NVAYO LIMITED v THE FINANCIAL CONDUCT AUTHORITY [2024] UKUT 00035 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Judge Swami Raghavan |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 05 February 2024 |
Neutral Citation: [2024] UKUT 00035 (TCC) Case Number: UT/2023/000092
UPPER TRIBUNAL
(Tax and Chancery Chamber) By remote video hearing
FINANCIAL SERVICES – procedure – supervisory notices imposing requirements taking
immediate effect in relation to e-money institution’s new and existing business and its assets
- application under Rule 5(5) of UT Rules to suspend effect of notice pending determination
of reference dismissed
Heard on: 17 January 2024
Judgment date: 5 February 2024
Before
UPPER TRIBUNAL JUDGE SWAMI RAGHAVAN
Between
NVAYO LIMITED Applicant
and
THE FINANCIAL CONDUCT AUTHORITY Respondent
Representation:
For the Applicant: Stephen Auld KC, instructed by Trowers & Hamlins LLP
For the Respondent: Adam Temple, Counsel, instructed by the Financial Conduct Authority
1
DECISION
INTRODUCTION
1. 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”).
2. 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.
3. 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”)).
4. 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.
5. For the reasons set out below, Nvayo’s suspension application is refused.
BACKGROUND
6. E-money is defined in the EMRs as monetary value, represented by a claim on the issuer,
stored electronically (including magnetically), issued on receipt of funds for the purpose of
making payment transactions, and which is accepted as a means of payment by someone other
than the issuer.
7. Nvayo provides e-money and pre-paid cards. Nvayo’s customers can transfer their e-
money to others or spend it, for instance, with a number of retailers who accept MasterCard
payments. Nvayo is owned by AU Card Limited (a company incorporated in the UK), which
is wholly owned by AU Card LLC (a company registered in the State of Utah, USA). AU Card
LLC is in turn owned by PMA Media Group Inc. (a US company) in relation to which Mr
Scanlon is the 100% shareholder. There is no dispute Mr Scanlon has a “qualifying holding”
To continue reading
Request your trial