Wise’s application for a US banking licence has been rejected by regulators because of “deficiencies” in the fintech’s anti-money laundering checks, as well as a lack of understanding of the banking law.
The Office of the Comptroller of the Currency said in a letter that Wise’s US business had not demonstrated enough understanding of money laundering rules or US banking law.
Rejecting Wise’s application, the regulator noted “longstanding . . . deficiencies” in the British fintech’s anti-money laundering and counterterrorist financing systems.
The OCC said Wise would need to address these shortcomings before it could be deemed to have an effective compliance programme in its US business.
The watchdog also raised the lack of experience of Wise’s proposed US management team as a factor in its rejection.
“Wise US has no historical experience with fiduciary activities, and proposed management and directors failed to demonstrate sufficient experience with the fiduciary activities of national banks,” it said.
Wise’s failure to nominate directors and managers with sufficient expertise in anti-money laundering rules “did not reflect favourably on the application”, the OCC said.
Wise’s shares were down 7 per cent in morning trading on Friday, having fallen as much as 9 per cent.
Wise said: “Since submitting this original application over a year ago, our business and compliance maturity have evolved significantly.”
It said it had made changes in response to OCC feedback during the application process, adding that the watchdog’s letter referred to “historical issues with our original application that we have been addressing”.
Wise also said its application, first made last year, was now out of date because of US President Donald Trump’s Genius Act, which regulates stablecoin companies.
Wise now intends to submit a fresh application under the Genius Act framework which will help it achieve a similar goal of accessing the federal payments network.
The rejection is the latest regulatory setback for Wise. Last month the group’s shares fell as much as 20 per cent in one day over investigations by Belgian authorities into potential money laundering offences and possible use of its accounts by international criminal groups.
Last year, the group’s US subsidiary was fined $4.2mn after US regulators found that it flouted the Bank Secrecy Act and anti-money laundering laws.
Wise, which has 19mn users globally, was founded in 2011 and specialises in cheap or free international money transfers.
The rejection of Wise’s application comes despite the OCC taking a more permissive approach to approving new banks under the presidency of Trump.
In December, the OCC approved five applications for US banking licences, including two for new entities owned by crypto asset companies Circle and Ripple. Both Revolut and Klarna are applying for US banking licences.
A national trust bank charter, the status Wise had applied for, allows financial institutions to hold money in a similar way to a bank without needing to gain individual licences from each state. However, it is not a full licence allowing institutions to make loans. Charters have been sought by several other payment institutions, such as cryptocurrency exchanges.