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Written by Jackie Whiting
on October 30, 2020

It’s the end of another month which means it’s time for the October RegTech Monthly Roundup here at kompany. As we find ourselves in the midst of a second wave, with history-making events taking place around the world (a little thing called the US Presidential Election is just days away) it’s the perfect time to sit down and reflect on stories specific to our industry.

Let’s get straight to some of the biggest regulatory, AML and compliance stories that broke this October!

200 law firms suspended from practicing in UAE over lax AML compliance

In a strong move by the UAE MInistry of Justice, two hundred UAE law firms have lost their licenses for “at least one month” following several breaches of anti-money laundering regulations. The affected firms have also received fines up to €1.1 million and are now asked to take “whatever measures necessary to ensure anti-money laundering and anti-terrorist financing obligations are fulfilled.”

The suspensions are a result of multiple failures including not appointing a compliance officer, not filling out a government-mandated questionnaire on AML laws, and not updating data as requested by authorities.

It would seem patience is running thin as the authorities had previously extended help to these regulated entities by offering them online meetings and workshops to explain their legal requirements. This was back in August 2020, after the most recent update of legislation, but it would seem many law firms did not apply the learnings or participate in the sessions.

Despite the relatively small size of the UAE, the country is considered a force in global finance and as such, was evaluated earlier this year by the Financial Action Task Force (FATF) on their AML capabilities. While it was acknowledged that the Emirati Government has taken positive steps towards a “strengthened legal framework” the progress has not been far-reaching enough.

Some of FATFs concerns include the country’s: 39 different company registries The potential misuse of the term ‘legal persons’The lack of uptake on international legal help when money laundering investigations were pursued

So what comes next? The Ministry of Justice has “confirmed that the 200 suspended licenses would be reinstated upon confirmation that firms had fulfilled their obligations under a Ministerial Resolution aimed at combating money laundering.”

One thing is for sure. It continues to get tougher out there for regulated entities around the world and those who are already struggling to keep up, will surely be left behind entirely if modern solutions are not embraced soon.

Bank of Canada seeks new lead for CBDC initiative

Heading north for our next story we’re highlighting an interesting development in Canada, where one of the country’s central banks is looking to make an important hire, one that offers us an interesting indication of where financial institutions are at when it comes to the mainstream adoption of digital currencies.

“The Bank of Canada is looking to hire an economist with an understanding of central bank digital currencies (CBDCs), in the latest steps towards developing a policy on CBDCs.” According to the job posting, “the candidate’s duties will include monitoring developments on CBDCs, digital payments and financial technologies around the world, as well as researching the technology towards the ‘potential development of a CBDC.’’

This move spotlights the progress being made in establishing a centrally issued digital currency, and also indicates a particular increase in efforts to develop a Canadian solution.

We now know that the Bank of Canada is in the middle of a large-scale research program to analyze the risks and opportunities that exist within the digital currency world. This direction echoes what the bank’s deputy governor, Timothy Lane, has said in the past, when he urged central banks like the Bank of Canada to speed up their progress on developing CBDCs in the wake of the pandemic. Lane has previously said efforts in Canada towards developing a digital currency were progressing at “a good pace.”

In developing its own CBDC, the Bank of Canada will join several other major central banks around the world in “pursuing a workable centrally issued digital currency, as a supplement to fiat and cash payment systems.”

“Others, including the U.S. Federal Reserve, the Bank of Japan and the Bank of England are among those already known to be working on developing their own central bank digital currencies.”

If you weren’t caught up on crypto yet...or blockchain technology for that matter, there’s never been a better time than right now.

Fed and Treasury Asks Public For Comment On New Travel Rule for Crypto

And finally, for our last story this month, we’re remaining in North America, where the United States Federal Reserve, alongside FinCEN, are asking the public to weigh in on a proposed rule to lower the threshold on “reporting under the Bank Secrecy Act (BSA) from $3,000 to $250 for transactions outside of the United States in what is widely known as the “Travel Rule.’” In addition, cryptocurrency transactions would also be required for “both domestic and international reporting as the rule broadens the definition of money.” The specific information required to be recorded and transmitted with these types of transactions would include:

  • a customer’s name and address
  • the amount of the transaction the execution date
  • the data of the recipient of the transaction

To put things into context, bitcoin transactions have risen from $366 billion USD in 2019 to $312 billion as of August 2020. With so much crypto passing through and into the United States, it is only logical that the Fed and FinCEN would propose to include digital assets and convertible virtual currencies as ‘money’ under the new rule in order to better regulate their movement and use.

"Earlier this year, Michael Ou, CEO of CoolBitX, said, 'The blockchain and cryptocurrency industry is at a major crossroad. As the Financial Action Task Force (FATF) continues to push its cryptocurrency guidance across the globe, compliance and preventing criminal activity can feel extremely daunting…The truth is, ‘Travel Rule’ compliance and blockchain analytics to track criminal activity are two sides of the same coin.' Ou spoke in reference to a partnership between the securities firm and Elliptic, a global leader in crypto asset risk management solutions."

Interested stakeholders will have roughly 30 days left to respond with public comments before the agencies issue the final rule. The drafted proposal can be viewed here.

Assuming the new rule proceeds as expected, it will certainly be interesting to see how American financial institutions respond to these intensified regulatory requirements - with such a lower threshold surely poised to cause concern for relevant time members. Luckily regtechs are here to help.

That’s it for this month! But before you go…

Earlier in October our founders presented at the virtual CoinGeek Live Conference, where they explained to a diverse audience that included entrepreneurs, investors, compliance experts and more from around the world, how our blockchain solution KYC onchain works. You can watch the full presentation by clicking here.

And don’t miss out on more news from us each month! Subscribe to our newsletter and we’ll keep you informed of can’t miss stories as they are published, increases to our registry access as they occur and more.

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