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Payments Company with Ties to Russia Involved in 20% Suspicious Transactions

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UK Payments Firm with Russian Ties Involved in Suspicious Transactions

Dzing Finance Ltd., a financial technology company based in the UK, has faced restrictions imposed by UK regulators due to its involvement in fraudulent activities. Approximately one in five payments received by Dzing last year were linked to fraud, leading to concerns about the company's operations. The Financial Conduct Authority (FCA) has prohibited Dzing from accepting new retail customers or funds without prior consent. The Payment Systems Regulator (PSR) also reported that Dzing received a higher number of payments per transaction associated with scams compared to other institutions. The FCA has been striving to enhance standards among electronic-money institutions and payment firms processing significant transaction volumes. While the sector has seen a surge in authorized firms operating in the UK, the FCA is now concerned about the prevalence of fraud and inadequate anti-crime controls. Mikhail Nadel, a Russian banker previously accused of looting a major bank in Kyrgyzstan, co-founded Dzing in 2018. The FCA granted the company an EMI license in 2019, despite Nadel's previous conviction for fraud and money laundering. Dzing's voluntary undertaking with the FCA has resulted in restrictions on its operations. While the company's license remains active, it must obtain regulatory approval to onboard new customers, and existing clients cannot add or receive funds into their accounts without permission. The PSR investigation focused on authorized push-payment scams, which involve fraudsters tricking individuals into making payments. Dzing received a significantly higher number of fraudulent payments compared to other finance firms, according to PSR analysis. In conclusion, the restrictions imposed on Dzing Finance highlight the importance of robust anti-fraud measures and regulatory oversight in the financial technology sector. The involvement of a company with ties to Russia in suspicious transactions raises concerns about the integrity of the payments industry. The actions taken by UK regulators serve as a reminder of the ongoing efforts to protect customers and maintain the integrity of financial systems.

Implications for New Businesses Amid Fraudulent Activities in the Fintech Sector

The recent restrictions imposed on Dzing Finance Ltd., a UK-based fintech firm with Russian ties, have sent ripples through the business community. The company's involvement in fraudulent activities, with nearly one in five payments linked to fraud, has led to a crackdown by UK regulators.

The FCA's Stance

The Financial Conduct Authority (FCA) has barred Dzing from accepting new retail customers or funds without prior consent, demonstrating a clear intent to tighten regulations around electronic-money institutions and payment firms. This move is particularly significant for new businesses in the fintech sector, which will need to ensure robust anti-fraud measures and regulatory compliance to avoid similar sanctions.

Lessons for New Businesses

Dzing's situation serves as a stark reminder of the importance of maintaining the integrity of financial systems. New businesses, particularly those in the fintech sector, must prioritize transparency and robust anti-crime controls to avoid falling foul of regulatory bodies. The case also highlights the potential reputational risks associated with dubious affiliations, as seen by Dzing's ties to a Russian banker previously convicted of fraud and money laundering. In conclusion, while the fintech sector continues to grow and offer exciting opportunities for new businesses, the Dzing case underscores the crucial need for robust anti-fraud measures, regulatory compliance, and careful selection of business partners.
Story First Published at: https://financialpost.com/pmn/business-pmn/uk-payments-firm-with-russian-ties-had-1-in-5-shady-transactions
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