Today, the Financial Crimes Enforcement Network (“FinCEN”) issued a Notice regarding online child sexual exploitation. Given its brevity, its text is set forth below in its entirety, without the footnotes. There is a final section to the Notice, not included below, which provides filing instructions regarding related Suspicious Activity Reports, or SARs. We offer no
Amicus Briefs Urge that Only FinCEN, Not the SEC, Should Enforce the BSA in Regards to Broker-Dealers
In the next stage of the Alpine Securities saga (as we blogged about here, here and here), a petition for a writ of certiorari is pending before the Supreme Court, asking the Court to decide whether the Southern District of New York and the Second Circuit correctly decided that the Securities Exchange Commission (“SEC”) may bring suit directly to enforce compliance with the Bank Secrecy Act (“BSA”). Distilled, the Second Circuit and the District Court ruled that by promulgating Rule 17a-8, which states in part that “[e]very registered broker or dealer who is subject to the requirements of the [BSA] shall comply with the reporting, recordkeeping and record retention requirements of [BSA regulations promulgated by FinCEN],” the SEC is properly exercising its own independent authority under Rule 17a-8 and Section 17(a) of the Exchange Act when it regulates broker-dealers for the record-keeping and reporting requirements of the BSA.
Alpine Securities’ petition (the “Petition”) has received support in the form of amicus briefs from former officials of the Financial Crimes Enforcement Network (“FinCEN”) and the Cato Institute (“CATO”), both of which argue the SEC does not have the power to enforce violations of the BSA. As we will discuss, the amicus briefs argue that only FinCEN may enforce the BSA, and that a contrary system would undermine FinCEN and create unacceptably conflicting interpretations, standards, and penalties for BSA/anti-money laundering (“AML”) compliance.…
Continue Reading Circular Delegation: Amicus Support By Former FinCEN Officials and the Cato Institute in the Alpine Securities Saga
Government Alleges Systemic and Deliberate AML Failures
Filings Describe Tools for CVC Exchanges to Use for Customer Due Diligence and Transaction Monitoring
The Financial Crimes Enforcement Network (“FinCEN”) and the Commodity Futures Trading Commission (“CFTC”) announced on August 10 (here and here) settlements with the operators of the BitMEX cryptocurrency trading platform for alleged anti-money laundering (“AML”) violations under the Bank Secrecy Act (“BSA”), and for allegedly failing to register with the CFTC. More specifically, FinCEN’s assessment of a civil monetary penalty and the CFTC’s consent order both involved the five companies operating the BitMEX platform: HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited, and HDR Global Services (Bermuda) Limited (collectively, “BitMEX”).
BitMEX will pay regulators up to a combined $100 million civil monetary penalty; perform a “lookback” regarding the potential need to file additional Suspicious Activity Reports (“SARs”); and hire an independent consultant to conduct two reviews of BitMEX’s operations, policies, procedures, and controls, in order to confirm that BitMEX is not operating in the U.S., and that no U.S. customers are able to trade with the BitMEX platform.
According to the government filings, BitMEX is one of the oldest cryptocurrency derivative exchanges, with 1.3 million user accounts and a collection of annual fees in excess of $1 billion. Combined, the government filings allege that for a period of six years between November 2014 and October 1, 2020, BitMEX offered trading of cryptocurrency derivatives to retail and institutional customers in the U.S. and worldwide through BitMEX’s website. Customers in the U.S. placed orders to buy or sell contracts directly through the website and BitMEX was aware that U.S. customers could access the BitMEX platform via virtual private network (“VPN”).
The civil penalty will be split between FinCEN and the CFTC. However, the settlement involves an interesting “carrot” offered by the regulators: $20 million of the penalty is suspended pending the successful completion of the SAR lookback and the two independent consultant reviews.
According to the government’s allegations, BitMEX deliberately ignored for years the most basic AML requirements, resulting in multitudinous violations and inviting – and even encouraging – its customers to launder illicit funds. As we will describe, the government has alleged that BitMEX operated on the announced pretext that it was not subject to the BSA or U.S. commodities laws because it had no U.S. customers or operations, when senior management knew otherwise.…
Continue Reading FinCEN and CFTC Reach Groundbreaking $100 Million AML Settlement with BitMEX
A Guest Blog by Angelena Bradfield
Today we are very pleased to welcome guest blogger Angelena Bradfield, who is the Senior Vice President of AML/BSA, Sanctions & Privacy for the Bank Policy Institute. BPI is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks. Its members include universal banks, regional banks and the major foreign banks doing business in the United States. BPI has been engaged in efforts to modernize the U.S. anti-money laundering/ countering the financing of terrorism (AML/CFT) regime for almost half a decade and worked closely with Senate and House leadership throughout the introduction and final passage of the Anti-Money Laundering Act of 2020 (AML Act). Angelena previously was a Vice President at The Clearing House Association, where she supported its regulatory affairs department in similar policy areas. Before that, she supported comprehensive immigration reform efforts at ImmigrationWorks USA and worked on various domestic policy issues at the White House where she served as a staff assistant in both the Domestic Policy Council and Presidential Correspondence offices.
We reached out to Angelena regarding BPI’s recent letter to the Financial Crimes Enforcement Network (FinCEN) commenting on its implementation of the Corporate Transparency Act (CTA). Congress passed the CTA on January 1, 2021, as part of the AML Act. The CTA requires certain legal entities to report their beneficial owners to a directory accessible by U.S. and foreign law enforcement and regulators. This directory also will be accessible to U.S. financial institutions seeking to comply with their own AML obligations, particularly the beneficial ownership regulation, otherwise known as the Customer Due Diligence Rule (CDD Rule), already applicable to banks and other financial institutions. The CTA’s beneficial ownership directory is one of the most important and long-awaited changes to the BSA/AML regulatory regime, but it presents many challenges, both legal and logistical. On April 5, 2021, FinCEN issued an advance notice of proposed rulemaking to solicit public comment on the CTA’s implementation. In response, FinCEN received over 200 letters from industry stakeholders – including the letter from BPI.
This blog post again takes the form of a Q&A session, in which Angelena responds to questions posed by Money Laundering Watch about the CTA and how it should be implemented. We hope you enjoy this discussion on this important topic. – Peter Hardy and Shauna Pierson…
Continue Reading Implementing the Corporate Transparency Act: A Guest Blog
The Financial Crimes Enforcement Network (“FinCEN”) recently complied with two important deadlines under the Anti-Money Laundering Act (“AML Act”) — issuing national priorities for AML and countering the financing of terrorism (“CFT”), and issuing an assessment on potential “no-action” letters. Both of these publications were due on June 30, 2021. This development prompted us…
Assessment Gives “Thumbs Up” to No-Action Letters but Notes Logistical Challenges
As required by the Anti-Money Laundering Act (“AML Act”), the Financial Crimes Enforcement Network (“FinCEN”) issued on June 30, 2021 its 14-page assessment regarding the feasibility of FinCEN issuing so-called “no-action” letters to financial institutions (the “Assessment”). FinCEN issued this Assessment on the same day that it issued the first government-wide list of national priorities for anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”), as we have blogged. In arguable contrast to the AML priorities, FinCEN’s Assessment is full of specific, concrete details and offers interesting insights into how no-action letters may (or may not) work in practice.
Ultimately, the Assessment posits that no-action letters are a desirable step, but that practical challenges remain – including sufficient funding for FinCEN. According to the Assessment, no-action letters will be the subject of future regulations promulgated by FinCEN. Although the details of a no-action letter process will be a debated topic, the Assessment gives reassurance that FinCEN takes the issue seriously and that no-action letters likely will occur in some form.…
Continue Reading FinCEN Issues Assessment on Possible “No-Action” Letters for Industry
Today, the Financial Crimes Enforcement Network (“FinCEN”) issued a press release, announcing leadership additions to FinCEN. This post merely repeats that press release, without further comment or analysis — other than to make the obvious observation that we wish both of these new appointees well, and that the appointment of Ms. Korver in particular…
Breadth of List Undermines Usefulness to Industry
As required by the Anti-Money Laundering Act (“AML Act”), the Financial Crimes Enforcement Network (“FinCEN”) issued on June 30, 2021 the first government-wide list of priorities for anti-money laundering and countering the financing of terrorism (“AML/CFT”) (the “Priorities”). The Priorities purport to identify and describe the most significant AML/CFT threats facing the United States. The Priorities have been much-anticipated because, under the AML Act, regulators will review and examine financial institutions in part according to how their AML/CFT compliance programs incorporate and further the Priorities, “as appropriate.”
Unfortunately, and as we will discuss, there is a strong argument that FinCEN has prioritized almost everything, and therefore nothing. …
Continue Reading FinCEN Identifies AML/CFT “Priorities” For Financial Institutions
Today we are very pleased to welcome guest blogger Tess Davis, who is the Executive Director of the Antiquities Coalition. Tess, a lawyer and archaeologist by training, oversees the organization’s work to fight cultural racketeering worldwide, as well as its award-winning think tank in Washington. She has been a legal consultant for the U.S. and foreign governments and works with both the art world and law enforcement to keep looted antiquities off the market. She writes and speaks widely on these issues — having been published in the New York Times, the Wall Street Journal, CNN, Foreign Policy, and top scholarly journals — and featured in documentaries in America and Europe. She teaches cultural heritage law at Johns Hopkins University, and is a Term Member of the Council on Foreign Relations. In 2015, the Royal Government of Cambodia knighted Tess for her work to recover the country’s plundered treasures, awarding her the rank of Commander in the Royal Order of the Sahametrei.
We reached out to Tess because Congress passed the Anti-Money Laundering Act of 2020 (“AMLA”) on January 1, 2021. This sprawling legislation in part applies the Bank Secrecy Act (“BSA”) to antiquities dealers by defining them as “financial institutions” – and suggests that the BSA later may apply to the art trade as well by requiring a study on money laundering and the art trade. We have blogged repeatedly on the fascinating intersection between the art and antiquities industry and BSA/AML compliance and money laundering concerns. This also is a topic that has garnered significant media interest, including in a recent article in the New York Times. For ease of reference, the AMLA’s requirements for factors to be considered for forthcoming regulations on the antiquities trade, and for the factors relevant to the study on the art trade, are described here.
The Antiquities Coalition convened the Financial Crimes Task Force; their materials, including a detailed joint report, Reframing U.S. Policy on the Art Market: Recommendations for Combating Financial Crimes, are available here. Antiquities, art and money laundering also was the subject of a panel at PLI’s May 2021 Anti-Money Laundering Conference, at which Tess was a panelist.
This blog post again takes the form of a Q&A session, in which Tess responds to questions posed by Money Laundering Watch about potential AML regulations regarding the antiquities and art markets. We hope you enjoy this discussion on this important topic. – Peter Hardy and Alex Levy…
Continue Reading Congress Regulates the Antiquities Market – and Perhaps the Art Market – for AML Compliance: A Guest Blog.
Treasury Offers Something for Everyone to Comply With: Trades and Businesses, Banks, Crypto Exchangers and Individuals
On May 21, 2021, the U.S. Department of Treasury (“Treasury”) released its American Families Plan Tax Compliance Agenda (“Agenda”), a comprehensive set of initiatives to increase tax compliance and close the “tax gap” between the amount taxpayers owe and the amount that is actually paid. While part of the $80 billion plan calls for providing Treasury and specifically the Internal Revenue Service (“IRS”) with additional resources to combat tax evasion, the Agenda also proposes revisions to current regulations and leveraging existing infrastructure to “shed light on previously opaque income sources;” namely, cryptocurrency. Although the sweeping Agenda obviously focuses on tax compliance, it also has related consequences for Bank Secrecy Act (“BSA”) compliance in areas where the BSA and the tax code overlap as to cryptocurrency.
The Agenda also represents the latest in a string of initiatives by the U.S. government regarding the increasing regulation of the use of cryptocurrency, whether by direct users, exchangers of cryptocurrency, or financial institutions with customers dealing in cryptocurrency. The Agenda represents both an acknowledgement by the U.S. Treasury that cryptocurrency use has become “normalized,” coupled with a clear signal that its use will be highly scrutinized and regulated.…
Continue Reading As Treasury Eyes Crypto in Tax Compliance Agenda, Reporting Obligations May Increase – Including a Crypto “Form 8300” for Transactions over $10K