Below is a summary of some of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.
American Bankers Association and the American Bar Association Money Laundering Enforcement Conference – November 16, 2015 – Summary of Statements Made by Jennifer Shasky Calvery, Director FinCEN
FinCEN Director, Jennifer Shasky Calvery, spoke this week at the ABA/ABA Money Laundering Enforcement Conference. A summary of her statements follows:
• IRS Examination: FinCEN recently worked with the IRS to design and implement a training program for IRS examiners. The agency is implementing better coordination between state and federal examiners, and is considering developing joint state and IRS exams.
• Banks Not Responsible for Monitoring MSBs: Noting that MSBs are having difficulties maintaining banking relationships, Calvery stressed that banks are not expected to serve as de facto regulators and supervisors over MSBs, and are not responsible for monitoring MSB’s AML programs. However, Calvery reiterated that MSBs are expected to monitor the activities of their agents.
• Proposal to Include “Investment Advisor” in Definition of “Financial Institution” Under Bank Secrecy Act: FinCEN recently identified financial advisors as a gap in AML coverage. The agency recently proposed including investment advisors in the definition of “financial institution” under the BSA, requiring financial advisors to establish AML programs and file suspicious activity reports (SARs). The proposal would apply to investment advisors required to be registered with the SEC.
• Final Crowdfunding Rules Create Regulatory Gap over Funding Portals: FinCEN has identified a regulatory gap in the definition of broker or dealer in securities following the release of the final Crowdfunding Rules. Under the final rules, funding portals that facilitate crowdfunding are no longer brokers or dealers under the BSA and are therefore no longer required to register with the SEC. FinCEN plans to issue a Notice of Proposed Rulemaking to amend the definition of brokers and dealers to include funding portals.
Full report: [FinCEN ABA AML Conference Nov 2015]
FinCEN Director Emphasizes the Role Traditional Banking Methods Plays in Terrorist Financing.
At an anti-money laundering conference in Washington, FinCEN Director Jennifer Shasky Calvery said ISIL used traditional banking methods as well as digital currency to finance their operations, emphasizing the need to focus on both means of moving money.
UK Treasury – “Bitcoin Poses Low Money Laundering Risk.”
A report published by the UK last month found that digital currencies are a low risk for money laundering and terrorism financing. The majority of the illicit transactions involving virtual currencies involve online markets and the sale and purchase of controlled substances and firearms, rather than terrorism and money laundering. Where law enforcement officials have found money laundering, such activity has taken place at the exchange level involving franchise MSBs.
Central Bank of Canada Supports Development of Emerging Technology and Bitcoin in Finance Sector.
The central Bank of Canada’s second in command, Carolyn Wilkins, expressed the need for radical change in the approach concerning traditional finance and emerging technology. She stated on the Vancouver Sun “We have to envisage a world in which people mostly use e-money, perhaps even one that’s not denominated in the national currency, like Bitcoin.”
Taiwan Corrects Statements Made Earlier this Month Concerning the Legality of Bitcoin.
The Financial Supervisory Commission (FSC) in Taiwan released a new statement indicating that recent statements made earlier this month by Tseng Ming-Chung that bitcoin is “illegal” were not accurate. The FSC reiterated the statement it made at the end of 2013 defining bitcoin a “virtual commodity,” and due to the non-currency nature of bitcoin, banks are not permitted to receive or exchange bitcoin. This week’s statement confirmed the FSC’s position on virtual currencies remained the same.”