Luxembourg Regulator Fines Rakuten Europe Bank €185,000 over AML Control Failures

Luxembourg’s CSSF fined Rakuten Europe Bank after inspections found major AML and counterterrorism financing gaps posing risks to financial system.

Rakuten Europe Bank S.A. received a penalty of 185,000 euros from Luxembourg's financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), following the discovery of serious flaws in the bank's anti-money laundering and counterterrorism financing controls. Following a site visit that revealed the Luxembourg based digital bank had not completely complied with national AML requirements, the fine was imposed.

The CSSF states that Rakuten Europe Bank lacked the internal processes and systems necessary to properly detect, evaluate, and reduce the risks of money laundering and terrorism financing. The regulator pointed out flaws in transaction monitoring systems, client due diligence procedures, and general risk management frameworks all of which are essential components of Luxembourg's AML regulations.

According to the CSSF, these shortcomings violated the norms expected of regulated institutions functioning in the nation and constituted a risk to the integrity of the financial system. In order to demonstrate its dedication to rigorous enforcement of AML duties, the authority chose to impose an administrative fine.

Digital banking and payment services are offered across Europe by Rakuten Europe Bank, a division of the Japan based Rakuten Group. The bank has recognized the regulator's ruling and stated that it has strengthened its compliance framework and addressed the problems found during the inspection by placing corrective measures in place.

As authorities continue to tighten oversight of banks and fintech companies in order to prevent financial crime and ensure stronger compliance with developing AML standards, the enforcement action reflects increased regulatory inspection in Luxembourg and throughout the European Union.