NEWS: Luxembourg fines Japanese lender Rakuten Bank for AML failings

By PAUL O’DONOGHUE, Senior Correspondent

THE Luxembourg financial regulator has fined Japanese-owned Rakuten Europe Bank €185,000 for breaches of AML rules.

The CSSF (Commission de Surveillance du Secteur Financier) said the bank showed long-standing weaknesses in its controls.

It imposed the fine on 19 May last year, and has now made the decision public. The regulator said the penalty equals about 1% of the Rakuten Europe Bank’s annual turnover at the end of 2022.

The sanction followed an on-site AML inspection carried out between February and November 2023. The review examined corrective actions taken after shortcomings identified by “another European national competent authority”, the CSSF said.

Inspectors found several deficiencies. Thes included:

• Rakuten Europe Bank failed to operate an adequate transaction monitoring system.
• Monitoring scenarios were outdated and did not cover all transactions.
• The system could no longer be properly configured after staff left key IT and compliance roles.
• The bank was using a version of the monitoring tool that its supplier no longer supported.

Luxembourg watchdog flags issues at Rakuten

The CSSF said a different European supervisory authority had already flagged similar issues in 2019 and 2020. However, the bank had still not fully implemented corrective measures four years later. The regulator cited delays in replacing the monitoring system. It also said interim compensatory controls were insufficient.

The inspection also identified significant backlogs in alert handling.

The bank filed several suspicious activity reports with Luxembourg’s Financial Intelligence Unit weeks later than required. This occurred despite the identification of potential money laundering or terrorist financing indicators in dozens of cases. In one case involving a customer previously subject to terrorism-related asset freezes in France, the bank failed to file a report at all, the CSSF said.

The regulator also found weaknesses in simplified due diligence measures. Customer risk assessments were deficient, including failures to properly consider the country of residence of beneficial owners.

The CSSF noted that Rakuten Europe Bank had acknowledged the shortcomings. It lso said the bank submitted an action plan and began implementing remedial measures during and after the inspection.

A Rakuten spokesperson said: “While our ongoing efforts reflect a strong determination to achieve full compliance with legal requirements, it has become evident that our measures had not yet met these standards at the time of the CSSF’s investigation.

“Consequently, we fully accept and understand the sanctions imposed by the CSSF, and we are diligently working to implement and thoroughly verify all necessary measures.”