed to prove the violation with regard to transaction monitoring for these customers,” says the judiciary.
However, CBb believes that DNB has proven that bunq has violated other anti-money laundering rules.
“This includes the obligation to investigate the source of a customer’s financial resources. bunq has also violated the rules that, due to the risk of corruption, prescribe that a bank must conduct stricter investigations into customers with an important public function,” says CBb.
The fight against money laundering
There are specific anti-money laundering and terrorist financing laws in the Netherlands that banks are required to follow. These laws oblige banks to screen and monitor their customers for any money laundering or terrorist financing risks.
The Dutch Central Bank (DNB) is responsible for supervising these activities. In 2018, the DNB required bunq to screen its customers in advance using an analysis method that followed a fixed set of rules. However, bunq believed that this mandatory approach was old-fashioned, less effective, and not designed for a digital bank.
The online bank wanted to use a learning system based on Artificial Intelligence, but DNB’s requirements did not allow for this. However, it went beyond a professional disagreement leading to bullying, intimidation, and ignorance, reports Banken.nl.
Ali Niknam, founder and CEO of bunq, says, “We made history today. The court has paved the way for progress.”
“The way in which DNB enforces takes us back in time and locks in the innovation of effective transaction monitoring,” Niknam explained to the commission.
It’s the first time a bank sued a regulator over such a fundamental issue, as banks prefer to settle disputes with DNB behind closed doors.
The Amsterdam-based neobank says it considered the long-term detriment to its users and, on a larger scale, the stability of the banking system as a whole, had it yielded to DNB’s anti-money laundering strategy.
The neobank says DNB itself started changing policies a month before this verdict by publicly releasing a study that advocated a more efficient anti-money laundering methodology.
In its report, DNB pushed for a different approach that uses certain technological innovations, such as machine learning.
bunq: What you need to know
Serial entrepreneur Ali Niknam founded bunq in 2012 after he secured the first European banking permit in over 35 years. He was company’s sole investor until 2021, financing the company with €98.7M of his own money.
In July 2021, the Dutch company raised €193M in a deal with British private equity firm Pollen Street Capital, valuing bunq at approximately €1.6B.
At the same time, the company also reported its first-ever profitable month. The Dutch unicorn also acquired Capitalflow, a Dublin-based company that lends to SMEs across a broad range of sectors in the Irish economy.
In May 2022, the company welcomed 5.4 million new users to its community with the acquisition of Belgian fintech Tricount, which made bunq the EU’s second-largest neobank.
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