Financial Supervisory Authority Challenges Klarna’s AML Measures

The regulator body of Sweden, “The Financial Supervisory Authority (FSA),” has criticized the “risk assessment of Klarna” for failing to comply with AML regulations

The popular fintech company Klarna offers payment and shopping solutions through its “Buy now, Pay later (BNPL)” service.

According to the FSA, it lacks appropriate measures to combat money laundering and terrorist financing. Additionally, it highlights the overall risk management and compliance concerns of the company.

Highlights from the FSA

According to the Swedish business newspaper “Dagens Industri” source, FSA sent a letter to the CEO of Klarna “Sebastian Siemiatkowski” and addressed the following concerns found in the initial assessment report:

• The company had insufficient “general risk assessment measures” to detect and mitigate AML risk
• The firm lacked “risk assessment of customers” to evaluate risks in high-risk customers who can be potentially involved in financial crimes such as money laundering.
• Inadequate “Know Your Customer procedures” show it doesn’t meet the customer’s due diligence requirements
• The firm has deficiencies in “measures for high-risk customers,” such as politically exposed persons, and needs immediate improvements in AML measures.

The Dagens Industri obtained a censored version of the letter and reported it according to visible content.

What’s next for Klarna?

The regulator body has yet to decide on the actions it will take; after a thorough investigation, decisions will be made based on the report.

As per the report, FCA stated, “We will communicate our decision when we have made one.” PYMNTS’ contacted Klarna for a reaction, but the company has not replied yet.

Swedish BNPL Firm Plans $20B IPO

Swedish company “buy now, pay later (BNPL)” appears to be getting ready to go public with its initial public offering (IPO), hoping to raise about “$20 billion” in the market as per the report.

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• US Treasury Department Takes Action Against Money Laundering in Real Estate
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27% Revenue and $66M Profit Increase

On 27 August, Karlna announced a “27%” revenue increase while reporting its earnings for the year’s first half. Additionally, “a significant increase of $66 million in adjusted profit has been observed in his adjusted profits, in contrast to an adjusted loss of $45 million in the same time duration in 2023.” 

Recent Regulatory Actions Against Klarna

GDPR Violation and fine

• While investigating Klarna, the Swedish court found out about its violation of the “General Data Protection Regulation (GDPR)” of the European Union.
• It imposed a fine of “7.5 million Swedish crowns,” or roughly $723,000.

Previous Compliance Issues

• According to a finding of the country’s “Administrative Court of Appeal,” Klarna provides incomplete information to their clients regarding preserving their personal data, and the delivered information was either vague or more challenging to locate.
• According to decisions made by “The Swedish Authority for Privacy Protection” in 2022, Karla has failed to comply with the General Data Protection Regulation (GDPR)’s rules regarding providing information related to user data handling.

Klarna has clarified, as reported by Dagens Industri, that an investigation found errors in a privacy notice that was used from March to June 2020.

The issues were related to the information provided in the privacy notice and not to how they actually collected or handled the client’s data.