Anti-money laundering and terrorist financing (AML/CFT) programs have faced a slew of regulatory changes in the past 18 months. Our team at Cadwalader talks about the latest in this ever-changing area of the law.
OFAC Name Matching and False-Positive Reduction TechniquesCognizant
Exploration of Office of Foreign Asset Control (OFAC) compliance and strategies to avoid false positives (and negatives), covering watch lists such as specially designated nationals (SDN), customer due diligence,data mining, probabilistic techniques and anti-money-laundering (AML) software.
Third Party Oversight and Monitoring: How to Establish an Effective Third Par...PECB
This presentation was delivered by Douglas Small, Director of the Berkeley Research Group’s Global Investigations, at the ISO 27001 & Anti-Bribery PECB Insights Conference.
Protecting Against Bribery Risk in Business Transactions: Developing an Effec...PECB
This presentation was delivered by John Boscariol, Partner in the Litigation Group at McCarthy Tétrault, at the ISO 37001 & Anti-Bribery PECB Insights Conference.
Performing due diligence investigations on an individual or company with a focus on financial resources, competence and reputation can be critical before making business decisions. In today’s fast-changing global marketplace, failure to conduct adequate due diligence can make an organization vulnerable to substantial losses and liabilities. The scope of a due diligence investigation may cover the legality of the source of investment funds, the transaction or litigation history of a counterparty, or other factual inquiries that may be required to close a deal. These investigations are particularly important if the parties are foreign, or if a proposed venture will operate in parts of the world where business is not adequately protected by contract law, making success heavily dependent on trust and good faith between the parties.
Interfor, Inc., a firm specializing in foreign and domestic corporate investigations since 1979, performs enhanced due diligence for clients who need comprehensive background information about new business relationships and prospective partners in mergers and acquisitions, joint ventures, venture capital investments or large loan transactions. All inquiries and findings are strictly confidential and are pursued in compliance with applicable law.
Customer Due Diligence: Improving Screening Processes for OFAC Entities and O...SHAUN HASSETT
Update on current OFAC Screening Requirements and How to Improve the Screening Processes as part of your overall Customer Due Diligence Program.
For more information about this topic, please contact SHAUN HASSETT at due_diligence@att.net
FCPA Enforcement Tends and Their Impact on Corporate Compliance ProgramsPECB
This presentation was delivered at the ISO 37001 & Anti-Bribery PECB Insights Conference by William Marquardt, Director at Berkeley Research Group LLC in Florida
NICSA Webinar | AML Enhanced Customer Due Diligence - "Beneficial Owner Rule"NICSA
The wait is finally over, after years of waiting we now have the final Customer Due Diligence Rule. This new rule will require financial institutions to enhance their AML programs to further scrutinize entity accounts and their beneficial owners. The panel will detail key requirements and dates while comparing the CDD rule to the EU 3rd directive.
OFAC Name Matching and False-Positive Reduction TechniquesCognizant
Exploration of Office of Foreign Asset Control (OFAC) compliance and strategies to avoid false positives (and negatives), covering watch lists such as specially designated nationals (SDN), customer due diligence,data mining, probabilistic techniques and anti-money-laundering (AML) software.
Third Party Oversight and Monitoring: How to Establish an Effective Third Par...PECB
This presentation was delivered by Douglas Small, Director of the Berkeley Research Group’s Global Investigations, at the ISO 27001 & Anti-Bribery PECB Insights Conference.
Protecting Against Bribery Risk in Business Transactions: Developing an Effec...PECB
This presentation was delivered by John Boscariol, Partner in the Litigation Group at McCarthy Tétrault, at the ISO 37001 & Anti-Bribery PECB Insights Conference.
Performing due diligence investigations on an individual or company with a focus on financial resources, competence and reputation can be critical before making business decisions. In today’s fast-changing global marketplace, failure to conduct adequate due diligence can make an organization vulnerable to substantial losses and liabilities. The scope of a due diligence investigation may cover the legality of the source of investment funds, the transaction or litigation history of a counterparty, or other factual inquiries that may be required to close a deal. These investigations are particularly important if the parties are foreign, or if a proposed venture will operate in parts of the world where business is not adequately protected by contract law, making success heavily dependent on trust and good faith between the parties.
Interfor, Inc., a firm specializing in foreign and domestic corporate investigations since 1979, performs enhanced due diligence for clients who need comprehensive background information about new business relationships and prospective partners in mergers and acquisitions, joint ventures, venture capital investments or large loan transactions. All inquiries and findings are strictly confidential and are pursued in compliance with applicable law.
Customer Due Diligence: Improving Screening Processes for OFAC Entities and O...SHAUN HASSETT
Update on current OFAC Screening Requirements and How to Improve the Screening Processes as part of your overall Customer Due Diligence Program.
For more information about this topic, please contact SHAUN HASSETT at due_diligence@att.net
FCPA Enforcement Tends and Their Impact on Corporate Compliance ProgramsPECB
This presentation was delivered at the ISO 37001 & Anti-Bribery PECB Insights Conference by William Marquardt, Director at Berkeley Research Group LLC in Florida
NICSA Webinar | AML Enhanced Customer Due Diligence - "Beneficial Owner Rule"NICSA
The wait is finally over, after years of waiting we now have the final Customer Due Diligence Rule. This new rule will require financial institutions to enhance their AML programs to further scrutinize entity accounts and their beneficial owners. The panel will detail key requirements and dates while comparing the CDD rule to the EU 3rd directive.
This presentation was delivered at the ISO 37001 & Anti-Bribery PECB Insights Conference by Serge Barbeau, Senior Advisor and Project Director at Gestion Jean Bourdeau Inc. in
Canada.
StubbsGazette AML/CFT EBook for Credit UnionsStubbsGazette
A comprehensive guide to Anti Money Laundering/Countering the Financing of Terrorism in the Irish Credit Union Sector (also highly relevant to other regulated sectors)
NICSA Webinar | SEC Transfer Agent Rule RevampNICSA
In late December 2015, the SEC issued an Advanced Notice of Proposed Rulemaking and Concept Release for Transfer Agent Regulations. This release discusses potential changes to rules that have remained largely unchanged for nearly 40 years, and includes a number of key considerations for industry players.
Join us for a discussion of the release from 3 perspectives: Mutual Funds Transfer Agent, Operating Company Transfer Agent, and Retirement Record-keeper. Our panel of experts will outline key components of the release that would be impactful to their lines of business, and will share their perspectives on the release.
In this webinar, the attendees will:
- Gain insight into how a single release impacts different lines of business.
- Learn more about the differences between servicing Funds investors and Operating Company investors.
- Hear more about how the Retirement record-keepers who service plan investors are currently regulated.
Bovill - the UK financial services regulatory consultancy - runs regular briefings. These are the slides from the February briefing on anti-money laundering. For more information visit http://www.bovill.com/FinancialCrime.aspx.
Information on the event is below:
Taking a company-wide approach to money laundering
“The FCA has made it very clear that responsibility for the overall culture of firms sits at the top. We need leaders and senior managers within the industry to set the tone for how their staff behave.”
Tracey McDermott, Director of Enforcement and Financial Crime, FCA
The regulator has recently reiterated their intention to carry out further thematic and enforcement work in financial crime. However, many firms still have a fragmented approach to managing the risks of money laundering.
The responsibility for preventing financial crime is shared across the firm from the back office to the boardroom. Firms need to take a company-wide approach to tackling money laundering to ensure they are complying with regulation and managing risks effectively.
Bovill’s briefing looked at Anti-Money Laundering (AML), covering:
• Governance arrangements: as the foundation for effective communication and issue resolution
• Risk management: the difficulties of negotiating the right level of due diligence for higher risk customers and what tools can be used to help with this process
• Systems and controls: ensuring that these are fit for regulatory purpose and are appropriately maintained within your firm.
Misconduct or Missed Conduct? Ensuring Consistent SAR Reporting of Internal M...Case IQ
Case management is an integral component of any institution’s overall compliance program, let alone those with suspicious activity report (“SAR”) filing responsibilities. However, misconduct is often reported through multiple channels such as whistleblower complaints, HR, and even through a company’s legal department. If misconduct requires SAR filing, input from HR, and advice from legal, but comes in through possibly siloed teams, how can a company feel confident that they are accurately capturing and consistently dispositioning these cases?
The answer boils down to an often-overlooked area – case management systems.
Join financial crime compliance advisory and training specialist Michael Schidlow, as he explains best and worst practices in the field, gives tips on what case management tools should always and shouldn’t ever do, and describes how to utilize metrics from those systems to get an accurate snapshot of their company’s risk profile.
Compliance Abhors a Vacuum - If the Void is Filled with Heightened BSA Scruti...CBIZ, Inc.
Bank Secrecy Act (BSA) violations may be the next big regulatory target - and can be very costly. Two cases and takeaways to consider before bank examiners come knocking.
Operational innovations in AML/CFT compliance processes and financial inclus...CGAP
This report contains the findings of a research project to identify and categorize leading operational AML* compliance practices among financial service providers for the identification, verification and ongoing monitoring and management of lower income customers. This project began with the hypothesis that an increasing number of financial service providers with products targeting lower income population segments are reducing client acquisition and monitoring costs, and improving efficiency and effectiveness of the processes in scope.
During this briefing we looked at two distinct hot topics, Deferred Prosecution Agreements and Correspondent Banking. The discussion focused on the evolving challenges and practical compliance tips
This presentation was delivered at the ISO 37001 & Anti-Bribery PECB Insights Conference by Ralph Haddad, Global Compliance Leader at Anti-Corruption at CAE Inc.
ICIL is one among few companies in Pakistan who is providing key AML solutions in accordance with country AML regulatory framework to Pakistan banking industry & sectors regulated by State Bank of Pakistan (SBP) & Security & Exchange Commission of Pakistan (SECP).
Deloitte has been at the forefront of providing services to help clients - especially for some of the leading financial institutions - to help deal with myriad business and compliance issues presented by financial crime. See More : https://www2.deloitte.com/in/en/pages/finance/topics/forensic.html
Research paper - Forensic investigation, due diligenceHarsh Chitroda
Topic: Importance of Business Intelligence Services - Forensic Investigation, Due diligence in the current business scenario. The type of research method used in the paper was a qualitative one and obtained from real experience working at Deloitte.
This presentation was delivered at the ISO 37001 & Anti-Bribery PECB Insights Conference by Serge Barbeau, Senior Advisor and Project Director at Gestion Jean Bourdeau Inc. in
Canada.
StubbsGazette AML/CFT EBook for Credit UnionsStubbsGazette
A comprehensive guide to Anti Money Laundering/Countering the Financing of Terrorism in the Irish Credit Union Sector (also highly relevant to other regulated sectors)
NICSA Webinar | SEC Transfer Agent Rule RevampNICSA
In late December 2015, the SEC issued an Advanced Notice of Proposed Rulemaking and Concept Release for Transfer Agent Regulations. This release discusses potential changes to rules that have remained largely unchanged for nearly 40 years, and includes a number of key considerations for industry players.
Join us for a discussion of the release from 3 perspectives: Mutual Funds Transfer Agent, Operating Company Transfer Agent, and Retirement Record-keeper. Our panel of experts will outline key components of the release that would be impactful to their lines of business, and will share their perspectives on the release.
In this webinar, the attendees will:
- Gain insight into how a single release impacts different lines of business.
- Learn more about the differences between servicing Funds investors and Operating Company investors.
- Hear more about how the Retirement record-keepers who service plan investors are currently regulated.
Bovill - the UK financial services regulatory consultancy - runs regular briefings. These are the slides from the February briefing on anti-money laundering. For more information visit http://www.bovill.com/FinancialCrime.aspx.
Information on the event is below:
Taking a company-wide approach to money laundering
“The FCA has made it very clear that responsibility for the overall culture of firms sits at the top. We need leaders and senior managers within the industry to set the tone for how their staff behave.”
Tracey McDermott, Director of Enforcement and Financial Crime, FCA
The regulator has recently reiterated their intention to carry out further thematic and enforcement work in financial crime. However, many firms still have a fragmented approach to managing the risks of money laundering.
The responsibility for preventing financial crime is shared across the firm from the back office to the boardroom. Firms need to take a company-wide approach to tackling money laundering to ensure they are complying with regulation and managing risks effectively.
Bovill’s briefing looked at Anti-Money Laundering (AML), covering:
• Governance arrangements: as the foundation for effective communication and issue resolution
• Risk management: the difficulties of negotiating the right level of due diligence for higher risk customers and what tools can be used to help with this process
• Systems and controls: ensuring that these are fit for regulatory purpose and are appropriately maintained within your firm.
Misconduct or Missed Conduct? Ensuring Consistent SAR Reporting of Internal M...Case IQ
Case management is an integral component of any institution’s overall compliance program, let alone those with suspicious activity report (“SAR”) filing responsibilities. However, misconduct is often reported through multiple channels such as whistleblower complaints, HR, and even through a company’s legal department. If misconduct requires SAR filing, input from HR, and advice from legal, but comes in through possibly siloed teams, how can a company feel confident that they are accurately capturing and consistently dispositioning these cases?
The answer boils down to an often-overlooked area – case management systems.
Join financial crime compliance advisory and training specialist Michael Schidlow, as he explains best and worst practices in the field, gives tips on what case management tools should always and shouldn’t ever do, and describes how to utilize metrics from those systems to get an accurate snapshot of their company’s risk profile.
Compliance Abhors a Vacuum - If the Void is Filled with Heightened BSA Scruti...CBIZ, Inc.
Bank Secrecy Act (BSA) violations may be the next big regulatory target - and can be very costly. Two cases and takeaways to consider before bank examiners come knocking.
Operational innovations in AML/CFT compliance processes and financial inclus...CGAP
This report contains the findings of a research project to identify and categorize leading operational AML* compliance practices among financial service providers for the identification, verification and ongoing monitoring and management of lower income customers. This project began with the hypothesis that an increasing number of financial service providers with products targeting lower income population segments are reducing client acquisition and monitoring costs, and improving efficiency and effectiveness of the processes in scope.
During this briefing we looked at two distinct hot topics, Deferred Prosecution Agreements and Correspondent Banking. The discussion focused on the evolving challenges and practical compliance tips
This presentation was delivered at the ISO 37001 & Anti-Bribery PECB Insights Conference by Ralph Haddad, Global Compliance Leader at Anti-Corruption at CAE Inc.
ICIL is one among few companies in Pakistan who is providing key AML solutions in accordance with country AML regulatory framework to Pakistan banking industry & sectors regulated by State Bank of Pakistan (SBP) & Security & Exchange Commission of Pakistan (SECP).
Deloitte has been at the forefront of providing services to help clients - especially for some of the leading financial institutions - to help deal with myriad business and compliance issues presented by financial crime. See More : https://www2.deloitte.com/in/en/pages/finance/topics/forensic.html
Research paper - Forensic investigation, due diligenceHarsh Chitroda
Topic: Importance of Business Intelligence Services - Forensic Investigation, Due diligence in the current business scenario. The type of research method used in the paper was a qualitative one and obtained from real experience working at Deloitte.
Compliance Risk Assessment Fall 2016 Class 7 Stephen Paine .docxaryan532920
Compliance Risk Assessment
Fall 2016 Class 7
Stephen Paine
Jay Holtmeier, Guest Lecturer
Compliance Risk by Area:
Anti-Corruption and Insider Trading
Recap of Class 1
Pfizer Case Study and Compliance Risks
Legal and Regulatory Incentives/Conflicts of Interest
Political Failure of Controls
Reputational Recidivism
Point of Sale/Distribution
Definitions
Compliance Risk is the risk of failing to comply with applicable legal or regulatory requirements resulting in a material loss (financial or reputational) or legal/regulatory sanction
A Compliance Risk Assessment is a framework to enable the evaluation and analysis of the overall Compliance risk (both inherent risks and control effectiveness) associated with a particular business area
Recap of Class 2
The Five Elements of an Effective Compliance Program
Tone at the Top
Enron Chronology: July 1985 Enron established through merger and by November 2006 entire senior management team has either been indicted or convicted with Enron and Arthur Andersen no longer operating
Corporate Culture and Communication
Codes of Conduct set the values for employees to follow and those values are based on Compliance Risk.
3. Compliance Risk Assessment
4. Testing and Monitoring
5. Chief Compliance Officer
Case Study: HSBC
Financing drug cartels
Permitting sanctioned regimes to process dollar payments
Claw back of compensation (including Compliance Officers)
Criminal charges for “failure to maintain an effective AML program”
Recap of Class 3
Compliance Tools/Controls
Advisory Function
Coverage of Front Office and Technology, Finance and Operations
Conflicts of Interest -- A Deep Dive
Conflicts of interest are inherent in the financial services business
Historical success of the industry has been managing these conflicts by eliminating or disclosing them
Top to bottom review of business operations to address conflicts of interest of every kind
Risk Assessments
Follow-Up
Policies and Procedures
Education and Training
Compliance Surveillance and Business Unit Review and Testing
‹#›
Recap of Class 4
A Compliance Risk Assessment is a framework to enable the evaluation and analysis of the overall Compliance risk (both inherent risks and control effectiveness) associated with a particular business area
1. Identifying Business Area(s) and Metrics
2. Mapping Applicable Rules
3. Identifying Key Compliance Risks and Themes
4. Defining a Controls Inventory
5. Rating Control Effectiveness
6. Determining Residual Risks
7. Scoring, Rating and Reporting
It’s All About the Questionnaire . . .
Compliance Risk Assessment Steps
Identify Business Area and Metrics
Map Applicable Rules
Identify Key Compliance Risks & Themes
Define Controls Inventory
Rate Controls Effectiveness
Determine Residual Risk
Score, Rate and Report
Phase 2 of the Course
Assignments
Listen c ...
The SEC & FINRA released their priorities for 2016 examinations. Asset management firms need to review + update their policies, procedures and business activities to reflect both sets of priorities so they can strengthen business practices and prepare for potential exams.
Overcoming compliance fatigue - Reinforcing the commitment to ethical growth ...EY
This presentation is based on EY FIDS' 13th Global Fraud Survey. It highlights the state of fraud, bribery and corruption, comprising global as well as India findings.
For further information, please visit: http://www.ey.com/FIDS
Anti-Bribery and Corruption Compliance for Third PartiesDun & Bradstreet
In this white paper, Kelvin Dickenson, Managing Director of D&B Global Compliance Solutions, discusses thoughtful approaches to buidling a scalable, effective and proportionate anti-corruption program for third-party due dilligence.
Discus the development of the fraud examinerforensic accounting pro.pdfMALASADHNANI
Discus the development of the fraud examiner/forensic accounting profession since the 2001
Enron fraud. Discuss applicable standards and the core foundation of the profession.
Solution
Forensic accounting has been pivotal in the corporate agenda after the financial reporting
problems which took place in some companies around the world like Enron. These scandals
resulted in the loss of public trust and huge amounts of money. In order to avoid fraud and theft,
and to restore the badly needed public confidence, several companies took the step to improve
the infrastructure of their internal control and accounting systems drastically. It was this
development which increased the importance of accountants who have chosen to specialize in
forensic accounting and who are consequently referred as “forensic accountants.”
Forensic accounting relies on the fraud triangle to identify weak points in the business systems
and find possible suspects in cases of fraud. It consists of three core concepts which together
create a situation ripe for fraud: incentive, opportunity, and rationalization. People must have the
incentive and opportunity to commit financial fraud, as well as the ability to justify it. Recent
analysis has suggested adding a fourth concept to make a diamond—capability. Just because
someone has the opportunity or incentive to steal does not necessarily mean that they have the
capability to do so. For example, if someone does not understand how to make journal or ledger
entries in the books of accounts, they would not know how to manipulate numbers no matter
what the incentive or opportunity is.
The accounting scandals involving Enron, WorldCom, Global Crossing, and other companies
have put accountants in the public spotlight as never before in their history. After these
accounting scandals, public confidence in the accounting profession has been seriously
undermined. However, the scandals have created business for forensic accountants and
developed opportunities for forensic and investigative accounting. Forensic accountants have
been conducting these activities for quite some time in a quiet professional manner. New laws
and regulations resulting from these scandals will make the role of forensic accountants more
important than ever before in the business world.
Forensic accountants, also referred to as forensic auditors or investigative auditors, often have to
give expert evidence at the eventual trial. All of the larger accounting firms as well as many
medium-sized and boutique firms have specialist forensic accounting departments. Forensic
accountants utilize an understanding of business information and financial reporting systems,
accounting and auditing standards and procedures, evidence gathering and investigative
techniques, and litigation processes and procedures to perform their work. Forensic accountants
are also increasingly playing more proactive risk reduction roles by designing and performing
extended procedures as part of stat.
The Digital Asset Transfer Authority working groups seek to formulate best practices and standards for the emerging digital asset industry, which include virtual and digital currencies, smart contracts and other assets that exist online.
These draft guidelines created by DATA's AML/KYC working group are available for public comment and review as part of DATA's public policy engagement effort.
Chapter Introduction
Ditty_about_summer/ Shutterstock.com
Learning Objectives
The five Learning Objectives below are designed to help improve your understanding. After reading this chapter, you should be able to answer the following questions:
1. What are two different views of the role of business in society?
2. How do duty-based ethical standards differ from outcome-based ethical standards?
3. What is short-term profit maximization, and why does it lead to ethical problems?
4. What are the four steps in the IDDR approach to ethical decision making?
5. What ethical issues might arise in the context of global business transactions?
“New occasions teach new duties.”
James Russell Lowell 1819–1891 (American editor, poet, and diplomat)
One of the most complex issues that businesspersons and corporations face is ethics. Ethics is not as clearly defined as the law, and yet it can substantially impact a firm’s finances and reputation, especially when the firm is involved in a well-publicized scandal. Some scandals arise from conduct that is legal but ethically questionable. At other times, the conduct is both illegal and unethical. Business law and legal environment students must be able to think critically about both legal and ethical issues. As noted in the chapter-opening quotation, “New occasions teach new duties.”
Suppose that Finn Clayborn dropped out of Harvard University to start a company in Silicon Valley that developed and sold finger-prick blood-test kits. Clayborn raised millions from investors by claiming that his new technology would revolutionize blood testing by providing a full range of laboratory tests from a few drops of blood. The kits were marketed as a better alternative to traditional, more expensive lab tests ordered by physicians. They were sold at drugstores for a few dollars each and touted as a way for consumers to test their blood type and monitor their cholesterol, iron, and many other conditions. Within six years, Clayborn and his company were making millions. But complaints started rolling in that the test kits didn’t work and the results were not accurate (because more blood was needed). Numerous consumers, drugstores, and government agencies sued the company for fraudulent and misleading marketing practices. Clayborn’s profitable start-up now faces an uncertain future.
The goal of business ethics is not to stifle innovation. There is nothing unethical about a company selling an idea or technology that is still being developed. In fact, that’s exactly what many successful start-ups do—take a promising idea and develop it into a reality. But businesspersons also need to consider what will happen if new technologies do not work. Do they go ahead with production and sales? What are the ethical problems with putting a product on the market that does not function as advertised? To be sure, there is not always one clear answer to an ethical question. What is clear is that rushing to production and not thinking through ...
The 2017 Regulatory and Examination Priorities Letter1, published by FINRA on January 4th, is a fitting reminder of the resolve of Regulators to better execute their mission of investor protection and market integrity. Although the Libor and FX scandals might seem like distant memories, Regulators have continued on the war path. We would like to share some thoughts based on work we have been involved in last year. The idea is to help lawyers and banks have a grown-up discussion and be prepared if, or rather more likely, when, the Regulator knocks at the door.
The 2017 Regulatory and Examination Priorities Letter, published by FINRA on January 4th, is a fitting reminder of the resolve of Regulators to better execute their mission of investor protection and market integrity. Although the Libor and FX scandals might seem like distant memories, Regulators have continued on the war path. We would like to share some thoughts based on work we have been involved in last year in a regulatory competition investigation.
The 2017 Regulatory and Examination Priorities Letter1, published by FINRA on January 4th, is a fitting reminder of the resolve of Regulators to better execute their mission of investor protection and market integrity. Although the Libor and FX scandals might seem like distant memories, Regulators have continued on the war path. We would like to share some thoughts based on work we have been involved in last year. The idea is to help lawyers and banks have a grown-up discussion and be prepared if, or rather more likely, when, the Regulator knocks at the door.
Kaluwa Maitre-Avril, FICA takes a frank look at client onboarding procedures at Financial Institutions with a view to providing solutions that add value to the process and manage risks more effectively while making money safely.
This article first appeared in inCOMPLIANCE Issue 28 "Coming into focus" published March 2017. It is an official publication of the International Compliance Association, www.int-comp.org
An inside look at a cartel at work common characteristics of international ca...GE 94
hey were first shown publicly at the trial of three former top executives from Archer Daniels Midland Company ("ADM"). ADM and its co-conspirators from Europe and Asia conspired to fix prices and allocate sales volumes of the food additive citric acid and the feed additive lysine. ADM pled guilty before trial and was sentenced to pay a $100 million fine - which at the time was nearly seven times larger than the previous record fine in an antitrust case in the United States. The ADM executives were convicted at trial and were recently sentenced to fines of up to $350,000 and lengthy prison sentences ranging from 24 to 30 months.
Similar to Cannabis, Crypto, and Broker-Dealers in the AML hot seat (20)
How to Obtain Permanent Residency in the NetherlandsBridgeWest.eu
You can rely on our assistance if you are ready to apply for permanent residency. Find out more at: https://immigration-netherlands.com/obtain-a-permanent-residence-permit-in-the-netherlands/.
Car Accident Injury Do I Have a Case....Knowyourright
Every year, thousands of Minnesotans are injured in car accidents. These injuries can be severe – even life-changing. Under Minnesota law, you can pursue compensation through a personal injury lawsuit.
WINDING UP of COMPANY, Modes of DissolutionKHURRAMWALI
Winding up, also known as liquidation, refers to the legal and financial process of dissolving a company. It involves ceasing operations, selling assets, settling debts, and ultimately removing the company from the official business registry.
Here's a breakdown of the key aspects of winding up:
Reasons for Winding Up:
Insolvency: This is the most common reason, where the company cannot pay its debts. Creditors may initiate a compulsory winding up to recover their dues.
Voluntary Closure: The owners may decide to close the company due to reasons like reaching business goals, facing losses, or merging with another company.
Deadlock: If shareholders or directors cannot agree on how to run the company, a court may order a winding up.
Types of Winding Up:
Voluntary Winding Up: This is initiated by the company's shareholders through a resolution passed by a majority vote. There are two main types:
Members' Voluntary Winding Up: The company is solvent (has enough assets to pay off its debts) and shareholders will receive any remaining assets after debts are settled.
Creditors' Voluntary Winding Up: The company is insolvent and creditors will be prioritized in receiving payment from the sale of assets.
Compulsory Winding Up: This is initiated by a court order, typically at the request of creditors, government agencies, or even by the company itself if it's insolvent.
Process of Winding Up:
Appointment of Liquidator: A qualified professional is appointed to oversee the winding-up process. They are responsible for selling assets, paying off debts, and distributing any remaining funds.
Cease Trading: The company stops its regular business operations.
Notification of Creditors: Creditors are informed about the winding up and invited to submit their claims.
Sale of Assets: The company's assets are sold to generate cash to pay off creditors.
Payment of Debts: Creditors are paid according to a set order of priority, with secured creditors receiving payment before unsecured creditors.
Distribution to Shareholders: If there are any remaining funds after all debts are settled, they are distributed to shareholders according to their ownership stake.
Dissolution: Once all claims are settled and distributions made, the company is officially dissolved and removed from the business register.
Impact of Winding Up:
Employees: Employees will likely lose their jobs during the winding-up process.
Creditors: Creditors may not recover their debts in full, especially if the company is insolvent.
Shareholders: Shareholders may not receive any payout if the company's debts exceed its assets.
Winding up is a complex legal and financial process that can have significant consequences for all parties involved. It's important to seek professional legal and financial advice when considering winding up a company.
Military Commissions details LtCol Thomas Jasper as Detailed Defense CounselThomas (Tom) Jasper
Military Commissions Trial Judiciary, Guantanamo Bay, Cuba. Notice of the Chief Defense Counsel's detailing of LtCol Thomas F. Jasper, Jr. USMC, as Detailed Defense Counsel for Abd Al Hadi Al-Iraqi on 6 August 2014 in the case of United States v. Hadi al Iraqi (10026)
A "File Trademark" is a legal term referring to the registration of a unique symbol, logo, or name used to identify and distinguish products or services. This process provides legal protection, granting exclusive rights to the trademark owner, and helps prevent unauthorized use by competitors.
Visit Now: https://www.tumblr.com/trademark-quick/751620857551634432/ensure-legal-protection-file-your-trademark-with?source=share
NATURE, ORIGIN AND DEVELOPMENT OF INTERNATIONAL LAW.pptxanvithaav
These slides helps the student of international law to understand what is the nature of international law? and how international law was originated and developed?.
The slides was well structured along with the highlighted points for better understanding .
Responsibilities of the office bearers while registering multi-state cooperat...Finlaw Consultancy Pvt Ltd
Introduction-
The process of register multi-state cooperative society in India is governed by the Multi-State Co-operative Societies Act, 2002. This process requires the office bearers to undertake several crucial responsibilities to ensure compliance with legal and regulatory frameworks. The key office bearers typically include the President, Secretary, and Treasurer, along with other elected members of the managing committee. Their responsibilities encompass administrative, legal, and financial duties essential for the successful registration and operation of the society.
3. Jodi Avergun
Jodi Avergun is Chair of the firm’s White Collar Defense and Investigations Group and a noted expert in anti-
money laundering law and regulated substances. Her practice focuses on representing corporations and individuals
in criminal and regulatory matters involving, among other things, anti-money laundering, the Foreign Corrupt
Practices Act (FCPA), securities enforcement, healthcare, and general white collar matters.
She is the former Chief of the Narcotic and Dangerous Drug Section of DOJ’s Criminal Division and the former
Chief of Staff of the DEA. She is also a former federal prosecutor, having been an AUSA in the Eastern District of
New York for more than a decade. She represents companies and individuals in cases involving both traditional and
unusual applications of the Controlled Substances Act (CSA), and counts among her clients large and small
wholesale distributors, manufacturers, retail chains, and pharmacists. She successfully represented the employees
of FedEx in grand jury investigations and at trial, successfully represented the clubs of the NFL in CSA-related
matters, and is the first independent reviewer appointed to oversee a CSA settlement. She also advises clients in the
burgeoning legal cannabis space, particularly as it relates to banking and financial transactions. She has written and
lectured widely on all aspects of controlled substance law, and is a regular speaker and commentator at business
seminars and conferences. Jodi was selected to Global Investigation Review’s Who’s Who Legal: Investigations
2017, and was named a top 100 Women in Investigations in 2018 in the white-collar criminal defense area.
4. Todd Blanche
Todd Blanche is a partner in Cadwalader’s global litigation group. His practice focuses on representing
corporations and individuals in criminal and regulatory matters involving all types of white collar investigations,
prosecutions and enforcement actions. He has successfully represented both companies and individuals facing
grand jury subpoenas, criminal charges, regulatory inquiries and actions, and internal investigations. A former
assistant US attorney for the Southern District of New York, he has extensive experience investigating all manner
of white collar crime.
5. Joseph V. Moreno
Joseph Moreno, a former federal prosecutor, is a partner in Cadwalader’s white collar defence and investigations
group. Dual-qualified to practise in the United States and as a solicitor in England and Wales, he has extensive
litigation and crisis management experience handling complex matters involving the US Department of Justice,
the SEC, the US Department of Defense and other domestic and international regulators and law enforcement
agencies. Representative matters have involved money laundering and terrorist financing, cybersecurity and data
breach response, securities and accounting fraud, insider trading, the FCPA, the UK Bribery Act, and other
criminal and civil matters.
6. Christian Larson
Christian Larson is an associate with Cadwalader’s white collar defence and investigations practice in
Washington DC. He has experience in a broad range of anti-money laundering and other white collar matters,
including conducting investigations in response to government inquiries and designing policies and procedures to
comply with complex regulations. Prior to joining Cadwalader, he worked with the International Monetary Fund,
the Organization for Security and Co-operation in Europe (OSCE) and the US Department of Justice Asset
Forfeiture and Money Laundering Section. He has written numerous articles on anti-money laundering controls
and served as head of the OSCE delegation to the Financial Action Task Force.
7. Overview
Anti-money laundering (“AML”) programs have faced a slew of regulatory and enforcement changes in the past
18 months, and new challenges are on the horizon.
• This webinar will analyze the current state of play for financial institutions servicing cannabis businesses,
including outcomes from recent Congressional debate on the issue.
• It will also evaluate the latest developments affecting the AML programs of businesses dealing with
blockchain, cryptocurrency, or other digital assets.
• In addition, the webinar will identify trends and lessons learned from the SEC and FINRA’s enforcement focus
on broker-dealer AML programs.
• Finally, the webinar will provide an overview of expected changes to the Bank Secrecy Act and related
regulations in 2019.
8. Broker-Dealer AML Programs
• SEC and FINRA Examination Priorities
• FINRA Examination Findings
• Enforcement Actions
• Takeaways
9. SEC and FINRA Enforcement Focus on
Broker-Dealer AML Programs
• The SEC and FINRA published Examination Priorities for 2016, 2017, 2018
and 2019 included a focus on anti-money laundering programs
• Focus has been on three aspects of AML:
1. Whether AML programs are tailored to the specific risks each firm
faces
• E.g. risks faced by introducing broker-dealers as opposed to
clearing broker-dealers
2. How broker-dealers are monitoring for suspicious activity at the firm;
and
• E.g. penny stock / microcap fraud
3. Whether independent testing of the firm’s AML program is effective.
10. SEC and FINRA AML Examination Findings
1. Maintaining Adequate Policies and Procedures for Suspicious Activity
Some firms failed to establish and implement risk-based policies and procedures to detect and report
suspicious transactions. FINRA identified these deficiencies where, for example, a firm’s business growth far
outpaced the growth of its AML programs, a portion of a firm’s business involved a high-risk product (such as
microcap securities or dual currency bonds), or a firm’s business evolved over time and AML policies and
procedures were not updated and adequately tailored to the firm’s current risks, including with respect to how
potentially suspicious activity would be monitored and documented.
• The SEC’s enforcement Annual Reports for 2016, 2017,
and 2018 include no mention of anti-money laundering
enforcement
• FINRA’s Reports on Examination Findings include more
feedback
• FINRA’s published Examination Findings for 2017
identified five issues with broker-dealer AML programs:
11. 2017 FINRA Published Examination Findings (cont’d)
2. Responsibility for AML Monitoring
While firms are permitted to delegate aspects of their suspicious activity monitoring program to non-AML staff (e.g., to
business line staff responsible for trade surveillance), in some cases where this was done, FINRA observed that problems
sometimes arose with the appropriate and adequate escalation of potentially suspicious activity. Those problems typically
occurred when the AML and surveillance staff did not share a common understanding of the types of activities that merited
escalation or when staff did not escalate such activities appropriately. In some cases, the problems occurred because firms
did not: (1) clearly define the activities that were being delegated; (2) articulate those delegations and related surveillance
responsibilities in their written supervisory procedures; or (3) adequately train non-AML staff on AML surveillance policies
and procedures.
3. Exclusions From Data Feeds Used for AML Monitoring
FINRA also observed instances where firms’ monitoring systems were deficient due to gaps in the data feeding those
systems that were created, for example, by the use of “suspense accounts” to process foreign currency money movement
and conversion. The use of suspense and other operational accounts sometimes obscured the source of funds to firms’
surveillance systems, resulting in weaker monitoring of high-risk transactions. FINRA also observed instances where firms
made decisions to exclude certain types of customer accounts from monitoring programs, but failed to document or, if
circumstances changed, revisit the risk-based rationale for the decision, again resulting in unidentified suspicious activity.
12. 2017 FINRA Published Examination Findings (cont’d)
4. Resources for AML Monitoring
FINRA also identified deficiencies due to policies and procedures not being implemented as a result of firms not providing
adequate resources to AML departments to carry out the responsibilities of the AML program. This result was more
common when a firm experienced significant growth but did not grow the firm’s AML program commensurately. The lack
of resources can lead to deficient monitoring or inadequate investigations of potentially suspicious activity.
5. Independent Testing of AML Monitoring
FINRA also observed that some firms did not ensure the independent testing required under FINRA Rule 3310(c) included a
review of how the firm’s AML program was implemented. Other weaknesses included firms not ensuring the independence
of the test, or not completing tests on an annual calendar year basis where the firm’s business warranted that regular testing.
13. 2018 FINRA Published Examination Findings
1. Questionable Ownership Status of Foreign Legal Entity Accounts
FINRA has observed increased trading by foreign legal entity accounts in similar low-float and low-priced securities. In
some instances, firms considered these accounts unrelated, but uncovered shared commonalities, which raised concerns
about potential ownership or control by similar beneficial owners. Examples of these commonalities included trading
directed from the same Internet Protocol locations, account funds sent from the same branches of a specific bank, accounts
with the same authorized traders, and accounts established with the same mailing address.
• FINRA’s examination findings for 2018 identified three additional issues with broker-dealer AML programs:
14. 2018 FINRA Published Examination Findings (cont’d)
2. No Documentation of Investigations of Potentially Suspicious Activity
Some firms that use exception reports did not document initial reviews and investigations into potentially suspicious activity
identified by the reports. This was particularly troubling where those firms failed to establish and implement a formal
investigation management process or document how they decided whether to file or not file Suspicious Activity Reports
(SARs).
3. Irregular and Undocumented 314(a) Searches
FINRA has found that some firms failed to comply with Section 314(a) of the USA PATRIOT Act, and did not conduct
reviews of FinCEN’s Secure Information Sharing System (SISS) on a bi-weekly basis or did not document their reviews
after the searches were complete. In other instances, firms also did not follow FinCEN’s guidance to print a confirmation
page from the SISS upon completing the review to evidence that they had performed the search and maintain records of
positive search results.
15. Enforcement Actions Against Broker Dealers
• Central States Capital Markets, LLC – December 2018
• SDNY announced first-ever criminal charges against a U.S. broker-dealer under the Bank Secrecy Act, and related
DPA with a fine of $400,000
• UBS Financial Services – December 2018
• $14.5 M penalty was shared with U.S. Treasury ($5 M), SEC ($5 M), and FINRA ($4.5 M)
• Morgan Stanley Smith Barney – December 2018
• FINRA settlement and fine of $10 M
16. Broker-Dealer AML Takeaways
• Enforcement against broker-dealers for AML violations is on the upswing
• Broker-dealers should candidly evaluate whether their current programs, practices, and controls meet regulatory
expectations
• FINRA’s examination findings are useful for understanding regulatory expectations, but each broker-dealer needs to
consider the specific AML risks present in its business, and whether its AML program is sufficiently mitigating
those risks
17. Financial Services for Cannabis
Businesses
• General U.S. Legal Principles Governing Cannabis
• Department of Justice Policy
• FinCEN Policy
• Appropriations Amendments
• Legal Developments in 2018
• Outlook for 2019
18. General U.S. Legal Principles Governing Cannabis
• U.S. Federal Law
⸰ The Controlled Substances Act (“CSA”) (21 U.S.C. § 801 et seq.)
‐ Cannabis is a Schedule I controlled substance; no legitimate medical use.
‐ The CSA makes the manufacture, distribution and possession with intent to distribute marijuana a felony.
‐ The CSA also criminalizes conspiracy to manufacture, distribute or possess with intent to distribute
marijuana.
‐ The CSA prohibits extraterritorial manufacture or distribution of controlled substances if the parties intend to
import drugs into the United States.
• U.S. State Law
⸰ More than 30 states currently permit prescribing and dispensing marijuana for medical use.
⸰ At least eight states also permit adult use of recreational marijuana. In these states, a medical reason to
grow, distribute, or dispense marijuana is not necessary.
⸰ In states that have either a medical or an adult-use scheme, there are generally detailed state regulations,
including licensing requirements, that a business must follow to be compliant with state law.
19. Department of Justice (“DOJ”) Policy
• 2013 Cole Memo
⸰ Instructed DOJ attorneys and law-enforcement officials to focus their marijuana-related CSA
enforcement on eight enforcement priorities (e.g. funding gang activity)
⸰ Notes that, outside of these enforcement priorities, the federal government traditionally relies on state
and local law-enforcement agencies to address marijuana activity through enforcement of their own
narcotics laws
• 2014 Cole Memo
⸰ DOJ will not prosecute marijuana-related financial crimes where federal enforcement priorities are not
implicated
20. Financial Crimes Enforcement Network (“FinCEN”)
Policy
• 2014 FinCEN Guidance (FIN-2014-G001)
⸰ Concurrent with the release of the 2014 Cole Memo.
⸰ Clarified BSA expectations for financial institutions seeking to provide services to Marijuana-
Related Businesses (“MRBs”).
⸰ Permissive structure: The stated goal in the guidance was to clarify “how financial institutions can
provide services to MRBs consistent with their BSA obligations.”
⸰ Made clear that state legalization of marijuana does not affect a financial institution’s obligation to file
a Suspicious Activity Report (“SAR”) where the financial institution knows, suspects, or has reason to
suspect that a transaction conducted or attempted by, at, or through the financial institution:
⸰ involves funds from illegal activity or is an attempt to disguise funds derived from illegal activity;
⸰ is designed to evade regulations promulgated under the BSA; or
⸰ lacks a business or apparent lawful purpose.
21. 2014 FinCEN Guidance (cont’d)
⸰ SARs must be filed for MRBs, which the guidance does not define.
⸰ Three types of SARS defined (in ascending order of seriousness):
⸰ “Marijuana Limited” SAR Filing. A financial institution should file a “marijuana limited” SAR regarding an
MRB that the financial institution “reasonably believes, based on its customer due diligence, does not implicate
one of the Cole Memo priorities or violate state law . . . .”
⸰ SAR needs to contain only basic information about the subject or parties.
⸰ “Marijuana Priority” SAR Filing. Financial institutions should file a “marijuana priority” SAR regarding an
MRB that the financial institution “reasonably believes, based on its customer due diligence, implicates one of
the Cole Memo priorities or violates state law.”
⸰ SAR “should include comprehensive detail” about the subject or parties and the enforcement priorities the
financial institution believes are implicated.
⸰ “Marijuana Termination” SAR Filing. Financial institutions should file a “marijuana termination” SAR when
the financial institution “deems it necessary to terminate a relationship” with an MRB “in order to maintain an
effective” AML compliance program.
⸰ SAR should include “the basis for the termination.”
22. 2014 FinCEN Guidance (cont’d)
⸰ Minimum Elements for Proper Due Diligence:
⸰ In assessing the risk of accepting an MRB customer, financial institutions should conduct due diligence,
including:
⸰ Verifying with the appropriate state authorities whether the business is duly licensed and registered;
⸰ Reviewing the license application (and related documentation) submitted by the business for obtaining a state license to
operate as an MRB;
⸰ Requesting from state licensing and enforcement authorities available information about the business and related
parties;
⸰ Developing an understanding of the normal and expected activity for the business, including the types of products to be
sold and the type of customers to be served;
⸰ Ongoing monitoring of publicly available sources for adverse information about the business and related parties,;
⸰ Ongoing monitoring for suspicious activity, including for any of the red flags described in the guidance; and
⸰ Refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk.
25. Appropriations Amendments
⸰ First passed in 2014, Rohrabacher-Blumenauer (then known as Rohrabacher-Farr) is an amendment to the
annual appropriations bill that prohibits the DOJ from using federal funds to interfere with state legal
medical marijuana programs.
⸰ Only applies to medical marijuana cases.
⸰ The appropriations prohibition has been upheld in court as prohibiting federal prosecutions against
medical marijuana growers.
⸰ As a part of the annual appropriations budget, this amendment needs to be renewed each time a new
budget passes.
⸰ A measure to apply appropriations prohibitions like the Rohrbacher amendment to FinCEN was voted
down in the house.
26. Cannabis-Related Legal Developments in 2018
⸰ January 2018
⸰ The 2013 and 2014 Cole Memos were rescinded.
⸰ Federal prosecutors are no longer required to decline prosecution of state legal MRBs. Instead they are to
consider their resources and balance equities appropriately.
⸰ FinCEN guidance was not rescinded.
⸰ But given its reliance on the Cole Memo, it is of somewhat less comfort than it was previously.
⸰ June 2018
⸰ Senators Warren and Gardner sponsored a bill (STATES Act) which provides that the CSA does not apply to any
person acting in compliance with the cannabis legalization laws of their states. Senator McConnell said he would
allow this bill to come to the floor for a vote, and President Trump even indicated he might support it.
⸰ If enacted as law, the bill would likely change the analysis on the AML risks inherent in banking MRBs
outside the United States. It will largely depend on the wording of the bill.
27. Banking Developments
• Although some banks serve MRBs, the situation remains difficult:
• Costs: Many banks charge high fees for MRBs
• Instability: Banks that publicized their services to MRBs have changed course (M Bank, First
Security Bank of Nevada)
• No new banks for MRBs: The Federal Reserve denied a master account to The Fourth Corner Credit
Union (TFCCU), a new CU which explicitly included MRBs in its field of membership
• A Federal Court held that TFCCU had no right to a master account
• Fintech startups have attempted to fill the banking void by enabling cashless transactions, but have
shortcomings:
• Do not eliminate BSA obligations of banks that ultimately receive funds
• Lack sufficient network effects to be attractive to MRBs
28. • SAFE Banking Act
• Designed to give financial institutions comfort sufficient to provide services to cannabis-related businesses
• Defines “cannabis-related legitimate business” and “service provider”
• If enacted as law:
• Would make clear that a transaction does not involve proceeds of an unlawful activity under 18 U.S.C. §
1956 solely because the transaction involves a state-authorized cannabis-related legitimate business or
service provider;
• Would protect a financial institution’s officers, directors, and employees from liability under any Federal
law or regulation solely for providing financial services to a state-authorized cannabis-related legitimate
business or service provider; and
• Would require FinCEN to issue (and financial institutions to follow) special SAR-filing guidance.
• First-ever House hearing on marijuana-related banking was held in February 2019
• Legalization of Cannabis in Canada
• Has generated a number of questions about whether and how a U.S. financial institution can provide financial
services, including IPO underwriting and share custody services, to Canadian cannabis businesses
Outlook for 2019
29. AML for Cryptocurrencies &
Digital Assets
• Blockchain technology
• Cryptocurrencies and digital assets
• Anonymity
• AML for “Money Services Businesses”
• Financial Institutions serving cryptocurrency or digital asset businesses
• Financial Institutions that are cryptocurrency or digital asset businesses
• Latest developments
30. Blockchain Technology
• Blockchain & Distributed Ledger Technology
• Blockchain is a shared, digitized ledger designed to be unchangeable once a transaction
has been recorded and verified
• The ledger is available to all parties to the transaction, and many third parties, making it
difficult to amend every copy of the ledger globally to fake a transaction
• Blockchain technology offers many advantages and some disadvantages
• Peer-to-peer global transactions
• Permits traceability (immutable record on all network devices, with time stamps)
• For AML purposes, there are two key considerations:
• Blockchain’s ability to move value; and
• Blockchain’s pseudonymous nature
31. Cryptocurrencies & Digital Assets
• There is no single set of definitions used by regulators, market participants or others to describe
assets represented on blockchain.
• For our purposes, there are three categories to consider:
• Cryptocurrency / Virtual Currency
• E.g. Bitcoin or Ethereum, which regulators generally treat as funds
• Initial Coin Offerings (“ICOs”)
• Regulators generally treat as a security
• Utility Tokens
• Grant a right to use an application or service. Regulators are divided.
• Despite the wishes of many crypo-enthusiasts, most U.S. regulators (CFTC, FinCEN, IRS,
SEC, NY DFS) take the view that crypto assets are likely either a security or a virtual currency
32. Anonymity
• CDD on customers is controversial with some crypto-enthusiasts who value anonymity
• U.S. regulations do not prevent “users” from transacting directly and anonymously with one another
• Just as I could anonymously give $5 cash to a street vendor selling flowers, a “user” can
anonymously send cryptocurrency directly from one personal digital currency address to another
personal digital currency address
• But when a person is “in the business” of providing payments, custody, and exchange services the
BSA treats it as a financial institution offering the same services for funds or securities
• Anonymity may be popular, but under the BSA a financial institution should not permit it
• For BSA purposes, who is a financial institution?
33. AML for “Money Services Businesses” (MSBs)
• 2013 FinCEN Virtual Currency Guidance (FIN-2013-G001)
• Definitions:
• “Users” obtain virtual currency to purchase goods or
services
• “Exchangers” are persons engaged as a business in the
exchange of virtual currency for real currency, funds, or
other virtual currency
• “Administrators” are persons engaged as a business in
issuing (putting into circulation) a virtual currency, and
who have the authority to redeem (to withdraw from
circulation) such virtual currency
34. 2013 FinCEN Virtual Currency Guidance
• A person has AML obligations under the Bank Secrecy Act if it is a “money services business”
(“MSB”)
• “Users” are generally not MSBs and thus not subject to the BSA
• “Money transmitters” are MSBs and thus subject to the BSA’s AML requirements
• Both “exchangers” and “administrators” of virtual currency are “money transmitters” if they:
• Accept and transmit a convertible virtual currency; or
• Buy or sell convertible virtual currency for any reason.
35. 2013 FinCEN Virtual Currency Guidance (cont’d)
• Persons that are MSBs must do the following:
• Register with FinCEN as an MSB
• Establish a written risk-based AML program
• Appoint a compliance officer
• Train employees
• Maintain records of funds transmitted
• File currency transaction reports (“CTRs”) and suspicious activity reports (“SARs”)
• SAR threshold for MSBs is $2,000 – lower than for other financial institutions
• Comply with the Transfer Rule (for transfers over $3,000) and Travel Rule
• Conduct independent testing of the AML program and controls
• 2014 guidance addressed the application of FinCEN’s regulations to virtual currency mining operations, virtual
currency software development, and certain investment activity (See FIN-2014-R001 & FIN-2014-R002)
36. Financial Institutions that Serve Cryptocurrency and
Digital Asset Businesses
• CDD on customers should include:
• Customer identification
• What is the business? Is the customer meeting appropriate regulatory requirements?
• Is it a registered MSB? If so, review its AML program.
• Is it an unregistered business that should be registered as an MSB? If so, ask why
and consider whether it is appropriate to accept or keep the customer.
• Is it an issuer of an unregistered security?
• Is it an unregistered exchange or broker-dealer in securities?
• Who is behind the business?
• Is there material negative information in the public domain about the business or its
promoters? ICO fraud, hacks, and sales of unregistered securities are common.
37. Financial Institutions that Are Cryptocurrency and
Digital Asset Businesses
• First things first: Be ready to explain your business, MSB status, and any AML program to your bank
• CDD on customers should answer the following questions:
• Is the customer a “user?” If the customer is a business, what is the business? A falafel shop? A crypto
exchange? Is the customer meeting appropriate regulatory requirements? (Same inquiries as previous slide)
• Which digital currency address(es) does the customer control?
• Monitoring and controls
• What is the expected transactional profile for the customer? Are transaction limits appropriate?
• If enabling payments to third parties, screen those third parties’ digital addresses and names (if known) against
known lists of high-risk persons (e.g. OFAC’s SDN list, commercially available lists)
• This includes monitoring digital addresses for the proceeds of hacks or fraud, and the use of “mixers” or
“tumblers” designed to obfuscate the identity of persons associated with digital addresses
38. Latest Developments
• February 2018: FinCEN letter to Senator Wyden
• Emphasized that IRS examines MSBs for AML compliance, whereas SEC and CFTC have jurisdiction over AML
matters related to securities and derivatives. Also said issuers of ICOs may by MSBs
• (Note: most money transmitters are also bound by state registration and inspection requirements)
• September 2018: SEC brought first enforcement action against a person (TokenLot LLC) who allegedly acted as an
unregistered broker-dealer in connection with the sale of ICO tokens
• October 2018: FATF Recommendations updated to define “virtual assets” and to require countries to subject “virtual asset
service providers” to AML/CFT regulation
• FATF’s flexible requirements are unlikely to be a catalyst for regulatory harmonization around the globe
• November 2018: OFAC doxes the blockchain
• OFAC stunned some crypto enthusiasts by publicly identifying the digital currency addresses of two individuals
named to the SDN list
• OFAC also stunned some crypto businesses by making clear that they are expected to comply with OFAC
requirements by screening the digital currency addresses they do business with
39. Latest Developments (cont’d)
• February 2019: SEC enforcement action against Gladius Network ICO
• Until recently, SEC enforcement primarily focused on fraud – ICOs making untrue statements to solicit funds
• Then Gladius Network LLC raised $12.7 million from 1,700 investors in 2017, when it publicly offered and sold its
own proprietary digital coins in exchange for an established digital currency
• SEC charged Gladius with offering unregistered securities; Gladius settled with SEC and registered the securities
• March 2019: American Bar Association published “Digital and Digitized Assets: Federal and State Jurisdictional Issues”
• 353-page tome
• Describes how existing regulatory regimes for securities regulation and money transmission apply to digital assets
• Includes a 50-state survey and overview of regulatory developments in Europe and Asia
• Ongoing:
• Regulatory positioning for blockchain dominance: Bermuda (ICO legislation), Bahamas (digital currency pilot),
Gibraltar (“DLT Regulatory Framework”), Malta (“the Blockchain Island”)
40. Looking Ahead in AML
• Growing synergies between AML and sanctions enforcement and compliance programs
• AML regulators’ encouragement of “innovative approaches” (i.e. artificial intelligence)
• Expansion of FinCEN’s real estate geographic targeting orders
• European Commission blacklisting U.S. territories as AML-deficient
• Draft legislation to amend key aspects of the Bank Secrecy Act
41. Growing Synergies Between AML & Sanctions Programs
• December 2018: Treasury published a speech in which Under Secretary Sigal Mandelker described “hallmarks of an
effective sanctions program.” The “hallmarks” are highly similar to the “pillars” of an effective AML program:
• Ensuring senior management commitment to compliance;
• Conducting frequent risk assessments to identify and mitigate sanctions-specific risks within an institution and its
products, services, and customers;
• Developing and deploying internal controls, including policies and procedures, in order to identify, interdict,
escalate, report, and maintain records pertaining to activity prohibited by OFAC’s regulations;
• Engaging in testing and auditing, both on specific elements of a sanctions compliance program and across the
organization, to identify and correct weaknesses and deficiencies; and
• Ensuring all relevant personnel, particularly those in high-risk areas or business units, are provided tailored training
on OFAC obligations and authorities in general and the compliance program in particular.
• February 2019: OFAC Venezuela FAQ 650 states, “OFAC expects U.S. persons to conduct due diligence on their own
direct customers”
• Recent settlements point to OFAC’s view that these “hallmarks” are an industry best practice.
• Takeaway: Sanctions programs may begin to look more like AML programs.
42. Artificial Intelligence
• December 3, 2018: Joint Statement from FinCEN, the Federal Reserve, FDIC, NCUA and OCC (the “Agencies”) on
“Innovative Efforts to Combat Money Laundering and Terrorist Financing”
• Stated goal is “to encourage banks to consider, evaluate, and [. . .] responsibly implement innovative approaches to
meet [. . .] BSA/AML compliance obligations
• The Agencies “will not penalize or criticize” a bank that does not use innovative approaches, if its BSA/AML
program is effective and commensurate with the bank’s risk profile
• Pilot programs “should not” subject banks to regulatory action if the pilot is unsuccessful or the pilot exposes
compliance gaps – the Agencies will assess existing processes independent of the results of any pilot program
• Bank management should “prudently evaluate whether, and at what point, innovative approaches may be
considered sufficiently developed to replace or augment existing BSA/AML processes”
• The Joint Statement is merely guidance, and is not binding on the Agencies
• As a result, banks can take only limited comfort
43. Expansion of the Real Estate GTOs
• FinCEN’s real estate geographic targeting orders (GTOs) have, in various forms, been in place since 2016.
• They require title insurance agencies to collect information about the individual beneficial owner(s) of specified
residential real estate, when a legal entity purchases the property without a U.S. bank loan.
• The orders initially applied only to purchases of $3 million in Manhattan and $1 million in Miami, but other cities have
been added.
• In November 2018, FinCEN dropped the threshold to $300,000, and included transactions conducting in virtual
currency, greatly expanding the GTO’s reach.
• The GTO regime is still temporary, but legislation could make it permanent.
• H.R. 389 would require FinCEN to expand the current GTO to cover commercial real estate transactions as well.
44. European Commission Blacklisting U.S. Territories
• February 13, 2019: the European Commission published a list of jurisdictions it identified as having strategic
AML/CFT deficiencies.
• The list included 12 jurisdictions already on the FATF list of jurisdictions with strategic deficiencies, and added 11
additional jurisdictions, including the U.S. territories of American Samoa, Guam, Puerto Rico and the U.S. Virgin
Islands.
• The U.S. Treasury rejected the list, stating that it has “significant concerns about the substance of the list and the flawed
process by which it was developed.”
• Treasury stated that it does not expect U.S. financial institutions to take the European Commission’s list into account in
their AML/CFT policies and procedures.
• March 7, 2019: EU Member States unanimously reject the EC list as “not established in a transparent and resilient
process.”
• Summer 2019: The EC is expected to publish a new list.
45. Draft Amendments to the BSA
• Various drafts of legislation that would amend the BSA have been introduced in the past 18 months
• Earlier drafts included:
• Changes to the SAR and CTR thresholds (raising as high as $30,000 or pegging to inflation)
• Requirements that persons registering companies file beneficial ownership information with FinCEN
• The latest draft includes:
• Broader sharing of suspicious activity reports within a financial group
• Additional damages for repeat Bank Secrecy Act violators
• Prohibition on tax deductions for attorney fees related to Bank Secrecy Act settlements and court costs
• Application of Bank Secrecy Act to dealers in art or antiquities
• Encouragement for the use of technology in BSA compliance
• Will this be the big year that amendments are passed?