Wise Faces Multi-State Crackdown After Reduced Federal Fine

Global payments company Wise has become the latest example of how quickly regulatory fortunes can shift. The company initially appeared to escape severe financial punishment when the Consumer Financial Protection Bureau (CFPB) cut its penalty for illegal remittance practices from almost 2.5 million dollars to just 45,000 dollars. But state regulators quickly stepped in, launching a coordinated multi-state enforcement action that revealed deep compliance failures. This sequence of events highlights the growing role of state regulators in financial oversight and sends a clear warning to other fintechs and payment companies that regulatory scrutiny is evolving, not disappearing.

How Wise’s Regulatory Troubles Escalated

The events unfolded rapidly and exposed weaknesses in both Wise’s marketing practices and its anti-money laundering (AML) program. In January, the CFPB fined Wise for misleading advertising related to fees and currency exchange rates. The agency alleged that Wise failed to provide clear and accurate information to consumers, violating federal remittance rules designed to protect customers from hidden charges and inaccurate rate disclosures. In April, the CFPB announced that it would scale back supervision of nonbanks, a move that shifted significant enforcement responsibility to state regulators. The following month, the CFPB unexpectedly reduced Wise’s penalty to 45,000 dollars, though the company was still required to set aside 450,000 dollars for customer compensation. State regulators, anticipating this reduction in federal oversight, had already begun examining Wise’s operations. Their findings, released this week, revealed systemic AML deficiencies that went far beyond marketing missteps.

Compliance Failures Uncovered by State Regulators

State regulators identified multiple weaknesses that pointed to fundamental gaps in Wise’s AML controls and risk management framework.

1. Lack of Independent AML Program Reviews: Wise failed to conduct timely independent evaluations of its AML program, preventing early detection of compliance weaknesses.
   
   

2. Inadequate Investigation of Suspicious Transactions: Procedures for investigating unusual or potentially illegal transactions were poorly defined, allowing high-risk activities to go unchecked.
   
   

3. Weak Controls for High-Risk Accounts: Accounts flagged as high risk were not subjected to the enhanced scrutiny required under AML regulations, increasing exposure to potential money laundering and terrorism financing activities.
   
   

4. Deficient Reporting of Suspicious Activity: Wise’s mechanisms for filing suspicious activity reports with authorities were inconsistent and in some cases ineffective, limiting regulatory visibility into potential criminal transactions.
   
   

5. Corrective Actions Imposed: As part of the enforcement action, Wise must now implement stronger AML controls, submit to independent monitor oversight, improve suspicious activity detection processes and undergo ongoing state supervision to ensure compliance.
   
   

Massachusetts Division of Banks Commissioner Mary L. Gallagher commented, “Results like this illustrate the power of collaboration and consistency.” Her statement reflects the growing trend of state regulators coordinating enforcement efforts to fill gaps left by federal agencies.

Marketing and Brand Implications for Financial Services

Wise’s case is not just about legal compliance. It also serves as a warning for how regulatory failures can damage brand reputation and marketing credibility. The initial CFPB fine stemmed from misleading advertising on fees and exchange rates. Even unintentional exaggeration of savings or unclear messaging can trigger enforcement action, making close collaboration between marketing and compliance teams critical. The reputational risks are equally significant. Being linked to money laundering or terrorism financing, even indirectly, can have long-term brand consequences. Headlines about weak AML controls tend to persist long after penalties are paid, undermining customer trust. Block, the parent company of Cash App, recently paid over 250 million dollars for similar AML violations and is still dealing with the public fallout.

What Financial Services Firms Should Learn

The Wise enforcement action underscores a new regulatory reality for financial services and fintech companies. Federal agencies may be pulling back on some areas of oversight, but state regulators are stepping up with unprecedented coordination and scrutiny. Compliance teams must now track multiple state-level regulatory agendas rather than focusing solely on federal requirements. Marketing teams must ensure that product messaging meets both state and federal disclosure rules. AML and risk management programs are under increasing pressure to detect and prevent high-risk activities proactively. Companies that fail to anticipate this shift risk not only financial penalties but also long-term reputational damage. The lesson is clear. Regulatory oversight is not easing. It is fragmenting and expanding, creating a more complex compliance landscape that demands continuous investment in risk management, transparent marketing practices and strong governance.