Jean-Jacques (J) Cabou

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Federal District Court Upholds Securities Indictment for ICOs but Defers Final Howey Determination in United States v. Zaslavskiy

This week, liberal pleading standards were applied to uphold the indictment in United States v. Zaslavskiy, the first criminal case examining whether ICOs are securities under U.S. law.
Continue Reading U.S. v. Zaslavskiy: Federal District Court Upholds Indictment for ICOs and Defers Final Howey Determination for Trial

On July 18, 2018, the Financial Action Task Force[1] (“FATF”), published its report to the July 2018 G20 Finance Ministers and Central Bank Governors’ meeting.[2] The report sets out FATF’s ongoing work to fight money laundering and terrorist financing, and in particular FATF’s work programme on virtual currencies, including the money laundering and…

In a recently published letter to the Senate Finance Committee, FinCEN confirmed that when an ICO token is a “convertible virtual currency,” administrators or exchangers of the token would be “money transmitters” under existing FinCEN regulations and interpretations.

Under the Bank Secrecy Act (BSA), a money transmitter must register with FinCEN as a money services business (MSB) and implement a risk-based anti-money-laundering (AML) compliance program. Pursuant to the BSA and its implementing regulations, an appropriate AML compliance program will include certain mechanisms for meeting the MSB’s transaction monitoring, reporting, and recordkeeping obligations—obligations that, in effect, require the MSB to know your customer. FinCEN’s letter to the Senate Finance Committee indicates that the agency is closely monitoring ICO tokens, as well as the developers and trading platforms that are issuing and exchanging ICO tokens, for BSA violations and trends or risks of associated money laundering, terrorist financing, and other financial crimes.
Continue Reading FinCEN Is Watching ICOs for BSA Violations

The Financial Action Task Force (FATF) has issued 2015 Guidance calling for a “risk-based approach” to virtual currencies.  This Guidance follows its 2014 initial Report on virtual currencies.  Since FATF’s 2014 Report, virtual currencies, the risks associated with them, and the individuals and entities using them have evolved substantially.  Law enforcement and regulatory agencies across…

Federal authorities announced this week a settlement with Ripple Labs Inc. and its subsidiary, XRP Fund II, resolving an investigation by FinCEN and the Department of Justice into violations of the Bank Secrecy Act.  The settlement generally calls for the company to pay $700,000 in fines and forfeitures, to move Ripple Trade (a version of the open source wallet software operated by Ripple Labs) to a registered Money Services Business, and to make changes to the AML compliance programs at Ripple Labs and its subsidiaries.
Continue Reading Federal Authorities Announce Settlement with Ripple Labs Inc. Resolving Investigation

This was a banner week in AML enforcement for the US Attorney’s Office for the Southern District of New York. First, the SDNY, on behalf of FinCEN, announced it has filed an enforcement action against Thomas Haider, the former Chief Compliance Officer of Moneygram International. The SDNY complaint alleges, among other things, that because of Haider’s actions and inactions, perpetrators of fraud and money laundering were allowed to use Moneygram’s services to facilitate their illegal schemes. The complaint seeks to enforce a $1M civil money penalty previously levied against Haider by FinCEN and to enjoin Haider from future work in the financial services industry. FinCEN’s individual targeting of the Chief Compliance Officer of not just any money services business, but of one of the world’s largest such businesses, is a further indication of FinCEN’s increasingly aggressive enforcement posture.
Continue Reading Busy Week for AML Enforcement in SDNY

Yesterday, December 16, 2014, the Conference of State Bank Supervisors (“CSBS”) released a Policy Statement on state virtual currency regulation, and a Draft Model Regulatory Framework (“Draft Framework”) to support its policy and to promote consistent regulation of virtual currency activities.  The Draft Framework lists numerous recommendations for state financial regulatory regimes applying to virtual currency activities and requests public comment on an extensive list of related questions.
Continue Reading Conference of State Bank Supervisors Releases Policy Statement and Draft Model Regulatory Framework for Virtual Currency

Please join us for a webinar addressing recently-proposed regulations for virtual currency companies proposed by the New York Department of Financial Services and how these proposed regulations might impact not only companies operating in New York but also companies dealing with New York-based customers and business partners.
Continue Reading Drastic Changes to Industry with Proposed New York Bitcoin Regulation

New York State DFS Superintendent Benjamin Lawsky today issued proposed rules applicable to virtual currency businesses. These proposed rules continue the DFS’s efforts to regulate this emerging, dynamic industry. As it has done in the past, the DFS seeks input from the public, soliciting comments on the proposed rules for 45 days after the proposed rules’ formal release on July 23, 2014.
Continue Reading NYDFS Issues Sweeping Proposal for Rules Governing Virtual Currency Businesses

The Texas Department of Banking released a “Supervisory Memorandum” on Thursday, April 03, 2014, providing its interpretation of Texas laws on currency exchange and money transmission as applied to virtual currency. After providing a thoughtful explanation of virtual currencies, the Memorandum then unambiguously concludes that “[b]ecause neither centralized virtual currencies nor cryptocurrencies are coin and paper money issued by the government of a country, they cannot be considered currencies under the [Texas currency exchange] statute.” Therefore, no license to engage in the exchange of virtual currency for fiat currency is required in Texas.
Continue Reading Texas Banking Department Provides Definitive Guidance for Virtual Currency in Texas.