Regulatory Actions and Updates from Around the Globe

Enforcement Highlights – December 2020

United States: 

• The Securities and Exchange Commission (SEC) charged jewelry wholesaler Gregory Altieri for defrauding both current and retired police officers and firefighters in a Ponzi-like scheme.

• SEC filed emergency action by imposing an asset freeze against Virgil Capital LLC in connection with an alleged securities fraud related to Virgil Sigma cryptocurrency fund.

• SEC charged Ripple and its co-founders with raising over USD $1.3 billion through an unregistered, ongoing digital asset securities offering.

• SEC charged real estate development company Silicon Sage Builders for USD $119 million securities fraud targeting the Northern California South Asian community.

• Robinhood Financial agreed to pay USD $65 million to settle SEC charges for misleading customers about their revenue sources.

• China-based Luckin Coffee agreed to pay USD $180 million in penalties to settle accounting fraud charges for misstating the company’s revenue, expenses, and net operating loss.

• General Electric paid a USD $200 million penalty to settle charges for repeated disclosure failures across multiple businesses that materially misled investors.

• SEC charged a global securities pricing service for compliance deficiencies, failing to implement written policies and procedures designed to prevent violations of the Investment Advisers Act and its rules.

• SEC ordered UK-based investment adviser BlueCrest Capital Management to pay USD $170 million to investors harmed by inadequate disclosures and material misstatements.

United Kingdom:

• The Financial Conduct Authority fined Charles Schwab GBP 8.96 million for failing to arrange adequate protection for its clients’ assets and carrying out a regulated activity without permission.

Hong Kong:

• The Securities and Futures Commission of Hong Kong fined Fulbright Securities Limited USD $3.6 million for failing to implement internal control procedures to detect and prevent illegal short selling.
• SFC issued a restriction notice to CNI Securities Group Limited to freeze client accounts linked to suspected market manipulation

Regulatory Updates

United Kingdom:

The Financial Conduct Authority has established a Temporary Registration Regime for cryptoasset businesses, which are required to be registered with the FCA by 10 January 2021. 

The regime was established due to FCA’s inability to assess and register all firms that have applied for registration due to the complexity of applications and COVID-19 pandemic restricting FCA’s ability to visit firms. It will allow existing firms that have applied for registration before 16 December 2020, and whose applications are still being assessed, to continue trading.

Businesses that began operating after 10 January 2020 are required to obtain full registration with the FCA before conducting business.

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Her Majesty’s Treasury and The Home Office issued the third national risk assessment of money laundering and terrorist financing in the UK. The policy paper outlines how the key risks have changed since the UK’s second NRA was published in 2017, and the action taken since 2017 to address these risks.

Past events: How Compliance Changed in 2020

Watch the recording of our most recent webinar reviewing the impact that the Fifth Money Laundering, more commonly known as AMLD5, had on the landscape of compliance in 2020 for businesses and financial services providers around the globe.

Biometric Authentication in KYC

How is biometric authentication used in the realm of KYC and compliance? Learn more about how financial services providers are using biometric authentication to keep their customer’s identity secure in our most recent Regtech Glossary post.

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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.

Regulatory Actions and Updates from Around the Globe

Enforcement Highlights – November 2020

Hong Kong: The Securities and Futures Commission of Hong Kong fined Credit Suisse Securities $2.1 million for regulatory breaches resulting in failures in its electronic trading systems.

United Kingdom: The Financial Conduct Authority imposed a £3.44 million penalty on TFS-ICAP Ltd, an FX options broker, for communicating misleading information to clients.

USA: The Securities and Exchange Commission of the United States charged Benja Inc., a San Francisco-based e-commerce startup, with defrauding investors, providing forged contracts and bank statements.

USA: The SEC filed actions against three investment advisory firms whose failure to implement written policies and procedures resulted in violations of the Investment Advisers Act in connection with sales of complex exchange-traded products.

Past events: Navigating the Complexities of Beneficial Ownership – The Challenges of UBO Due Diligence

Watch the recording of our most recent webinar breaking down the challenges and solutions to the Ultimate Beneficial Owner due diligence.

Legal Entity Customer Due Diligence

What is a legal entity in terms of compliance? Learn more about how due diligence helps financial institutions understand the relationships, risks, and obligations of a legal entity in our most recent Regtech Glossary post.

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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.

Regulatory Actions and Updates from Around the Globe

Enforcement Updates – October 2020

International: Regulators in the United States, Hong Kong, and the United Kingdom charged Goldman Sachs for deficiencies in its compliance and AML controls that led to multi-billion misappropriation of funds in a 1MDB bond offering underwritten by the firm in 2012 and 2013. Goldman Sachs agreed to pay over $3 billion in fines to the SEC, SFC, and FCA.

United States: The Commodity Futures Trading Commission filed a civil enforcement action charging the BitMEX trading platform with failure to implement required KYC/AML procedures.

United States: The Financial Crimes Enforcement Network (FinCEN) targets the founder of Helix and Coin Ninja with a $60-million fine for violating AML laws.

United States: The Securities and Exchange Commission charged a Houston-based seismic data company with an accounting fraud that inflated the company’s revenue by approximately $100 million.

United States: The SEC fined Israel-based day-trading education firm $130,000 for selling security-based swaps to over 5,000 retail investors without registration.

United Kingdom: The Financial Conduct Authority censured Aviva plc insurance company for listing and transparency rules breaches.

Expert Insights

FCA Research Reveals 1.1 Million Spike in Cryptoasset Buyers

Oct 13, 2020  |  In our October Expert Insight series, Denisse Rudich of Rudich Advisory reviews the FCA’s recent findings on the growth of the cryptoassets industry in the UK and potential regulatory changes.

October’s Regtech Theme: UBO Due Diligence

Identifying and verifying an Ultimate Beneficial owner (UBO) of the company you are doing business with is a crucial requirement of corporate due diligence.

What are UBOs? How can you make sure they are not involved in money laundering or terrorist financing, and comply with AML regulations?

Learn more in the recent iComply Glossary article: Ultimate Beneficial Owner due diligence.

Upcoming Events

Fireside Chat: Navigating the Complexities of Beneficial Ownership

Date: Thursday, November 26, 2020 | 10am PST – 1pm EST – 7pm CET

Curious about the challenges and importance of beneficial ownership and proper due diligence?

Join our live November fireside chat, “Navigating the Complexities of Beneficial Ownership: The Challenges of UBO Due Diligence.“

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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.

Regulatory Actions and Updates from Around the Globe

Regulatory Updates – September 2020

Switzerland:

The Swiss Parliament approved new distributed ledger technology (DLT) regulations, introducing a new license category for digital asset exchanges, a new type of digital securities, and an updated framework for custody providers. Most notably, the new regulation is expected to pave the way for blockchains to be applied to the function of the central securities register.

MME, a prominent legal and accounting firm in Switzerland, recently published this detailed analysis of the new Swiss DLT regulation.

European Union:

The European Commission unveiled its much anticipated legislative package titled the Digital Finance Package. The package aims to increase the competitiveness and innovation within the EU financial markets and covers digital finance, payments, virtual assets, cyber-security, and digital resilience.

Hong Kong:

The Hong Kong Monetary Authority published new onboarding requirements for corporate customers, highlighting the possibilities of remote identity verification.

While the onboarding of natural persons has become commonplace in most major financial centers, an onboarding process for legal entities requires additional layers of assurance to complete:

• verification of the legal entity’s identity;
• identity verification of corporate representative(s);
• confirm corporate representative(s) have related authorizations;
• identification of current beneficial owner(s);
• identity verification on beneficial owner(s); and
• understanding the ownership, control, and business nature of the legal entity.

When it comes to customer due diligence for legal entities, the regulator considers these steps to be essential for any basic know your customer process. However, because corporations often have complex structures, enhanced due diligence is often required when onboarding a corporation or other legal entity. 

While there is still a lot of room for innovation, iComply’s leadership in this area has contributed to the development of international and open source standards for how to digitally onboard a legal entity. Book a live demo of iComplyKYC to learn more.

Global:

The Financial Action Task Force (The FATF) issued new guidance, “Virtual Assets – Red Flag Indicators of Money Laundering and Terrorist Financing.” The report aims to help virtual asset service providers (VASPs), financial service providers, and non-financial businesses to better detect and report suspicious transactions.

The FATF outlines the following events to be key indicators of potentially criminal activity:

• Anonymization: peer-to-peer exchanges websites, mixing or tumbling services or anonymity-enhanced cryptocurrencies
• Geographic risk: where criminals may “shop jurisdictions” to exploit countries with weak, or non-existent, measures for virtual assets
• Transaction patterns: irregular, unusual, or uncommon account or wallet activity 
• Transaction size: where the amount and/or frequency has no apparent business explanation
• Sender or recipient profiles: unusual account behavior
• Source of funds or wealth: which can relate to criminal activity

The report is expected to provide clarity for the finance sector, financial intelligence units, law enforcement agencies, prosecutors, and regulators to better understand when a virtual asset transaction may require enhanced due diligence, monitoring, or suspicious activity reporting.

United States:

The Securities and Exchange Commission (SEC) published a “no action” letter outlining the role of an alternative trading system (ATS) in the nascent digital securities industry.

The letter provides clarity from the regulator on how digital securities transactions can be performed using either a four-step non-custodial process or a new three-step process using custodians. The letter outlines both processes in detail and signals how the SEC is preparing for digital securities to be used widely throughout the financial sector—with or without the need for a custodian.

Expert Insights

12 Month Review of Revised FATF Standards – Virtual Assets and VASPs

Sept 16, 2020 | In the recent Expert Insight, Jonathan C. Dunsmoor of Dunsmoor Law, P.C. reviews the impact of the revised FATF standards on the virtual asset industry.

Enforcement Highlights

Hong Kong: SFC fined The Bank of East Asia $4.2 million for failing to ensure compliance according to relevant regulatory requirements.

United Kingdom: FCA published a warning regarding a “clone firm” that scams customers by pretending to be an FCA-authorized firm and advice on protecting yourself from similar fraud schemes.

United States: SEC charged 5 individuals including a famous film producer for promoting two fraudulent ICOs, FLiK and CoinSpark.

United States: eSports gaming platform Unikrn settled unregistered ICO charges with SEC by paying a $6.1 million penalty back to harmed investors.

United States: The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned two Russian nationals for involvement in a cryptocurrency phishing campaign, blocking all of their all property and interests in property in the country.

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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.