- The Regulation Process for FinCEN’s New Beneficial Ownership Reporting Requirement Launches
- The Department of Treasury Sanctions Individuals for Laundering Cryptocurrency for Lazarus Group
- Guilty Plea in DeepDotWeb Criminal Proceedings
- Japan Announces Plans to Adopt FATF Travel Rule for Crypto
- Canadian Securities Organizations Unveil Guidance on Treatment of Cryptocurrencies
US Regulatory Developments
The Regulation Process for FinCEN’s New Beneficial Ownership Reporting Requirement Launches
The Financial Crimes Enforcement Network (FinCEN) issued an Advanced Notice of Proposed Rulemaking (ANPRM) on Thursday to solicit public comment on a variety of questions related to implementing the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA), which became law on January 1, 2021.
The ANPRM is the first in a series of regulatory actions planned by FinCEN to implement the CTA, which is included within the Anti-Money Laundering Act of 2020 (AML Act). The AML Act was part of the FY 2021 National Defense Authorization Act, which was passed by Congress late last year.
The CTA amended the Bank Secrecy Act (BSA) to require corporations, limited liability companies, and similar entities to report information about their beneficial owners. The new reporting requirement is intended to enhance national security by making it more difficult for criminals to use shell companies to launder money, finance terrorism, or commit other crimes. FinCEN encourages all interested parties, especially those who will be affected by the beneficial ownership reporting requirements, to participate in the public comment process regarding this ANPRM.
Comments must be submitted by May 5, 2021.
The Department of Treasury Sanctions Individuals for Laundering Cryptocurrency for Lazarus Group
Last month, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned two Chinese nationals involved in laundering stolen cryptocurrency from a 2018 cybersecurity event against a cryptocurrency exchange. This intrusion is linked to Lazarus Group, a North Korean state-sponsored malicious cyber group—which the United States has designated as such. OFAC designated that Tian Yinyin and Li Jiadong materially assisted, sponsored, and provided financial, material, or technological support for the malicious cyber-enabled activity.
OFAC reports that the Democratic People’s Republic of Korea (DPRK) trains cyber actors to target and launder stolen funds from financial institutions. According to OFAC, Tian and Li received approximately $100 million from DPRK-controlled accounts originating from stolen funds obtained in several cryptocurrency exchange hacks. These actions appear to be part of a pattern and practice of DPRK-backed cyber attacks and laundering through Chinese banks.
Guilty Plea in DeepDotWeb Criminal Proceedings
An Israeli national, Tal Prihar, pleaded guilty this week for his involvement in operating DeepDotWeb (DDW). According to the Department of Justice (DOJ), the website connected internet users with Darknet marketplaces, where users could purchase “illegal firearms, malware and hacking tools, stolen financial data, heroin and fentanyl, and other contraband.”
According to court documents, Prihar, along with co-defendant Michael Phan, has owned and operated DDW since 2013. Through the website, users could access direct links to illegal Darknet marketplaces that are not accessible through traditional search engines. The defendants allegedly received kickback payments from the marketplaces in virtual currency, including approximately 8,155 bitcoins (worth approximately $18.4 million at the time of the transactions). To conceal the nature and source of these illegal kickback payments, Prihar transferred the payments from his DDW bitcoin wallet to other bitcoin accounts he controlled via shell companies. Federal authorities seized DDW in April 2019, and Prihar agreed to forfeit $8,414,173.
Prihar acknowledged his leadership role in operating the website, and he pleaded guilty to conspiracy to commit money laundering. He is awaiting sentencing and faces a potential maximum penalty of 20 years in prison for his acts.
International Regulatory Developments
Japan Announces Plans to Adopt FATF Travel Rule for Crypto
Japan’s Financial Services Agency (FSA) announced this week its plans to implement the FATF “travel rule” for the nation’s crypto industry to address money laundering concerns. The FSA issued a statement on Wednesday reporting that by April 2022, it intends to adopt the FATF rule requiring virtual asset service providers (VASPs) to share transaction data of senders and recipients.
FSA Press Release (March 31, 2021)
Canadian Securities Organizations Unveil Guidance on Treatment of Cryptocurrencies
The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) published a notice this week outlining securities law requirements that apply to crypto asset trading platforms (CTPs) and how they may be tailored by regulators for the CTP’s business model.
The guidance details the steps platform operators must take to comply with Canadian securities legislation as it integrates into the Canadian regulatory structure. The introduction describes the overall goal of the guidance as ensuring the balance between needing to be flexible to foster innovation in Canadian capital markets while also meeting the regulatory mandate of promoting and protecting investors and efficient capital markets.
The guidance provides an overview and application of securities legislation to CTPs (and a variety of business use cases), outlines an interim approach for how crypto contracts will be treated under the law in the short term, and establishes the application process to ensure proper entities are subject to regulatory oversight.
To comply, CTPs must contact their local securities regulator to discuss the registration process and address applicable requirements.