Keeping Up With the Regulators — November 2019 Weeks #1 and #2

Your weekly briefing on what’s new in KYC/AML for FinTechs

Photo by Brandon Wong on Unsplash

As promised, Fractal is sharing our weekly briefings to help FinTechs stay up-to-date with the latest developments in the KYC/AML regulatory space. In case you missed our last issue, here it is:

Keeping Up With the Regulators — October 2019 Week #4

Find last weeks’ briefing below:

Week 25.10.2019–08.11.2019

What’s cooking in the regulatory space?

• Brazil: FATF expresses concern about Brazil’s AML framework, following the Supreme Court’s decision that imposed limitations on the use of financial intelligence in criminal investigations
• Canada: B.C. government announced new rules to curb hidden ownership of private companies
• China: China wants to replace cash with its own cryptocurrency (DCEP) to eliminate illegal cash dealers and tax evasion, and amplify control
• China: Law to regulate the use of cryptography, facilitate the cryptography business and establish cybersecurity was passed
• Cayman Islands: New report demonstrates how different industry sectors can be misused by criminals through a compilation of real-life crime cases
• EU: EBA calls for harmonization of AML and consumer protection requirements across the EU to allow for a smooth flow of financial services
• Finland: Financial services regulator approved five cryptocurrency service providers to operate in the country
• Hong Kong: New regulations allow crypto exchanges to apply for a license. Exchanges that do not trade securities do not need to apply
• International: FATF published draft guidance on digital identity for public consultation
• International: The FATF will undertake a strategic review of its work methodology
• International: International Organization of Securities Commissions (IOSCO) says that stablecoins could be covered by securities’ regulations
• Iran: Saudi Arabia, Qatar and four other Gulf nations joined the U.S. in imposing sanctions on a network of Iranian companies, banks and funds
• Iran: Central Bank of Iran requires banks and credit institutions to establish anti-money laundering units
• Israel: AML laws are preventing the Tax Authority from collecting roughly a billion shekels in taxes owed by companies outside the country
• Jamaica: House of Representatives approves an amendment to AML regulations to ensure compliance with FATF’s recommendations
• Japan: FATF will probe Japan’s government, banks and cryptocurrency exchanges on money laundering prevention
• Luxemburg: Head of Luxemburg’s financial regulator flags that the risk of money laundering in the private banking sector is increasing
• Philippines: In danger of being included in FATF’s grey list if it fails to address AML shortcomings in the coming 12 months
• South Korea: South Korea to adopt regulations to prevent money laundering through virtual currencies
• South Africa: FATF is currently evaluating the country’s compliance with AML standards and will report back in 2020
• Turkey: Amendments to payments and banking laws aim to ensure compliance with EU regulations (in particular, PSD2) and introduce changes in the supervision of AML compliance
• Turks and Caicos: Public register disclosing the beneficial owners of companies based in the jurisdiction will be introduced in 2023
• UK: FCA publishes new “Cryptoassets: AML / CTF” webpage
• USA: FinCEN imposes a Fith Special Measure on Iran as a “jurisdiction of primary money laundering concern”. This measure is analysed here

News

• US recognizes Pakistan’s efforts to combat money laundering and terrorist financing, but flags that implementation remains uneven
• AML solution market size is projected to grow to USD 3.6 billion by 2024 and, by deployment mode, cloud-based solutions will win the race
• Canadian startup Ledn expanded its bitcoin-backed loan offering to include the US dollar-pegged stable coin DAI
• Bittrex announced that it was leaving Malta to set up new headquarters in Liechtenstein
• India and the US committed to enhancing cooperation in tackling money laundering and combating terrorism financing
• Calibra’s CEO claims that Libra’s AML standards will be better than those of other payments networks
• Highlights from Libra’s hearing at the House Financial Services Committee
• Australian regulators to probe Libra
• Hong Kong’s chief securities regulator calls for a united response to Libra to tackle the “real risk of regulatory arbitrage”
• China is studying the application of blockchain and artificial intelligence in cross-border financing with a focus on risk management

The AML’s Watch

• Turkish state-owned bank Halkbank charged with money laundering and other offences for allegedly evading US sanctions on Iran
• Philippines’ Anti-Money Laundering Council froze over P1 billion and seized P600 millions between January 2018 and July 2019
• Alleged involvement in money laundering and customer’s inability to withdraw funds trigger proceedings against Canadian Einstein Exchange
• Deutsche Bank alerted US federal authorities to $72 million real estate sale linked to the son of a former Kremlin official
• Ivan Manuel Molina Lee, the president of Crypto Capital, was arrested by Polish authorities for suspicions of money laundering
• Bitfinex denies any involvement in Crypto Capital’s alleged laundering of drug proceeds or other illicit activities
• Sweden’s financial watchdog gave its strongest indication yet that there’s evidence of serious wrongdoing at Swedbank
• Estonia’s launches criminal investigation of Swedbank over alleged money laundering

Add this to your knowledge folder

• LexisNexis publishes enhanced due diligence guide to help firms navigate the requirements of the 5th AMLD
• Romania’s AML framework reshuffling and its impact on corporate law: increasing the transparency of the real beneficiaries of legal entities
• Overview of Europe’s 6th AMLD impact
• Analysis of US Corporate Transparency Act

Good reads

• Measuring User Growth: Blockchain Vs. ‘Regular’ Fintechs
• The true cost of KYC AML — everyone is a suspect
• Tighter regulations and the exodus of crypto from Malta
• ASEAN transformation of legacy AML compliance programs — learning from 1MDB scandal
• Machine-learning algorithms to boost the effectiveness of transaction monitoring
• Traditional financial regulations are getting to crypto and RegTech can help companies be prepared
• Tech sprints for high-tech regulatory problem solving: the example of the sprint that aims to strike a better balance between privacy and AML
• Data analysis of how PlusToken pulled off the scam involving billions of dollars in crypto assets
• The race to regulate crypto: China, US and EU
• The ever-evolving nature of crypto use-cases and the inevitable regulatory gap that comes with it
• The 5th AMLD will be a game-changer for crypto exchanges like Binance and Kraken

About the Author:

Catarina Veloso is a legal counsel at Fractal and co-chair of INATBA’s identity working group — Catarina specialized in energy law and focused on how blockchain technology can contribute to the management of electricity grids; but an unexpected(-ly happy) turn of events lead her to work closely with Fractal’s product team to remove all the friction while keeping all the compliance in a global KYC/AML onboarding solution.