new milestone or just a guide?

The Central Agency for Business and Commerce (CBB) ruled in October that the online bank Bunq was within its rights to screen customers with artificial intelligence and data analyses. The verdict has been presented by FD and Banken.nl as a monumental victory for Bunq, while other media emphasize that part of the instruction will be maintained.

What does the Bunq case actually mean for practice within the financial sector, and is it really a new milestone or is the case more nuanced?

Arjan Bom is a consultant at the consulting company Enigma Consulting and specializes in financial crime. He explains the case and gives an insight into what the result could mean for the market.

Background

Bunq is a bank that operates entirely online and processes all payment transactions through the app. It assigns a customer a ‘regular profile’ upon acceptance, based on analysis of customer data and artificial intelligence (AI). Almost all Bunq customers fall within that profile.

It should be noted that we are talking here about Bunq’s payment services and not investment services or mortgages. The judgment also provides little insight into the role of AI in assigning this profile. This in itself is not unusual, as it concerns competitively sensitive information, which is rarely set out in a public version of the ruling.

According to DNB, assigning such a general user profile to each new customer is not the same as conducting a customer survey of the purpose and intended nature of the business relationship. In 2019, DNB therefore issued an instruction ordering Bunq to follow a specific course of action. The instruction specifically relates to three components:

  • Bunq has not complied with the obligation to determine the purpose and intended nature of a business relationship as stipulated in Article 3, paragraph 2, letter c), in Wwft.
  • Bunq has violated Article 3, subsection 2 under d Wwft, insofar as it relates to the investigation of the origin of the funds.
  • Bunq has violated Article 8, subsection 5 of the Wwft, insofar as it must maintain sufficient and suitable risk management systems to determine whether a client or ultimate beneficial owner is a politically exposed person (PEP).

Put simply, DNB’s position is that Bunq has violated the anti-money laundering rules. It is something that happens more often, and for which several banks have been heavily fined or have entered into settlements.

In practice, banks relatively often choose an amicable solution, such as ING in 2018 with an amount of €775 million and ABN Amro in 2021 with an amount of €480 million. It should also be noted that this was a settlement with the prosecution and a criminal investigation was already underway. The context is therefore slightly different from a process where ‘only’ DNB is involved.

Bunq objection

In a move that is unusual for the financial sector, Bunq has objected to DNB’s decision to issue an instruction. Bunq even escalated the dispute by taking it to the Supreme Court. It is rare for banks to choose to fight their regulators in court and even go to the highest court.

However, an unusual step to litigate does not mean that the case has any practical significance. CBB agrees with Bunq on the first point. The obligation to determine the purpose and intended nature of a business relationship does not prescribe the exact method to be used in such an assessment.

It follows that Bunq is deemed to be able to determine the purpose and intended nature of the business relationships based on the risk profile established during their chosen assessment method, according to CBB.

DNB is right on the other two points, which means that the original instruction from 2019 remains in force. In any case, this means that it is not a resounding victory, neither for Bunq nor for DNB.

What does this mean for the market?

What can be practically deduced from the case is the following:

  • Financial institutions have a discretion to comply with Wwft’s obligations, as the law sets open standards.
  • The condition is that the purpose and nature of the business relationship can be sufficiently determined. Since DNB was wrong on this point, other statements from DNB about the quality of the finding are not dealt with in terms of content. This is a missed opportunity for practice as the lessons learned from it could be very useful.
  • The use of artificial intelligence and digital CDD tools is acceptable, although we cannot derive from the decision exactly how Bunq uses them.
  • The decision may give the institutions leeway to adapt their policy more to their own working method and customer type.
  • Although DNB seems to have a more accommodating attitude recently, it cannot be ruled out that DNB will take a conservative position in this regard, although it should be remembered that DNB even expressly makes the statement to see what this case means for the supervision. .

It was certainly a brave and unusual decision on Bunq’s part to file suit and, in that respect, an indication of a turnaround in the market. At the same time, it is forgotten that DNB has also been at work itself and clearly recognizes input from the market.

For me, the decision is therefore not a new milestone, but rather a signpost that is indicative of the current development in the banking and supervisory landscape. The nuance is sometimes forgotten on both sides of the spectrum in the reporting, which does not do justice to the steps that both DNB and Bunq (must) take.

What will this look like in the future? In case of conflicts with their supervisors, institutions may henceforth be more inclined to go to the sole impartial arbitrator; the judge.

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