AML – FinTech and Blockchain Law Watch

Change Is Constant* and There’s a lot of Regulatory Change Happening in the UK – Impacting Fintechs and Crypto Asset companies.

Jun 29 2022

Critical third party regime

This is to address the concentration issue where financial services firms outsource key functions/services to a few large service providers (e.g. cloud service providers). HM Treasury will designate which third party service providers are considered “critical”. Then the relevant regulators will be given power to make rules supervising them with respect to certain “material services”. See policy statement of 8 June.

AML Scrutiny in the UK: The Trend Towards Culture of Compliance

Jan 18 2022

By Kai Zhang

On 14 December 2021, National Westminster Bank Plc (“NatWest“), a major bank in the UK, was fined by the Financial Conduct Authority (“FCA“) close to £265 million for failure to comply with the relevant anti-money laundering (“AML“) requirements with respect to one single client, a Yorkshire jewelry company (“the Client”) during the period from 8 November 2012 to 23 June 2016 (the “relevant period“). The fine would have been nearly £398 million, but NatWest pleaded guilty and therefore was given a reduction. In addition, slightly over £460,000 of crime money was confiscated (which is essentially the fees NatWest gained from the Client.).

Global AML Regulator Amends Its International Standards for Virtual Assets

Nov 07 2018

By Jim Bulling and Felix Charlesworth

On 19 October 2018, the global anti-money laundering and counter terrorism financing watchdog, the Financial Action Task Force (FATF), made a series of amendments to its rules framework (Standards), in response to international developments in the use and exchange of virtual assets such as cryptocurrencies and other virtual tokens.

The Standards set out the FATF’s recommended framework of rules and measures which countries, including Australia, should adopt in order to combat money laundering and terrorist financing.

As part of the revised Recommendation 15, the FATF has written “to manage and mitigate risks emerging from virtual assets, countries should ensure that virtual asset providers are regulated for AML/CTF purposes“.

Worldwide Cryptocurrency AML Standards

Sep 20 2018

By Jonathan Lawrence

On 19 September, the president of the Financial Action Task Force (FATF), Marshall Billingslea, said he is optimistic that at its plenary, due in October 2018, the FATF will agree a series of updated standards. He said: “It is essential that we establish a global set of standards that are applied in a uniform manner”. He said that the task force has accelerated its work and made significant progress on reaching a “consensus across nations” after the G20 requested the organisation tackle the issue as a matter of urgency.

Australia’s New AML Rules: Reducing the Anonymity of Digital Currencies

Apr 05 2018

By Jim Bulling and Edwin Tan

The Australian Government has recently decided to regulate Digital Currency Exchange (DCE) providers, as they have inherent money-laundering and terrorism financing risks stemming from their high degree of anonymity and ease of cross-border transactions. As part of this regulation, DCE providers must provide regular reports to the Australian Transaction Reports and Analysis Centre (AUSTRAC). These reports must include, if known, the social media identifiers, unique device identifiers and digital wallet addresses of the relevant customer.

Many digital currencies operate on public blockchains that contain records of all transactions ever made, which is essential to their transaction validation and anti-tampering features. This public nature enables every client on the blockchain network to verify that any currency used in relation to a transaction actually exists, by looking through the transaction history of a particular digital wallet address. As such, being able to link digital wallet addresses to particular individuals will, over time, give AUSTRAC the power to trace suspicious transactions up the chain back to an individual. It may also be possible for the Australian Taxation Office to use this information in the future to ensure that individuals correctly report any capital gains resulting from the trading of digital currency for taxation purposes.

Digital currency exchange providers, do you need to register with AUSTRAC?

Jan 25 2018

By Jim Bulling and Michelle Chasser

Australian anti-money laundering regulator AUSTRAC has released draft AML/CTF Rules for consultation following recently passed amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act which expand Australia’s AML/CTF regime to digital currency exchanges. The amendments will come into effect from the date of Proclamation which is expected to be 1 April 2018.

Under the amendments exchanging digital currency for money (whether Australian or not) or exchanging money (whether Australian or not) for digital currency, where the exchange is provided in the course of carrying on a digital currency exchange business will attract obligations under the AML/CTF regime. Notably, exchanging one digital currency for another will not be regulated.

FinTech in the Fight Against Money Laundering

Dec 22 2017

By Jonathan Lawrence

Rob Gruppetta, Head of the Financial Crime Department at the UK Financial Conduct Authority (FCA), recently gave a speech at the FinTech Innovation in Anti-Money Laundering (AML) and Digital ID regional event, London about “Using artificial intelligence to keep criminal funds out of the financial system”. He considered whether machine learning and artificial intelligence (AI) techniques could help. Better transaction monitoring is not the only way AI can aid the fight against money laundering. The Financial Stability Board (FSB) published a report on 1 November about the impact of AI that identified other ways it can help. Examples include AI-driven anti-impersonation checks that evaluate whether photos in different identity documents match, and using machine learning to identify customers that may pose a higher risk and so warrant, say, a deeper probe into the sources of their wealth.

UK Treasury looking to regulate cryptocurrencies

Dec 10 2017

By Jonathan Lawrence

The UK Treasury is looking to regulate cryptocurrencies. Stephen Barclay, the economic secretary to the UK Treasury, recently answered a Parliamentary question as to what steps his department was taking to regulate (a) Bitcoin and (b) other cryptocurrencies. Mr Barclay answered that the UK government is currently negotiating amendments to the European Union (EU) Fourth Anti-Money Laundering Directive that will bring virtual currency exchange platforms and custodian wallet providers into Anti-Money Laundering and Counter-Terrorist Financing regulation, which will result in these firms’ activities being overseen by national competent authorities for these areas. He said that the UK government supports the intention behind these amendments. They expect these negotiations to conclude at an EU level in late 2017/early 2018. This development follows a recent UK Financial Conduct Authority warning on cryptocurrencies.

Federal Government extends AML/CTF regulation to capture digital currency exchanges

Aug 31 2017

By Michelle Chasser and Felix Charlesworth

On Thursday 17 August 2017, the Minister for Justice tabled the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017 (Bill).

The Bill will extend the Australian AML regime to cover digital currency exchange providers. Currently the AML regime applies only to ‘e-currencies’ which are backed by physical things such as bullion or precious metals while digital currencies backed by a cryptographic algorithm such as Bitcoin are excluded. The Bill repeals the definition of ‘e-currency’ and replaces it with the broader term ‘digital currency’ which is defined as a digital representation of value that:

functions as a medium of exchange;
is not issued by the authority of a government body;
is interchangeable with money; and
is generally available to members of the public.

RegTech and AML: New UK Report

Aug 14 2017

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) published a report on 2 August entitled “’New Technologies and Anti-Money Laundering Compliance”. The report details findings of three months of research by the authors PA Consulting. The work included over 40 interviews with regulated firms, technology providers, and other bodies. The report sets out respondents’ views on topics such as:

What are the key functions of new and emerging technologies related to anti-money laundering (AML) compliance, and how can they aid compliance activities?
What challenges do firms face in introducing new technologies?
What good practice examples and lessons are available for firms considering new compliance technologies?
What steps could the FCA take to encourage more innovation in AML compliance?

Tag:AML