As reported by the Guardian, NatWest BoardMember Morten Friis, who is head of the Risk Committee, explained during a shareholder event:
“We have no appetite for dealing with customers, whether taking them on as new clients or having an ongoing relationship with people, whose main business is backed by an exchange for cryptocurrencies, or otherwise transacting in cryptocurrencies as their main activity. We think of cryptocurrencies as high risk and we’re taking, for that reason, a cautious approach to this. It’s an area where regulation is very much in evolution and we’ll obviously respond to that as things change.”
Of course, a statement like this appears to be bucking a global clear trend where a growing number of big banks are seeking out crypto businesses and looking for ways to support both firms and consumers interested in holding or using crypto. Blocking crypto firms may also stymie Fintech innovation in the UK.
NatWest’s timid approach to crypto may be due, in part, to last month’s news that the UK Financial Conduct Authority had launched criminal proceedings against NatWest due to allegations of shortcomings in anti-money laundering issues.
In a recent corporate statement, NatWest commented on the FCA action:
“Last month, we also received the disappointing news that the Financial Conduct Authority has launched criminal proceedings against the bank for alleged failures to comply with Anti-money laundering regulations. We take these matters extremely seriously and the bank has co-operated fully throughout the FCA’s investigation. As set out in their statement, the case arises from the handling of funds deposited into accounts operated by a UK incorporated customer of NatWest. An adjournment of the initial hearing was agreed by the court at the request of both parties to allow for a detailed consideration of the case by NatWest in an appropriate timeframe. The initial hearing is now set to take place on May 26. Detecting and preventing financial crime to protect people, families and businesses is a key priority for the Group. Today, we have over 4,000 colleagues dedicated to that task. And, over the past three years alone, the bank has invested almost £500m in anti-money laundering systems and controls. But we cannot tackle financial crime in isolation. We work with other organisations, including industry bodies, law enforcement agencies, regulators and governments to help find solutions to this shared problem and to improve our own approach.”
While the FCA allegations are not said to be affiliated with crypto, NatWest may be a bit gun-shy right now. The FCA has recently made statements cautioning consumers on crypto worrying that individuals may lose money. In mid-2020, the FCA banned crypto-derivatives for retail investors.
In a speech last month by Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, he noted that the regulator is the AML supervisor of crypto firms as of January 2021. He highlighted the fact that crypto firms that operate in the UK must be registered with the FCA and compliant with AML rules.
“We have now developed a version of the Warning List, called the Unregistered Cryptocurrency Businesses List, to help consumers and FCA authorised firms identify cryptocurrency firms that appear to be carrying on business in the UK but are not registered with the FCA or sought such registration. We placed the first names on the Unregistered Cryptocurrency Businesses List earlier this month, all crypto ATM firms, and we have just added 29 crypto custodian wallet providers to the list. Without commenting on what other steps may be taken to enforce the new obligations, appearing on the list should be a warning for FCA authorised firms, including any banks who may be providing banking services to these firms, as well as consumers. We would like to see the Unregistered Cryptocurrency Businesses List used in the same way as the Warning List, to safeguard consumers, as well as to ensure any transactions or transfers of funds by or to such firms are properly scrutinised and, where applicable, the subject of suspicious activity reports or other reports to the NCA and the FCA.”
Steward’s warning directed at banks that do business with certain crypto firms may have made operational risk a bit too high for NatWest. Perhaps, over time, NatWest’s strategy will change or, maybe, this will be an opportunity for other financial services firms that are more comfortable with crypto.