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January 2021 Regulatory Updates

January 2021 Regulatory Updates

by | Feb 2, 2021 | Compliance Updates, iComply Insights

January 2021 Regulatory Updates

Regulatory Actions and Updates from Around the Globe

Enforcement Highlights – January 2021

 

United States: 

 

  • Fund manager at MG Capital Management real estate fund was charged by the SEC with misappropriating $7 million from retail investors.

 

  • The SEC charged Deutsche Bank AG with violations of the Foreign Corrupt Practices Act (FCPA) due to a lack of sufficient internal accounting controls. The bank agreed to pay $43 million in disgorgement and interest.

 

Germany:

 

Hong Kong:

  • The Securities and Futures Commission (SFC) has issued restriction notices to five brokers to freeze client accounts related to suspected market manipulation.

 

Regulatory Updates

Austria:

An Austrian startup building an app for trading in security tokens became the first fintech company to be admitted to Austria’s Financial Market Authority (FMA) regulatory sandbox.

***

FMA announced that it has granted registration to 18 virtual asset providers since tightening anti-money laundering regulations in January 2020.

 

 

Past events:

Mergers & Acquisitions – The Future of Enhanced Due Diligence

 

Missed our January 2021 Fireside Chat? Watch the full event where guest panelists discuss the trends for enhanced due diligence within mergers and acquisitions for both buyers and sellers, and the importance that proper due diligence plays in successful M&A transactions.

Watch Now

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.

Enhancing Security with Liveness Detection Technology
Enhancing Security with Liveness Detection Technology

Nov 15, 2024

In an era where digital fraud is increasingly sophisticated, liveness detection technology has emerged as a critical tool for enhancing security. This technology ensures that the biometric data provided during identity...

January 2021 Regulatory Updates

December 2020 Regulatory Updates

by | Jan 4, 2021 | Compliance Updates, iComply Insights

December 2020 Regulatory Updates

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.
  • 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.

 

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.

***

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.

Watch Now

 

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.

 

 

 

Read More

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.

Enhancing Security with Liveness Detection Technology
Enhancing Security with Liveness Detection Technology

Nov 15, 2024

In an era where digital fraud is increasingly sophisticated, liveness detection technology has emerged as a critical tool for enhancing security. This technology ensures that the biometric data provided during identity...

January 2021 Regulatory Updates

November 2020 Regulatory Updates

by | Nov 23, 2020 | Compliance Updates, iComply Insights

November 2020 Regulatory Updates

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.

Watch Now

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.

 

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.

Enhancing Security with Liveness Detection Technology
Enhancing Security with Liveness Detection Technology

Nov 15, 2024

In an era where digital fraud is increasingly sophisticated, liveness detection technology has emerged as a critical tool for enhancing security. This technology ensures that the biometric data provided during identity...

January 2021 Regulatory Updates

October 2020 Regulatory Updates

by | Nov 9, 2020 | Compliance Updates, iComply Insights

October 2020 Regulatory Updates

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.“

Register Now!

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.

Enhancing Security with Liveness Detection Technology
Enhancing Security with Liveness Detection Technology

Nov 15, 2024

In an era where digital fraud is increasingly sophisticated, liveness detection technology has emerged as a critical tool for enhancing security. This technology ensures that the biometric data provided during identity...

January 2021 Regulatory Updates

September 2020 Regulatory Updates

by | Oct 20, 2020 | Compliance Updates, iComply Insights

September 2020 Regulatory Updates

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.

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.

Enhancing Security with Liveness Detection Technology
Enhancing Security with Liveness Detection Technology

Nov 15, 2024

In an era where digital fraud is increasingly sophisticated, liveness detection technology has emerged as a critical tool for enhancing security. This technology ensures that the biometric data provided during identity...

FCA Research Reveals 1.1 Million Spike in Cryptoasset Buyers

FCA Research Reveals 1.1 Million Spike in Cryptoasset Buyers

by | Oct 13, 2020 | Compliance Updates, iComply Insights

FCA Research Reveals 1.1 Million Spike in Cryptoasset Buyers

Denisse Rudich reviews the FCA’s recent findings on the growth of the cryptoassets industry in the UK and potential regulatory changes

What happened​?

The FCA issued its findings of a quantitative study carried out to get a better understanding of the cryptoassets market and user behavior in the UK. The research looked into areas of potential harm as well as general attitudes towards cryptoassets. A key finding is that over 2.6 million people or companies in the UK have purchased cryptoassets.

What types of stakeholders will be impacted by this?

The research will be of interest to pretty much everyone in the cryptoassets ecosystem: from regulators to exchanges to financial institutions looking to offer custody services in the UK and abroad.

Why does this matter?

The study offers several significant insights into a market that has seen some controversy, particularly around fraud. As virtual assets service providers become regulated, it is important to gauge how both the market and consumer understanding of cryptoassets will continue to expand.

For example, the study found that “the majority of cryptoasset owners are generally knowledgeable about the product, are aware of the lack of regulatory protection afforded, and understand the risk of price volatility.” However, “an estimated 300,000 cryptoasset owners believe they have protection which leaves them at potential risk of financial harm.”

This makes the case that there needs to be better communication around the pitfalls of investing in cryptoassets, similar to other types of investments and asset classes.

Does this update/change create new opportunities? If so, what might they be?

Absolutely. Any time you gain new insights into a market, there is the opportunity for regulators to redefine their areas of focus for regulation, as well as their messaging towards target demographics. In a similar manner, crypto exchanges can gain an understanding of regulatory concerns but also themselves look at where to put their resources.

The FCA also highlighted that:
Cryptoassets present risks and opportunities for consumers and we hope that these insights will inform the policy debate and internationally as the use of these assets continues to grow.

Does this change create new risks for industry stakeholders? If so, what should they be looking out for?

One of the key findings is that 83% of cryptoassets purchases are carried out through non-UK exchanges. This is telling and could create regulatory arbitrage and a challenge for cryptoasset providers who have to comply with stringent anti-money laundering laws vs. those based in overseas jurisdictions who do not.

This could lead to the UK widening the net on what it regulates (i.e. those advertising in the UK or with UK clients on their books). The devil, of course, is in the details and along the lines of how do you regulate the internet? There are some lessons to be learned from the Gambling Commission on how they treat overseas entities with UK customers.

How does this impact compliance teams, and what can they do to stay ahead of the regulatory requirements?

Studies like these support businesses in their horizon planning, seeing what is looming in the distance. Compliance teams need to be aware of the ever-evolving regulation, not only in the UK but also in Europe. With countries such as the U.S. issuing crypto-related sanctions and the UN warning against North Korea’s use of crypto to evade sanctions, compliance teams must also look to maintain their sanctions screening systems up to date as well as ensure that they are signed up to regulatory intelligence sources.

The FCA stated that they are working with the UK Cryptoassets Taskforce to “understand and address the harms from cryptoassets whilst encouraging innovation in the interests of consumers.” This essentially means that they are likely to issue more guidance and decisions that will force cryptoassets providers to act quickly and possibly stop outgoing transfers or products and maybe even remove certain client types.

What can management teams or boards of directors do to stay ahead of these changes?

Management teams and boards should make sure that their compliance teams are adequately resourced so that they are able to quickly act on any information that may affect the business. changes.

For example, on 6 October 2020, the FCA published a final rule banning the sale of derivatives and exchange-traded notes to retail consumers. You can tell that this decision was informed by the survey, as the FCA clearly states:

The FCA considers these products to be ill-suited for retail consumers due to the harm they pose. These products cannot be reliably valued by retail consumers because of the:

  • inherent nature of the underlying assets, which means they have no reliable basis for valuation
  • prevalence of market abuse and financial crime in the secondary market (eg cyber theft)
  • extreme volatility in cryptoasset price movements
  • inadequate understanding of cryptoassets by retail consumers
  • lack of legitimate investment need for retail consumers to invest in these products

This essentially means that exchanges and providers must immediately cease to offer these products in the UK or to UK consumers.

What can service providers do to help their clients stay ahead of these changes?

Providing clients with intelligence and analysis to support their clients in staying ahead of the game is key. Making sure that the services that they are offering are understandable, clearly sourced, and agile can make the difference to a client’s ability to navigate the rapids that come with regulatory action.

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Author — DENISSE RUDICH

Denisse Rudich has over 15 years of delivering financial crime prevention, anti-money laundering, and counter-terrorist financing systems & controls across banking and public sectors, including as Head of AML/CFT Policy for RBS (CBD) and Strategic Advisor to Rabobank. She has experience working with many top-tier financial institutions as well as holding the roles of Director of the G7 and G20 Research Groups (London) and as Secretariat for the WEF’s Global Coalition to Fight Financial Crime. Denisse set up the first global AML/CFT working group for the crypto industry and acts as a Senior Advisor to RegTech, FinTech, crypto/virtual assets firms, and The Sentry. She most recently acted as a technical expert on the Joint Working Group of InteVASPs Messaging Standards that issued the IVMS-101 Messaging Standard and was a member of the RegTech Council. Denisse is an author, trainer, speaker, and panelist at industry events and mentors multiple startups.

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.

Enhancing Security with Liveness Detection Technology
Enhancing Security with Liveness Detection Technology

Nov 15, 2024

In an era where digital fraud is increasingly sophisticated, liveness detection technology has emerged as a critical tool for enhancing security. This technology ensures that the biometric data provided during identity...