Red flags raised by a third of electronic money institutions says report
Researchers have warned that one in three UK electronic money institutions (EMIs) raise money laundering red flags.
The fast growing e-money sector has become a hotbed for illicit activity according to new research from UK Transparency International which called for greater oversight of the sector by regulators.
EMIs are licensed by the UK’s FCA and fulfil many of the same functions of a bank, such as offering bank accounts, money transfers and payment cards, but they do not hold a banking license and are not covered by the Financial Services Compensation Scheme.
The report found that between 2019 and 2020 over 19,000 reports to UK law enforcement relating to suspected criminal funds came from the e-money sector while 100 of Britain’s 261 registered EMIs raised money laundering concerns.
“While most EMIs will be legitimate payment providers, there is a growing body of evidence that suggests they are open to abuse by those seeking to launder corrupt and other illicit funds through the global economy,” the report warned.
“There is a cottage industry of professionals who specialise in helping clients obtain EMI licences, which could make it easier for those with pasts to hide and obtain authorisation from the FCA,” the report further warned, noting that the companies are so easy to set up in the UK that British e-money businesses are being advertised for sale on LinkedIn for between £600,000 and £1.5m.
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