DNB Fines Modulr Finance €722,160 for AML Monitoring Failures

De Nederlandsche Bank (DNB) has imposed an administrative fine of €722,160 on electronic money institution Modulr Finance B.V. for serious deficiencies in its ongoing monitoring of customers and transactions.

The fine relates to the period from January 1, 2023, to July 16, 2024. DNB identified shortcomings through its review of 10 customer files and concluded that Modulr had failed to adequately monitor customer relationships and transaction activity over a prolonged period.

DNB found that Modulr relied heavily on intermediary partners, including crypto-asset service providers, to conduct ongoing monitoring. As a result, the institution had insufficient visibility over its own customers and their activities.

The supervisory authority identified instances in which very large amounts were received without sufficient information about the origin of the funds. Despite indicators of elevated risk, Modulr conducted limited or no further investigation into some of the transactions.

DNB also found that Modulr's transaction monitoring system was not sufficiently effective. Certain risk indicators, including transactions involving high-risk countries, transactions by non-residents and specific unusual transaction patterns, were not monitored adequately.

In some cases, large amounts consisting of multiple transactions were not detected because individual transactions remained below the applicable monitoring thresholds. DNB said this resulted in indicators of potential money laundering and fraud either not being identified or being identified and reported late.

The deficiencies were considered by DNB to constitute serious shortcomings in both the management of money laundering risks and the execution of customer due diligence obligations under the Dutch Anti-Money Laundering and Anti-Terrorist Financing Act.

The original fine was set at €849,600. DNB reduced the amount by 15% to €722,160 after taking into account Modulr's cooperation and remedial measures.

Before DNB began its investigation, Modulr had taken steps to terminate or restrict its relationships with three of the four partners identified in the enforcement case. During the investigation, the company also indicated that it would tighten its commercial strategy and adjust its risk appetite.

DNB said Modulr subsequently strengthened its transaction monitoring framework, customer risk assessment and screening processes, as well as its oversight of partners and customers.

The enforcement procedure was concluded through a simplified settlement. Under the arrangement, Modulr acknowledged the facts underlying the violation and accepted the fine without lodging an objection. In return, DNB applied the 15% reduction and issued an abbreviated decision.

DNB said electronic money institutions have a gatekeeper role in the financial system and are required to continuously monitor customers and their transactions, identify unusual activity and report it to the Financial Intelligence Unit of the Netherlands without delay.

By fLEXI tEAM