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SEC Takes Emergency Action Against High Street Capital ICO

SEC Takes Emergency Action Against High Street Capital ICO

by | Jun 19, 2020 | Compliance Updates, iComply Insights

SEC Takes Emergency Action Against High Street Capital ICO

The US regulator charges Pennsylvania-based ICO issuers with violating the antifraud provisions of federal securities laws

What Happened?

June 19, 2020: The Securities and Exchange Commission obtained a temporary restraining order and asset freeze against the companies Hvizdzak Capital Management, LLC, High Street Capital, LLC, and High Street Capital Partners, LLC. Brothers Sean Hvizdzak and Shane Hvizdzak offered securities in a private fund and allegedly misrepresented fund performance, fabricated financial statements, and forged audit documents.

Source: https://www.sec.gov/news/press-release/2020-137

Who Is Impacted?

Current investors and advisors of the project; companies that have conducted a non-compliant token offering.

Why This Matters?

While the Hvizdzak brothers clearly had fraudulent intentions, the current precedent shows that any company making misleading statements in its investor communications–even if by mistake–would be treated by the U.S. regulators in the same way.

While fraudulent schemes are not uncommon in the traditional securities world, the percentage of issuers conducting offering fraud and the misappropriation of investor proceeds is significantly higher in the ICO world–and thus attracts a lot of attention from regulators.

To avoid similar action, companies operating in the digital securities space should make sure that their investor communications are compliant.

What’s Next?

In addition to an asset freeze and a temporary restraining order, the court ordered an accounting audit, expedited discovery, and an order prohibiting the destruction of the entities’ documents. A hearing is scheduled for June 30, 2020, in order to consider continuing the asset freeze and the issuance of a preliminary injunction for a longer period.

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Is your AML compliance too expensive, time-consuming, or ineffective?

iComply enables financial services providers to reduce costs, risk, and complexity and improve staff capacity, effectiveness, and customer experience.

Request a demo today.

Networks of Trust: How Digital Identity Can Solve Key Barriers to Transformation in Financial Services

Networks of Trust: How Digital Identity Can Solve Key Barriers to Transformation in Financial Services

by | Jun 18, 2020 | Blog, Events, iComply Insights

Fireside Chat – Networks of Trust

How Digital Identity Can Solve Key Barriers to Transformation in Financial Services

Date: Thursday, July 16, 2020, 10am PST – 1pm EST – 7pm CET

 

Can digital identity unlock new business models in financial services?
Will new regulations for privacy, client authentication, and data impact my IT infrastructure?

As an industry, financial service providers are just beginning to decipher these questions. New initiatives such as digital charters, open banking, and verified networks of trust have made significant technological progress but lack a common standard or interoperability. Without a trusted and ubiquitous framework for digital identity authentication, however, these applications are limited in their potential to isolated networks.

Join “Networks of trust: how digital identity can solve key barriers to transformation in financial services” live fireside chat with industry experts and thought leaders to discuss:

  • What is digital identity? Key characteristics of digital identities
  • What are the barriers to mass consumer adoption of digital identity?
  • Can single sign-on solutions or identity and access management providers be used to improve the client experience of KYC procedures?


Join this Fireside Chat on digital identity on June 25th, featuring a live panel of industry experts and thought leaders across various industries on this critical aspect of the future of financial services.

Register today!

About iComply
iComply Investor Services Inc. (“iComply”) is a Regtech company that provides fully-digital KYC and AML compliance solutions for non-face-to-face financial and legal interactions. iComply enables financial services providers to reduce costs, risk, and complexity and improve staff capacity, effectiveness, and customer experience. By partnering with multinational technology vendors such as Microsoft, DocuSign, Thomson Reuters and Refinitiv, iComply is bringing compliance teams into the digital age. Learn more: www.icomplyis.com

 

FCA Fines Commerzbank for Failing to Comply with AML regulations

FCA Fines Commerzbank for Failing to Comply with AML regulations

by | Jun 18, 2020 | Compliance Updates, iComply Insights

FCA Fines Commerzbank for Failing to Comply with AML regulations

The UK regulator fined a major German bank over £37 million

What Happened?

June 17, 2020: The Financial Conduct Authority has fined Commerzbank AG London over £37 million for failing to conduct timely, periodic due diligence of its clients. As a result, nearly 2,000 Commerzbank clients had transacted without passing proper Know-Your-Customer checks between October 2012 and September 2017.

Source: https://www.fca.org.uk/news/press-releases/fca-fines-commerzbank-london-37805400-over-anti-money-laundering-failures

Who Is Impacted?

Financial firms in the UK, including any overseas branches of UK firms, and the customers of these firms.

Why This Matters?

Despite the FCA publishing the guidance on steps firms could take to mitigate financial crime risk, the bank was reportedly aware of the weaknesses in the system yet didn’t take any measures to fix them. Moreover, the FCA raised specific concerns directly to Commerzbank in 2012, 2015, and 2017 with no response from the bank.

FCA’s investigation highlighted the bank’s failings in several key areas:

  • Failure to conduct timely and periodic due diligence on its clients, resulting in an ‘out of control’ situation of outdated due diligence checks at the close of 2016;
  • Failure to properly address and mitigate long-standing flaws in the automated monitoring tools for money laundering risk on transactions for clients; and 
  • Failure to implement and practice all required customer due diligence policies and procedures.

On top of that, the bank’s transaction monitoring tool was missing 40 high-risk countries and 1,110 high-risk clients, which is a violation of Principle 3 of the FCA Principles for Businesses.

What’s Next?

Since the FCA’s ruling, Commerzbank London has enacted a remediation strategy to ensure its AML and KYC procedures follow adequate compliance requirements. It has also conducted a robust deep-dive investigative exercise internally to review and identify any suspicious transactions that occurred during the time period in question.

This exercise involved pausing all onboarding of any new, high-risk clients, as well as suspending all trade finance activity until the exercise is complete. Commerzbank committed to resolving the flaws in their systems, and ended up qualifying for a 30% discount on their original penalty amount, reducing the amount owing from £54 million to £37 million. 

Speedy mitigation measures notwithstanding, Commerzbank and other UK firms would be well-advised to heed the words of the FCA:

“Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected. Firms should recognise that AML controls are vitally important to the integrity of the UK financial system.”

– Mark Steward, Executive Director of FCA

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Is your AML compliance too expensive, time-consuming, or ineffective?

iComply enables financial services providers to reduce costs, risk, and complexity and improve staff capacity, effectiveness, and customer experience.

Request a demo today.

Digital Securities: 2020 & Beyond

Digital Securities: 2020 & Beyond

by | Jun 3, 2020 | Blog, Events, iComply Insights

Fireside Chat – Digital Securities: 2020 and Beyond

What Is The Next Chapter For Digital Securities?

Date: Thursday, June 25, 2020, 10am PST – 1pm EST – 7pm CET

 

Are Stablecoins, Money Market Tokens, and Structured Products The Next Big Thing in Digital Securities?

Digital securities – an electronic representation of shares, equity, debt on public blockchain – have attracted the attention of the world’s largest banks and corporations for their potential to reduce transaction costs and friction, increase liquidity and transparency in capital markets.

Recently, World Bank Group, JPMorgan, and Societe Generale have made headlines with debt securities and stablecoins. Despite leading experts worldwide predicting the global expansion of digital securities and interest from institutional players is growing – we are still far from mainstream adoption.

iComply is hosting a “Digital Securities: 2020 & Beyond” fireside chat to discuss the current state of the digital securities industry, the role of regulation in mass adoption, as well as benefits and pitfalls of putting structured financial instruments onto public blockchains:

  • Overhyped or underestimated: what is the real value that digital securities can bring to the financial industry
  • Digital securities regulation: what are the key regulatory updates and trends to watch related to digital securities?
  • The future of digital securities: is institutional adoption happening and when?


Register below for free to join the discussion with the leading experts in finance and blockchain.

Register Now

Panelists:

  • Joel Telpner, Senior Partner, Sullivan & Worcester
  • Matthew Unger, CEO, iComply Investor Services
  • Cathy Yoon, Special Counsel, Katten Muchin Rosenman 
  • Arnaud Salomon, CEO, Mt Pelerin

About iComply
iComply Investor Services Inc. (“iComply”) is a Regtech company that provides fully-digital KYC and AML compliance solutions for non-face-to-face financial and legal interactions. iComply enables financial services providers to reduce costs, risk, and complexity and improve staff capacity, effectiveness, and customer experience. By partnering with multinational technology vendors such as Microsoft, DocuSign, Thomson Reuters and Refinitiv, iComply is bringing compliance teams into the digital age. Learn more: www.icomplyis.com

 

SEC Takes Emergency Action Against High Street Capital ICO

SEC Ruling Issued Against BitClave ICO

by | May 30, 2020 | Compliance Updates, iComply Insights

SEC Ruling Issued Against BitClave ICO

Unregistered $25.5-million ICO issuer ordered to return money to investors

What Happened?

May 28, 2020: The Securities and Exchange Commission (SEC) found BitClave PTE Ltd. of San Jose, California conducted an unregistered Initial Coin Offering (ICO) between June and November 2017​.

Source: https://www.sec.gov/news/press-release/2020-124

Who Is Impacted?

The 9,500+ investors who invested USD $25.5 million into BitClave’s Consumer Activity Token (CAT).

Why This Matters?

Because it was never registered as a security, the public sale of the CAT token violated the registration provisions of federal securities laws in the United States. 

In the US, securities issuers must follow registration requirements, or use a registration exemption such as Reg D or Reg  CF. Token issuers that use US exemptions must follow specific restrictions and thresholds – for both the primary sale and the secondary market of any security they issue. BitClave has been ordered by the SEC to return all the funds they acquired through this token sale.

What’s Next?

Without admitting or denying the SEC’s findings, BitClave has agreed to pay a total disgorgement of USD $25,500,000, a prejudgment interest of USD $3,444,197, and a penalty of USD $400,000. The SEC’s order also establishes a Fair Fund to return monies paid by BitClave to the 9,500+ injured investors.

Finally, BitClave has also agreed to transfer all of the remaining CAT in its possession to the fund administrator for permanent disabling, publish a notice of the SEC’s order through their site, and request the removal of CAT from all virtual asset trading platforms currently listed for sale or trade.

learn more

Is your AML compliance too expensive, time-consuming, or ineffective?

iComply enables financial services providers to reduce costs, risk, and complexity and improve staff capacity, effectiveness, and customer experience.

Request a demo today.