Two Men Arrested in Japan for Purchasing NEM Cryptocurrency Stolen from Coincheck

What Happened?

On March 11, 2020. Tokyo police arrested two Japanese citizens for alleged possession of NEM cryptocurrency that was stolen from the crypto exchange operator Coincheck in a massive cyberattack in 2018. According to investigative sources, the suspects were aware that the cryptocurrency they acquired was stolen from the exchange.

Source: https://www.japantimes.co.jp/news/2020/03/11/national/crime-legal/tokyo-police-arrest-two-taking-possession-stolen-nem-cryptocurrency/

Who Is Impacted?

Virtual asset service providers, trustees, and OTC traders that buy, sell, or custody cryptocurrencies.

Why This Matters?

Supervisory technology for regulators, financial intelligence units, and law enforcement has become incredibly sophisticated. Firms such as CipherTrace, Elliptic, and Chainalysis allow regulators to follow the money, monitor wallets and entities in real-time, and quickly build a trail of evidence for prosecution. Exchanges and other virtual asset service providers need to respond to requests for information about the cryptocurrency transactions they facilitate.

What’s Next?

Any business that facilitates or promotes cryptocurrency or virtual asset transactions should ensure their anti-money laundering software is capable of identifying high-risk transactions.

Transaction monitoring software such as Alessa or ComplyAdvantage can help firms integrate blockchain data with know your customer (KYC) data, freeze or escalate transactions, and compile suspicious activity reports and regulatory filings.

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What Happened?

March 6, 2020: Canada’s financial watchdog FinTRAC audited 500 real estate companies, and found 172 were guilty of violating anti-money laundering rules by neither checking the identities of their clients nor reporting large cash deals to the government.

At half of the companies audited, the sales agents had no formal training on how to properly detect money laundering or verify the identity of their clients.

In response, FinTRAC is implementing an ownership registry beginning May 2020, and making it mandatory for real estate agents to take an anti-money laundering course–a first for Canada.

Source: https://www.occrp.org/en/daily/11760-canada-real-estate-firms-violate-anti-money-laundering-rules

Who Is Impacted?

Real-Estate Developers, Brokers, and Sales Representatives.

Why This Matters?

In 2019, an expert panel estimated that $5.3 billion dollars (US$ 4 billion) were laundered through real-estate transactions in Canada in 2018.

With their 2019 budget increase from the Canadian government, FinTRAC has launched an aggressive front to combat this activity in our economy.

“This offensive is sending a strong message to the sector and to people who might seek to exploit it that we all are determined to protect the Canadian people and the economy.” – FinTRAC spokesperson, Erica Constant

What’s Next?

The provinces hope these actions from the Regulator will prevent the use of trusts, corporations, or partnerships to hide transactions from public view. 

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What Happened?

February 28, 2020: The European Union blacklisted four additional jurisdictions–Cayman Islands, Panama, Seychelles, and Palau. The EU list of non-cooperative jurisdictions helps member states deal more robustly with countries that encourage abusive tax practices.

Source: https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/

Who Is Impacted?

Businesses engaged in transactions with entities (individuals, organizations, or governments) based in, or operating through, the listed jurisdictions.

Why This Matters?

Entities operating in or through blacklisted countries will have increased difficulty accessing funding programs. Private capital transactions may be subject to significant withholding taxes, and companies operating in or through these jurisdictions must implement additional compliance measures.

What’s Next?

Effective January 1, 2021, EU member states will be required to implement measures for any transaction with entities based in Grand Cayman, Seychelles, Panama, and Palau. Member states are required to implement at least one of four tax measures before this date. Tax measures can include withholding tax on any funds sent to the listed jurisdiction, enhanced AML screening requirements for foreign beneficial ownership and control, and restrictions on tax deductions.

The targeted jurisdictions will have to demonstrate cooperation with the EU in the form of changes to corporate ownership and tax transparency. The EU blacklist of non-cooperative jurisdictions is updated twice a year; the next update will occur in October 2020.

Investors based in the EU can remain invested in funds based in listed jurisdictions–such as the Cayman Islands, a major offshore hotspot for U.S. institutional investors. However, new transactions may be subject to additional reporting, withholding tax (which can drastically increase the cost of making an investment), or other measures which may vary significantly between EU member states.

Compliance teams should review their obligations to identify all related parties under the EU Mandatory Disclosure Regime (DAC 6). For example, any payment involving an entity related to an entity in the Cayman Islands may need to report the activity to the “home country” within 30 days as per DAC 6. Reporting requirements are expected to take effect as of July 1, 2020. 

For online financial service providers in the EU, KYC onboarding tools must be able to distinguish between entity types, such as natural persons vs legal or incorporated entities. Corporate onboarding tools should be tested to ensure they can accurately identify and verify related parties–such as everyone with control or beneficial ownership in the company–involved in the transaction. Where a transaction has a related party operating from or through this jurisdiction, enhanced due diligence and government reporting may be required.

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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.

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