Articles
AML Roundup: Spotlight on Digital Currencies – Compliance News – Legislation, Reports, & Opinions – Sanctions – ESG – Money Laundering, Bribery, & Corruption
04 Nov 2022

While much of the focus centres on cryptocurrencies, digital currencies come in many forms. Virtual currencies include cryptocurrencies, stablecoins, and the fast-emerging central bank issued digital currencies (CBDCs). While non-fungible tokens (NFTs) and even credit cards are also regarded as stores of value in digital form. As digital currencies in all their guises become increasingly mainstream, this week we examine the most recent advances in this arena and how they are impacting the compliance landscape. 

We also take a look at news from the world of compliance and update you with the latest sanctions, together with the most recent legislation, reports and opinions.

Environmental, Social, and Governance (ESG) also features this week, alongside the latest reports covering money laundering, bribery and corruption. 

Spotlight on Digital Currencies

How CBDCs are set to power the future of money in the digital era 

In recent years we have seen a revolution in digital currencies across the world, fuelled by rapid advancements in technology and the decline in cash transactions in the wake of the covid pandemic. As countries look to alternatives to physical currencies, many are in the process of implementing or initiating pilot projects to issue their own CBDCs.

ECB believes CBDCs will become the ‘holy grail’ of cross-border payments

As we reported a few weeks ago, a paper by the European Central Bank (ECB) believes the concept of the central bank digital currency (CBDC) delivers a system that is ‘cheap, universal and settled in a secure settlement medium’. The ECB is exploring several options for achieving the holy grail of cross-border payments using a combination of CBDCs, stablecoins, Bitcoin, correspondent banking, emerging FinTech services, and by interlinking domestic payment systems.

BIS and three central banks to test cross-border CBDCs using DeFi protocols

The Bank for International Settlements (BIS) is working with three central banks to explore cross-border CBDC trading and settlement using DeFi protocols. The new project will explore automated market makers (AMM) for the cross-border exchange of hypothetical Swiss franc, euro and Singapore dollar wholesale CBDCs. With a primary focus on the ability to settle foreign exchange trades, the aim is to deliver proof of concept by mid-2023. 

Research shows that CBDCs can work with private stablecoins

Research from the Hong Kong Monetary Authority and BIS Innovation Hub has revealed that a wholesale CBDC could successfully work with private stablecoins. Project Aurum saw the partners create a technology stack comprised of a wholesale interbank system in which the wholesale CBDC is issued to banks for distribution to retail users. 

Understanding the regulatory landscape for cryptoassets in Germany and the EU

The new Market in Crypto Assets Regulation (MiCAR) has the potential to give the EU crypto market a huge push forward. This article looks at the response to MiCAR and delves into efforts that Germany and the EU have made to regulate the cryptoasset sector. 

Singapore proposes measures to reduce crypto trading risks while developing stablecoins 

The Monetary Authority of Singapore (MAS) has published two consultation papers proposing strict regulatory measures to reduce the risk to consumers from cryptocurrency trading while supporting the development of stablecoins. While the Singapore central bank contends that trading in cryptocurrencies is risky, it recognises that cryptocurrencies play an important supporting role in the broader digital asset ecosystem, and it would not be feasible to ban them 

India’s finance minister says crypto regulation should be an international priority 

Nirmala Sitharaman has stated that how to regulate crypto assets should be an international priority and will be a big topic of discussion at the upcoming summit of the Group of 20 nations. She added that India needs to encourage international groups such as the International Monetary Fund, Financial Stability Boar and the Organization for Economic Co-operation to help form crypto regulations with “all countries being on board.”

“No one single country can succeed in individually, being in a silo, trying to regulate the crypto assets,”  

~ Nirmala Sitharaman, India Finance Minister

Hong Kong seeking to become a crypto hub again 

Hong Kong’s regulators have declared the city’s ambitions to be a virtual asset hub. The government announced it will hold consultations for allowing retail investors to invest on licensed platforms and is open to considering virtual asset futures exchange-traded funds (ETFs). The irony being that just a few years back, Hong Kong was already a hub its financial regulator the Securities and Futures Commission (SFC) started to clamp down on exchanges over the legality of their operations. 

Cryptocurrency and economic crime: an overview of ten select cases 

In recent years, cryptocurrencies have been increasingly associated with criminal activities. This article explores trends in the enforcement actions against cryptocurrency-based economic crime by analysing ten recent select criminal cases investigated or tried in different jurisdictions.

Compliance News

DORA: Financial institutions must act now or risk non-compliance 

The EU’s incoming Digital Operational Resilience Act (DORA) was published in September 2020 with a clear objective of improving the digital resiliency of the entire financial system. As a result, almost every financial institution (FI) across the EU will be required to ensure that their suppliers and their suppliers’ security controls meet resilience standards. Formal adoption of the Act is expected to be approved in October 2022, in which case FIs will most likely have a twenty-four-month window in which to finalise their DORA implementation. 

Why communication has a critical role to play in compliance 

Getting people to recognise that compliance is a priority is one thing but managing collaboration at scale is an entirely different undertaking. The new challenge for compliance teams is in effectively managing and facilitating the compliance process across increasingly dispersed, varyingly interconnected types of organisations. In effect, it all comes down to communication. 

How to pinpoint compliance blind spots and unaddressed problems due to remote working 

With the onset of remote working in 2020, company leaders have had to reassess everything from their business strategies to the way they manage employees and maintain compliance. As employees continue to work remotely, it is now crucial for all businesses to identify the compliance blind spots that can result from having a remote workforce. 

A trusted approach to achieving EU Whistleblower Directive compliance 

The EU Whistleblower Protection Directive requires appropriate internal reporting channels for stakeholders when communicating potential violations of EU law. OneTrust Ethics and Compliance solutions provide you with assistance through multi-channel helplines, managing cases efficiently, protecting whistleblowers, and training employees on the protection the directive offers. 

Western Australia government warned over risk of non-compliance with Commonwealth laws 

The WA government has been warned that almost all of its agencies with anti-money laundering and counter-terrorism obligations are at risk of non-compliance with Commonwealth laws. In particular, it was noted that two agencies were missing key program elements and were at a “greater risk of non-compliance, and money laundering or terrorist financing activity”. 

JPMorgan strikes deal to settle compliance whistleblower retaliation lawsuit 

JPMorgan Chase has agreed to settle a whistleblower retaliation lawsuit brought by a former anticorruption lawyer at the bank. Shaquala Williams, an attorney and former vice president in the bank’s global anti-corruption compliance division, claims she was fired after raising concerns about the bank’s anti-corruption policies, including its screening of employees and third-party entities. 

Legislation, Reports, & Opinions

EBA publishes fraud taxonomy

The Euro Banking Association (EBA) has made its payment fraud taxonomy freely available in order to curb rising threats to the European payments system. By providing a “simplified and straightforward framework to describe fraud scenarios related to all kinds of payments, including card transactions”, it is envisaged that it will make it easier for organisations to share data and intelligence.

FATF Guidance on Beneficial Ownership – Public Consultation

FATF welcomes views on draft guidance on the implementation of its measures on transparency and beneficial ownership of legal persons, which aims to prevent criminals from hiding their assets and illegal activities behind shell companies and other corporate structures. Comments should be provided by 6 December 6, 2022, and you can download the draft guidance here.

US regulator sets up fintech office 

The US Office of the Comptroller of the Currency (OCC) is setting up a financial technology unit to help keep up with the rapidly changing banking landscape. To be established in 2023, the Office of Financial Technology will build on and incorporate the Office of Innovation, which the OCC established in 2016 to coordinate agency efforts to support responsible financial innovation. 

The Government of Jersey launches Financial Crime Risk Assessment

The Government of Jersey has launched an assessment into the risk of financial crime posed by companies, partnerships, trusts and other similar vehicles available in Jersey. The assessment will be used to review the risks posed of money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction. More detailed information is available here.

Fee for registering a company to increase tenfold in order to fund the crackdown on economic crime

The fee for registering a company could soon rise from £10 to £100. Companies House is considering the increase in charges as a way of funding new responsibilities and powers to tackle illegal activity that it is gaining under the new laws going through Parliament. 

Opinion: Identity verification is the foundation for fintech’s future 

Identity verification is fast becoming the foundation of the future of digital banking. This video explores how organisations should think about identity verification considering increasingly stricter regulations, how crypto exchanges can manage shifting compliance and regulatory requirements, and what is possible when companies can optimize their digital identity verification processes. 

Sanctions

US Treasury targets corruption and the Kremlin’s malign influence operations in Moldova 

The US Treasury has sanctioned almost two dozen individuals and entities, including two influential government officials, implicated in what has been described as the Russian Federation’s attempts to corrupt and capture Moldova’s political and economic institutions. 

UK Government responds to Committee report on illicit finance and Russia sanctions 

The Foreign Affairs Committee has published the UK Government’s response to its report “The cost of complacency: illicit finance and the war in Ukraine”. In its report, the Committee called for the Government to match rhetoric with action and voiced concerns that enforcement agencies working to root out illicit money lacked adequate resources. The Committee also called for the Government to publish its long-awaited review into “Golden” or Tier 1 Visas. 

US lists Iranian 15 Khordad Foundation over Salman Rushdie bounty

In response to the attack on author Salman Rushdie, the Office of Foreign Assets Control has designated the Iranian entity ‘15 Khordad Foundation’ for providing financial support for an act of terrorism. Before the attack, it had issued and subsequently increased a bounty on Rushdie’s life in support of Ayatollah Khomeini’s order calling for Rushdie’s death.

Binance CEO suggests exchange may still allow Russian users to evade sanctions 

Changpeng Zhao, the head of the largest cryptocurrency exchange by volume said new and stronger EU sanctions have created a “tricky situation” for dealing with Russian users. While the crypto exchange’s EU entities have complied with sanctions against Russia, the decision isn’t as clear outside of Europe. 

ESG

Report: The Future of ESGTech 2023

2023 will be pivotal in the goal to drive sustainability and ethics. This report explores issues such as climate disclosures, ESG standardisation, greenwashing, and financial inclusion. In addition, key insights explore just how organisations can lead positive change across the globe.

Australian regulator issues first greenwashing fine

An energy company has become the first company in Australia to be fined for greenwashing by the country’s corporate watchdog. The Australian Securities and Investment Commission (ASIC) fined Tlou Energy AU$53,280 for making factually incorrect statements about its environmental credentials.

Chinese cotton sold in UK could be from persecuted Uyghurs

Lawyers for the World Uyghur Congress said there are “reasonable grounds” to believe UK retailers have benefited from cotton made by Uyghurs held in China. A court heard that the UK government acted unlawfully by not investigating whether some cotton imports come from Uyghur forced-labour camps in China, but government lawyers say they need more evidence of a link in order to be able to act. 

The US never banned asbestos and workers are paying the price  

The dangers of asbestos are irrefutable. But unlike other countries that banned the potent carcinogen outright, the US never did, and to this day, it allows hundreds of tons of asbestos to flow in every year, primarily for the benefit of two major chemical companies, OxyChem and Olin Corp who say asbestos is integral to chlorine production at several aging plants and have made a compelling argument to keep it legal.  

Money Laundering, Bribery, & Corruption

UK court forces Glencore to pay record £281m for bribery in Africa 

The mining and commodities giant Glencore will be made to pay £281m in fines, confiscated profits and costs as punishment for “sustained criminality”, the largest ever penalty imposed on a company in a UK court. Glencore employees and its agents had given bribes worth $27m to unnamed officials in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea, and South Sudan. 

“Companies that operate in the UK have to play by the rules. Glencore stands convicted of multiple accounts of bribing their way to favourable oil contracts around the world. And I am proud of the SFO team that used that global evidence to put together a complicated and important case, I am proud of their dedication and the ability to bring such an important company to justice.” 

~ Lisa Osofsky, SFO Director

Danske Bank braced for money-laundering fines of $2bn 

Danske Bank says it expects to pay around DKr15.5 billion (US$2 billion) to settle with US and Danish authorities in order to resolve one of the biggest money laundering scandals in recent years. The settlement follows the alleged laundering of up to €200bn (US$15.6 billion) by non-resident customers of its Estonia branch between 2007 and 2015. 

Airbus facing fresh bribery settlement 

French authorities are in talks with Airbus that could result in the expansion of the record multi-national bribery settlement agreed in 2020. The aircraft manufacturer is facing an investigation into alleged bribery in the sale of 21 jets to Libya in 2007, part of a wider probe into links with Libya under late leader Muammar Gaddafi. 

Watchdog warns vetting failings could mean ‘thousands’ of corrupt officers in police 

The Inspectorate of Constabulary has reported that an estimated 35,000 people working for police forces across England and Wales have not been properly vetted. The inspectorate stated that while vetting is the first line of defence for forces, it warned that over 10% of the police workforce do not have up-to-date vetting. 

MEPS claim Malta is granting golden visas to executives behind spyware firms 

European parliamentarians have expressed their concerns over claims that Malta is offering Golden Passports to the executives behind spyware firms. According to a Dutch Member of the European Parliament, through the scheme, Malta alongside Cyprus and Luxembourg are easing the proliferation of spyware. 

Sportsbet and Bet365 under investigation for suspected money laundering 

The Australian financial crime watchdog has launched an investigation into Sportsbet and Bet365 on suspicions they have failed to comply with anti-money laundering laws. The Australian Transaction Reports and Analysis Centre (Austrac) says it has “reasonable grounds to suspect the gambling companies had or were still contravening multiple sections of the anti-money laundering and counter-terrorism financing laws.

RiskScreen AML spotlight report

AML Vulnerabilities in the Crypto Sector

Download this valuable compliance analysis here.

The growth of digital and virtual currencies, and the services that surround them, has undoubtedly brought significant benefits, but these developments have not gone unnoticed by bad actors.

Criminals and their enablers spotted the opportunity to exploit this newly emerging, and therefore lightly regulated, area of financial services very early on. As a direct result, financial regulators are now taking a far greater interest in the crypto sector’s compliance with anti-money laundering (AML) and combating the financing of terrorism (CFT) legislation.

To ensure your business doesn’t fall foul of any new national and international legislation and regulatory requirements, this industry report will help you to identify any weaknesses in your existing compliance framework.
 
In this brand-new industry report, we examine:

– Where crypto businesses may be vulnerable to AML risk
– The current regulatory environment in the UK, EU, and US
– Screening for sanctions, ultimate beneficial owners (UBOs), and politically exposed persons (PEPs)
– How to ensure compliance with AML regulations
 
Download this valuable compliance analysis here.

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