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FATF Releases Draft Guidance on a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers

On March 19, 2021, the Financial Action Task Force (FATF), the global anti-money laundering standards-setting body, released draft guidance to clarify and supplement its 2019 guidance on a Risk-Based-Approach (RBA) to Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs). While FATF’s guidance is not technically binding on member countries, it is broadly followed by such jurisdictions, in part to avoid inclusion on FATF’s lists of jurisdictions with deficiencies in their anti-money laundering (AML) and countering the financing of terrorism (CFT) regimes. For example, FATF’s recommendation that the so-called “travel rule” be applied to VASPs is being widely implemented by…

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Hong Kong Security Crackdown Leads to Record Capital Outflows— Residents Reportedly Used Cryptocurrencies to Move Funds

The Canadian anti-money laundering agency, Fintrac, says it recorded official capital inflows originating from Hong Kong that totaled more than $34 billion in the past year. The outflows, which are the highest since 2012 when the earliest Fintrac records are available, “are the first evidence of a significant flight of capital overseas from the Asian financial hub following the security turmoil.” Accounts Frozen As detailed by one report, the city’s record capital transfers, which are “up 46 per cent from 2016 and 10 percent from 2019, came in a year when Hong Kong police froze the accounts of several people…

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Russia’s money laundering watchdog monitoring crypto to ruble transactions

Rosfinmonitoring has informed the Russian parliament that it is paying close attention to transactions involving the conversion of crypto to rubles. Russia’s Federal Financial Monitoring Service, or Rosfinmonitoring — the country’s Anti-Money Laundering body — is policing crypto to fiat transactions. The federal executive body responsible for AML oversight made this known while addressing the members of parliament on Tuesday, according to a report by Russian news agency Regnum. In a meeting with members of the State Duma Committee on the Financial Market, Herman Neglyad, deputy chief of Rosfinmonitoring revealed that the AML watchdog was working with commercial banks to…

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Ten Key Takeaways from the NDAA’s AML Reforms

On January 1, 2021, the United States enacted the National Defense Authorization Act for Fiscal Year 2021 (NDAA) after the US House of Representatives and US Senate voted to override a presidential veto of the law. Included within the NDAA are a significant number of provisions related to anti-money laundering (AML) and countering the financing of terrorism (CFT), including provisions reforming the Bank Secrecy Act (BSA), a collection of statutes underpinning most of the current AML regulatory framework. These amendments, many of which have been under consideration for years, represent the most substantial AML-related reforms enacted since at least the…

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FinCEN Seeks Comments on Effectiveness of AML Programs, Presenting Rare Opportunity for FinTech and Blockchain Companies

On September 16, 2020, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) published an advanced notice of proposed rulemaking (ANPRM) seeking comments on regulatory changes to enhance the effectiveness of anti-money laundering compliance programs of regulated financial institutions. As described in FinCEN’s press release, the ANPRM presents an opportunity for financial institutions to provide comments on “a wide range of questions pertaining to potential regulatory amendments under the Bank Secrecy Act (BSA).” While FinCEN has published a number of rules in recent years through formal notice and comment procedures, the rules have been fairly targeted to issues…

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Banks in Mexico Pose Greater Money Laundering Risk Than Crypto Firms, Says Report

Commercial banks by far pose the greatest risk of money laundering in Mexico compared to crypto-related companies, according to a new report by the country’s Financial Intelligence Unit (FIU). The study singles out what it calls the “G7 banking group”, which includes BBVA, Santander, Citibanamex, Banorte, HSBC, Scotiabank, and Inbursa, as the biggest conduits of illicit money in the South American country. Brokerage firms and foreign exchange entities have also been flagged as “high risk”, El Economista reported. The “G7 banking group” controls 80% of the assets within Mexico’s financial sector. However, Mexico’s second National Risk Assessment report did not…

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Secretary Mnuchin Indicates New Cryptocurrency Regulations are Coming

In his testimony before the Senate Finance Committee, on February 12, Treasury Secretary Steven Mnuchin stated that the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) will soon release new regulations related to cryptocurrency. FinCEN is responsible for issuing and implementing anti-money laundering (AML) and counter-terrorist financing (CTF) regulations applicable to certain US financial institutions. According to Secretary Mnuchin: We’re spending a lot of time on the issue of cryptocurrencies and digital payment systems …. on pure cryptocurrencies like Bitcoin, and there are others, we want to make sure that these are not used as the equivalent of secret…

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US Regulators Issue Joint Statement on AML Compliance Involving Digital Assets

On October 11, the leaders of the Commodities Futures Trading Commission (CFTC), Financial Crimes Enforcement Network (FinCEN), and the Securities and Exchange Commission (SEC) issued a joint statement regarding anti-money laundering (AML) compliance for persons engaged in certain activities involving digital assets. While the statement largely reaffirms known agency guidance and existing regulations, it is noteworthy for a number of reasons. First, the joint statement, issued from multiple regulators, is the first of its kind in the digital asset space with respect to AML and may indicate an intent of regulators to show that their approach to AML compliance is…

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