Recent developments in the world of crypto have come at a rapid pace to open 2025 not only signaling but, in some instances, explicitly declaring the Trump Administration’s intent to significantly relax or eliminate regulation and enforcement in the crypto markets. On January 23, 2025, President Trump signed an executive order with the goal of
Does it matter if a law is valid if the Government refuses to enforce it? For months, we have watched (and blogged on) courts grappling with the constitutionality and enforceability of the Corporate Transparency Act (“CTA”). While, as we have blogged most recently here, courts have produced mixed returns on the validity of the
Developments concerning the enforceability and enforcement of the CTA came at a rapid clip this week. As things stand, the government may enforce the CTA pending a Texas court appeal in Smith v. U.S. Department of the Treasury. FinCEN indicated its intent to enforce the CTA but provided reporting companies with a revised deadline
The new administration has signaled that the Department of Justice (“DOJ”) will significantly shift its approach to criminal corporate enforcement. Specifically, on February 5, 2025, newly-confirmed United States Attorney General Pamela Bondi issued a memorandum (the “Bondi Memo”) that outlined the ways in which the DOJ will aim to eliminate cartels and transnational criminal organizations
The Fifth Circuit has granted the government’s request to stay temporarily the order and injunction issued by the United States District Court for the Eastern District of Texas, which had issued a nationwide stay prohibiting enforcement of the Corporate Transparency Act (“CTA”).
As we have blogged, on December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., the Eastern District of Texas issued an order (“Order”) granting a nationwide preliminary injunction that: (1) enjoined the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stayed all deadlines to comply with the CTA’s reporting requirements.
The Order created great uncertainty, if not chaos, because the CTA’s reporting deadline for covered entities existing prior to January 1, 2024 was January 1, 2025. The uncertainty regarding the status of the CTA was exacerbated last week during the looming federal showdown, in which the initially proposed budget stop-gap bill included language which would have extended the CTA’s filing deadline for previously-existing covered entities by one year. But, that initial spending bill did not pass, and the spending bill which ultimately did pass did not include any language regarding the CTA.
Nonetheless, these political machinations suggest that the CTA and its implementation may face a rocky road when the new administration takes over in January 2025. The CTA could be undone by Congress, or just not enforced by a new administration. Or the implementing regulations could be revised significantly. It’s very hard to predict right now.
Continue Reading Fifth Circuit Halts Nationwide Stay of CTA Enforcement
Following up on its Notice of Proposed Rulemaking (“NPR”), which we discussed back in March, the Financial Crimes Enforcement Network (FinCEN) released on August 28th a final rule extending Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) requirements to certain investment advisers (Final Rule).
The Final Rule adds “investment adviser” to the definition of “financial institution” at 31 C.F.R. 1010.100(t). The Final Rule applies to registered investment advisers (RIAs), and investment advisers (IAs) that report information to the Securities Exchange Commission (SEC) as exempt reporting advisers (ERAs), subject to certain exceptions. IAs generally must register with the SEC if they have over $110 million in assets under management (AUM). ERAs are investment advisers that (1) advise only private funds and have less than $150 million in AUM in the United States or (2) advise only venture capital funds.
The Final Rule requires certain IAs to: (1) develop and maintain an AML/CFT compliance program; (2) file Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs); (3) comply with the Recordkeeping and Travel Rules; (4) respond to Section 314(a) requests; and (5) implement special due diligence measures for correspondent and private banking accounts.
FinCEN released a Fact Sheet in conjunction with the Final Rule, which becomes effective January 1, 2026.
Continue Reading FinCEN Finalizes Rule Subjecting Investment Advisers to AML/CFT Regulations
On May 13th, the Financial Crimes Enforcement Network (FinCEN) and the Securities Exchange Commission (SEC) issued a joint notice of proposed rulemaking (NPRM) that would require SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to establish a customer identification program (CIP). This joint NPRM is the second recent rulemaking effort aimed at investment advisers. In February, FinCEN issued a separate NPRM amending the definition in the Code of Federal Regulations of “financial institution” under the Bank Secrecy Act (BSA) to include investment advisers, which would require implementation of an anti-money laundering/countering terrorist financing (AML/CFT) compliance program. In this earlier NPRM, FinCEN alluded to a future joint rulemaking regarding CIP requirements for investment advisers.
The NPRM highlights that CIPs are long-standing, foundational components of an AML program. The NPRM requires a CIP similar to existing CIP requirements for other financial institutions, as FinCEN and the SEC want to ensure “effectiveness and efficiency” for investment advisers that are affiliated with other financial institutions, including banks, broker-dealers, or open-end investment companies that are already subject to CIP requirements.
Investment advisers have not been previously subject to CIP requirements, unless they were also a registered broker-dealer, a bank, or an operating subsidiary of a bank, and therefore already covered separately by the BSA. In many cases, investment advisers already voluntarily comply with CIP requirements, or their functional equivalent.
This joint NPRM implements section 326 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”). Section 326 requires the Secretary of the Treasury to promulgate regulations setting forth the minimum standards for “financial institutions” regarding the identity of their customers in connection with the opening of an account at a financial institution. More specifically, and as the NPRM notes, the BSA defines “financial institution” to include, in a catch-all provision, “any business or agency which engages in any activity which the Secretary of the Treasury determines, by regulation, to be an activity which is similar to, related to, or a substitute for any activity in which any business described in this paragraph is authorized to engage[.]” That is the statutory authority upon which this NPRM and the earlier NPRM rest. If FinCEN’s proposed amendment to the regulatory definition of “financial institution” is finalized and survives any legal challenges, investment advisers will be required to implement and maintain a CIP, as well as AML programs.
Continue Reading FinCEN and SEC Propose Rulemaking Requiring CIP for Investment Advisers
Years in the making, on February 13, the Financial Crimes Enforcement Network (“FinCEN”) issued a notice of proposed rulemaking (“NPRM”) to include “investment adviser” (“IA”) within the definition of “financial institution” under the Bank Secrecy Act (“BSA”). FinCEN has posted a fact sheet on the NPRM here.
The NPRM subjects broad categories of IAs to statutory and regulatory anti-money laundering/countering terrorist financing (“AML/CTF”) compliance obligations. FinCEN is accepting comments on the NPRM until April 15, 2024.
Continue Reading FinCEN Seeks to Make Investment Advisers Subject to Bank Secrecy Act
Farewell to 2023, and welcome 2024. As we do every year, let’s look back.
We highlight 10 of our most-read blog posts from 2023, which address many of the key issues we’ve examined during the past year: criminal money laundering enforcement; compliance risks with third-party fintech relationships; the scope of authority of bank regulators; sanctions
As the world now knows, Binance Holdings Limited, doing business as Binance.com (“Binance” or the “Company”), has entered into a plea agreement with the U.S. Department of Justice (“DOJ”).
Binance is registered in the Cayman Islands and regarded as the world’s largest virtual currency exchange. It agreed to plead guilty to conspiring to willfully violating the Bank Secrecy Act (“BSA”) by failing to implement and maintain an effective anti-money laundering (“AML”) program; knowingly failing to register as a money services business (“MSB”); and willfully causing violations of U.S. economic sanctions issued pursuant to the International Emergency Economic Powers Act (“IEEPA”). Despite the plea agreement, Binance will continue to operate.
Changpeng Zhao, also known as “CZ,” also pleaded guilty to violating the BSA by failing to implement and maintain an effective AML program. Zhao is Binance’s primary founder, majority owner, and – until now – CEO. As part of his plea agreement, Zhao has stepped down as the CEO, although he apparently will keep his shares in Binance.
As part of its plea agreement, Binance has agreed to forfeit $2,510,650,588 and to pay a criminal fine of $1,805,475,575 for a total criminal penalty of $4,316,126,163. Binance also entered into related civil consent orders with the Financial Crimes Enforcement Network (“FinCEN”), the Commodity Futures Trading Commission (“CFTC”), and the Office of Foreign Assets Controls (“OFAC”). Zhao also entered into a consent order with the CFTC.
The allegations are vast and detailed, and much digital ink already has been spilled regarding this matter. Our discussion therefore will be relatively high-level. Distilled, the government alleges that Binance – under the direction of Zhao – tried to hide the fact that it operated in the U.S., purposefully avoided any meaningful AML compliance, and consequently laundered many millions of dollars’ worth of cryptocurrency involving extremely serious criminal conduct, including terrorism, child pornography, and U.S. sanctions evasion.
As for Zhao, and as we will discuss, whether he will go to prison – and if so, for how long – is an open and very interesting question. His sentencing currently is scheduled for February 23, 2024.