UT/2023/000092 - [2024] UKUT 00035 (TCC)

The applicant, “Nvayo” is an e-money institution authorised by the Financial Conduct Authority (“the Authority”) under the Electronic Money Regulations 2011 (“the EMRs”). E-money issuers such as Nvayo are subject to various regulations including obligations in relation to anti-money laundering (“AML”) and the Payment Services Regulations (“the PSRs”).

In May 2023, the US Department of Justice (“USDoJ”) arrested Christopher Scanlon, Nvayo’s ultimate beneficial owner (“UBO”), on charges of conspiracy to control and own an unlicensed money transmitting business in violation of US federal law. The Authority issued Nvayo three decisions in the form of Supervisory Notices. The two in August 2023 (the First Supervisory Notice of 8 August 2023, and the Second Supervisory Notice (“SSN”) of 24 August 2023) were in response to the arrest and various failings alleged by the Authority regarding the way Nvayo had dealt with that and the preceding USDoJ investigation. Subsequently, on 21 November 2023, the Authority issued a Further Second Supervisory Notice (“FSSN”). That followed an AML review on Nvayo which the Authority considered revealed significant deficiencies in Nvayo’s AML regulatory compliance. Nvayo made timely referrals to the Upper Tribunal (“UT”) (which the parties agreed on 20 December 2023 should be consolidated) of the SSN and FSSN and the requirements those imposed on Nvayo.

Those requirements took immediate effect from the date of the relevant notice. In broad summary, they stop Nvayo carrying out new business and restrict Nvayo’s dealings of its own assets until the Authority considers their concerns in respect of the UBO and AML are satisfied. The requirements also stop redemptions by existing customers unless the appropriate AML due diligence in relation to the customer has been remediated to the satisfaction of a Skilled Person (an independent third party appointed under s166 Financial Services Markets Act 2000 (“FSMA”)).

This decision deals with Nvayo’s application for suspension of the effect of those requirements under Rule 5(5) of The Tribunal Procedure (Upper Tribunal) Rules 2008 (“the UT Rules”), pending the substantive hearing of Nvayo’s reference. In summary, Nvayo argues the requirements should be suspended as they are disproportionate to the concerns raised for a number of reasons including that: Nvayo swiftly removed Mr Scanlon from any management responsibilities following his arrest and a sale of his holding is imminent, the USDoJ charges are in any case simply unproven allegations in relation to matters in the US and prior periods and do not concern Nvayo’s business, the AML issues are not as serious as the Authority make out and that Nvayo has taken sufficient steps to address them such that there is no significant risk to consumers if the restrictions imposed were lifted.

For the reasons set out below, Nvayo’s suspension application is refused.