Another Bank Scandal: Lesson For the Crypto Space?

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By Jim Duffy

Here we go again with another bank embroiled in a major scandal. NatWest, the UK retail and business lending focused bank is again in the headlines for all of the wrong reasons.

The Financial Conduct Authority [FCA] in the UK has started criminal proceedings against NatWest over allegedly failing to comply with money laundering rules. These are serious allegations that have now resulted in unprecedented action. 

The FCA says that this case marks the first criminal prosecution under money laundering regulations and the first against a bank.

Once again the spotlight has fallen on UK banks, many of whom in the sector criticize, belittle and characterize cryptocurrency as bad, fraudulent and at times – evil. These very bank, in fact, point across the Atlantic to Ripple and its joust with the SEC. 

NatWest formally known as RBS or Royal Bank of Scotland has not been a stranger to bad headlines. A major player in the banking and global financial crisis of 2008, RBS was bailed out by the British taxpayer to the tune of £45.5 billion.

It is still 62% government owned. In 2018, RBS had to pay $4.9 billion to settle charges that it misled investors ahead of the 2008 crisis. Now this prosecution is a major blow to NatWest’s already fragile reputation and another example of how traditional banks often break the rules.

Commenting on the criminal proceedings the FCA stated:

 “The case arises from the handling of funds deposited into accounts operated by a UK incorporated customer of NatWest….It is alleged that £365m was paid into the customer’s accounts, of which around £264m was in cash.”

For too long now banks, bankers and bank regulators in the UK and the USA have been able to sit on a pedestal pointing an accusatorial finger at the emerging cryptocurrency industry. An industry that, it may be suggested, is under tighter scrutiny than the traditional banks.

Digital exchanges such as Kraken, Gemini and Coinbase put customers through the wringer on identification and source of funds. Quite rightly too. As a customer of any of these exchanges, if I deposited $300m in cash there would be alarm bells ringing. And you could bet your bottom dollar that I’d be turned upside down to ensure that I’m meeting the AML and KYC rules.

There’s a lesson here for cryptocurrency, namely, that it’s best to avoid being complacent. As an industry it needs to be whiter than white in order to grow. No CEO in any crypto exchange or crypto bank ever wants to see his or her name in headlines like this or involved in prosecutions. Let’s all hold this space accountable and build a better financial system.





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