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Santander UK fined £107.8 million for shortcomings in its AML systems – Industry update: 9 December

Santander UK fined £107.8 million for shortcomings in its AML systems

The Financial Conduct Authority (FCA) has fined Santander UK, the British subsidiary of Spanish bank Santander, with £107.8 million (US $132 million) after discovering that business banking clients were negatively impacted by poorly enforced anti-money laundering controls. The bank's oversight and management of these systems were reportedly inadequate and cited as "serious and persistent gaps" by the FCA. The gaps reportedly compromised more than 560,000 business clients.

The FCA claimed that Santander's verification procedures for clients’ businesses were ineffective, resulting in more than £298 million passed through the bank before it closed accounts. Furthermore, Mark Steward, Executive Director of Enforcement and Market Oversight, FCA, commented that Santander's inadequate controls of their AML systems and ineffective attempts to address the problems created a protracted and serious risk of money laundering and financial crime.

Mike Regnier, CEO, Santander UK, reportedly apologized for the AML-related issues in their business banking division identified by the FCA during 2012 and 2017, stating that the AML framework should have been stronger at that time. The bank now claims to have significantly improved their technology, systems and procedures for combating financial crime since then.

Deutsche Bank and NVIDIA collaborate to integrate artificial intelligence into financial services

Deutsche Bank has partnered in a multi-year alliance with NVIDIA, a US-based multinational technology company, to expedite the use of artificial intelligence (AI) and machine learning (ML) in the financial services sector, including regulatory-compliant AI-powered services. The collaboration is intended to assist Deutsche Bank in its transition to the cloud, using AI and ML to streamline cloud migration decision making.

Both companies reportedly tested several potential use cases during months of experimental research, with particular emphasis on three areas: the development of risk models, high-performance computing and the creation of branded virtual avatars. Investment traders can expect to manage risk efficiently as well as operate more scenarios quickly and in large quantities with the accelerated computing solution.

Deutsche Bank intends to use NVIDIA AI Enterprise’s software and NVIDIA AI workflows. The bank also plans to collaborate with NVIDIA Omniverse Enterprise, an open computing platform for developing and operating applications in the metaverse, as well as AI models and services to create and tailor humanlike virtual assistants and “digital humans”.

Reports indicate that the bank has created an early prototype of a 3D virtual avatar using NVIDIA Omniverse to assist employees in navigating internal systems and responding to HR-related queries. Plans to investigate interactive client experiences in banking is reportedly in the bank’s timeline for the future.

The bank also aims to support the testing and development of AI and ML services, as well as the development of professional skills by increasing the scope of an internal “AI Center of Excellence” to further advance the understanding of model predictions in applications related to the financial services industry.

Corporate cybersecurity budgets expected to rise by only 11% on average, per the S-RM Report

The Global Intelligence and Cybersecurity Consultancy, S-RM, released data from the 2022 Cyber Security Insights Report, noting that corporate budgets for cybersecurity are expected to rise by an average of just 11% over the next 24 to 36 months. Due to the high rate of inflation, organizations in the UK can expect to face reductions in their cybersecurity budgets through 2025, with 13% of UK respondents anticipating budget cuts over the next three years. The report also indicates that companies have spent over a quarter (26%) of their annual IT budgets on cybersecurity on average. In addition, the data pointed out an average growth of 5% year over year in cybersecurity budget compared to 2021’s research data.

Heyrick Bond-Gunning, CEO, S-RM, commented that investing in cybersecurity is critical despite market instabilities in order to protect companies and encourage business expansions. The research revealing that budgets are only expected to slightly rise in the upcoming years is triggering concerns as cyber threats grow, insurance coverage decreases, and compliance issues develop further. Cyberattack defence must be proactive on the part of administrators in order to reduce future costs and damage, said reports.

Additionally, the study discovered that smaller businesses are more likely to allocate 40–60% of their IT budgets to cybersecurity. Currently, 20% of businesses with annual revenues of US $500 million to $1 billion apportion this amount of their IT budget to cybersecurity, compared to only 10% of businesses with annual revenues between $1 billion and $5 billion.

In both the UK (25%) and the US (26%), organizations reportedly allocate a relatively similar amount of their IT budgets to cybersecurity. The average budget increase for cybersecurity over the next two to three years, per the report, varies somewhat across the two markets, with the UK expected to increase by 8%, and the US by 14%.

Fifth Third Bank broadens its supply chain finance solutions for corporate clients in collaboration with PrimeRevenue

Fifth Third Bank has partnered with PrimeRevenue, a global working capital and B2B payment solutions provider, to strengthen the bank’s working capital and trade payables solutions, enabling businesses to access unused liquidity as well as assisting enterprises and mid-market customers with the ability to navigate supply chain challenges during economic uncertainties.

The collaboration is expected to help businesses unlock capital and cash flow that empowers steady expansion, scalability and advancement, particularly during times of uncertainty and volatility, according to Natalie O'Donnell, Senior Vice President, Global Head of Marketing, PrimeRevenue. Additionally, businesses can utilize an alternative to debt such as supply chain financing in efforts to improve and minimize risk.

RBI grants PayMate India Ltd. preliminary approval to operate as a payment aggregator in India

The Reserve Bank of India (RBI) has granted preliminary approval to PayMate India Limited, a B2B payments and services provider, to operate as a payment aggregator in India subject to the RBI guidelines.

PayMate India Ltd, as a payment aggregator, will reportedly assist merchants and businesses in sending and receiving payments and then transferring them to the recipients within a window of time outlined in the RBI Guidelines. A number of requirements for onboarding merchants, including minimum net worth requirements, adherence to KYC requirements, and data storage requirements through tokenization are outlined in the guidelines. All of these parameters are reportedly included in the PayMate platform.

As part of a larger geographic expansion strategy into other regions of Central Europe, the Middle East, Africa, South Asia and the Asia Pacific, PayMate recently launched its entry into Singapore and Sri Lanka. In addition, PayMate has reportedly become a Visa-certified business payment solution provider, further establishing its partnership with Visa in India.

Bank of Montreal partners with Mastercard and Extend to enhance its corporate card platform

Bank of Montreal (BMO), a Canadian-based multinational investment bank and financial services company, and Extend, a US-based virtual card and spend management platform, have partnered to add a variety of payment functionality to BMO's Corporate Cards. Additionally, BMO commercial bank clients in North America can reportedly now use an Extend mobile and desktop app due to the collaboration with Mastercard. Clients can expect to use the app to create, send and manage virtual cards.

BMO is reportedly the first company in Canada to collaborate with Extend, enabling its clients to implement secure virtual cards from their existing corporate card program within minutes. The Extend API also reportedly provides immediate transaction matching, stringent security measures and high-volume transaction support, enabling businesses to optimize their core business functions.

Google Pay receives payment institution status from the central bank of Brazil

Brazil, one of Latin America’s largest economies, has reportedly granted Alphabet's Google Pay permission to operate as a payment institution, enabling the firm to initiate payment transactions in the country. The central bank of Brazil stated that payment initiators are expected to carry out a transaction that has been authorized by the final user. However, they will not manage the payment account or hold the associated funds. A Google spokesperson commented that the move is aimed at providing additional payment options to users through their platforms in Brazil. Days prior, Brazil's National Monetary Council had also granted fintechs permission to begin payment transactions in the country.

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