Dutch Central Bank Loses AML Case to Neobank Bunq

The Dutch Central Bank (DNB) has lost a case filed by the Amsterdam-based neobank, Bunq, challenging its anti-money laundering (AML) strategy.

Bunq announced on Tuesday that it won the case that questioned DNB's insistence on adopting a method that depended on one-sided reports from account holders.

The challenger bank believes that this system rests “squarely on the honesty of fraudsters" and is “antiquated and ineffective.”

The bank noted that it has been advocating for the use of modern technology, such as artificial intelligence and machine learning to effectively fight money laundering.

The European digital bank said it charged DNB and brought it to court earlier in the year over the issue.

“It’s the first time a bank sued a regulator over such a fundamental issue, as banks prefer to settle disputes with DNB behind closed doors,” Bunq said.

We’re proud and happy to announce that the Dutch court ruled in favor of using modern technology to fight money laundering. Check out our CEO and Founder Ali Niknam’s post here for more: https://t.co/8tkmovRayW pic.twitter.com/LUDZ4kwDg0

— bunq (@bunq) October 18, 2022

The mobile bank explained that it decided to sue because of the long-term danger of the AML policy to its users and the stability of the country’s banking system.

Ali Niknam, the Founder and CEO of Bunq, said the company made history today (Tuesday), adding that the court judgment “has paved the way for progress.”

Meanwhile, Bunq said that DNB about a month ago released a study calling for a technology-based approach to AML efforts.

Manual AML Process

The use of spreadsheets and other manual processes to meet financial crime control obligations is a major problem among banks, neobanks inclusive.

The UK Financial Conduct Authority (FCA) recently disclosed that it found the assessment of financial crime risks among many banks to be insufficient.

This gap, in addition to the failure to gather adequate know-your-customer (KYC) data and to enshrine customer due diligence, especially among high-risk customers, is a great distress to AML efforts, FCA said.

The cost of onboarding new technology to automate the process is one source of concern.

However, to address the issue, some banks have turned to regulatory technology (regtech) solution providers to meet their compliance obligations.

In May, Brand New Day, a Dutch neobank, onboarded the services of Sentinels, a regtech firm that deploys artificial intelligence for transaction monitoring, to scale its AML control mechanism.

Finance Magnates reports that the integration will help Brand New Day to save its resources by depending on Sentinels’ automated development of client risk profiles.