Klarna was fined $50 million and reprimanded by the Swedish regulator

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Klarna has been fined $50 million and reprimanded by Sweden’s financial regulator for breaching anti-money laundering rules, as the buy now, pay later company prepares for a stock market listing.

Between 2021 and 2022, the Swedish regulator said on Wednesday Klarna It had “significant shortcomings”, such as the lack of any assessments of how its services were used for money laundering or terrorist financing.

“Anti-money laundering regulations must be followed. It is important to confront the risk of criminals using company operations,” said Daniel Baar, Director General of FI, the main Swedish financial regulator.

Klarna is considering listing in the United States in the first quarter of next year after submitting confidential initial public offering documents last month. The value of the Swedish group is expected to reach $20 billion.

But it has come under the spotlight from regulatory authorities around the world, who are increasingly scrutinizing the buy-now-pay-later sector. Klarna has faced criticism before for how it handles credit risk and debt collection.

FI said its investigations were not serious enough to revoke Klarna’s license or issue a formal warning, but enough to hand the company a “note” — less a reprimand — and a fine of 500 million Swedish krona ($45 million).

The regulator said Klarna did not have “procedures and guidelines clarifying all situations regarding when to undertake customer due diligence”.

all SwedenThe country’s largest banks recently received fines for violating anti-money laundering rules, including Sweden Bank – the country’s oldest bank – which was ordered to pay 4 billion Swedish krona.

Klarna said on Wednesday that it faced a “complicated set of regulations” and added that it was the largest Swedish bank – apart from state-owned SBAB – that had not yet been investigated.

She added that she takes her responsibility to follow anti-money laundering rules “seriously.” He stressed that the FI decision was about “the interpretation and application of the rules, and not to actual cases of money laundering.”

Founded in 2005 by three friends at business school in Stockholm, Klarna has been on a rollercoaster ride in recent years, falling from a 2021 valuation of $46 billion – which made it Europe’s most valuable unlisted startup – to… Just $6.7 billion last time around. Official fundraising tour in 2022.

It has also suffered a major corporate governance rift between two of its founders – CEO Sebastian Siemiatkovsky and third-largest shareholder Viktor Jacobson – which culminated in the latter being dismissed. He is overthrown From the Klarna Board of Directors in October.

Klarna’s IPO will bring greater scrutiny to the controversial buy now, pay later sector. Siemiatkovsky sold the Swedish group as offering customers fees much lower than credit card fees, but charities and consumer groups have criticized the sector for encouraging people to take on additional debt they often cannot afford.

The US Consumer Financial Protection Bureau said earlier this year that buy now, pay later should be regulated like credit cards, while the UK’s Labor government launched plans to regulate it as consumer credit.

Klarna, which achieved profits from its founding until 2019 when it began to incur losses due to its rapid expansion in the United States, achieved Net profit 216 million SEK in the third quarter. But in the first nine months of this year, it made a net loss of SEK 116 million.