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Written by Jackie Whiting
on November 30, 2020

November is at an end and with it, an impressive collection of stories that shouldn’t be missed as everyone heads into the last month of a very long year. From the United States to the European Union to FATF’s approach to regulating the virtual assets industry, we’re covering a wide variety of important news worth knowing in this edition of our monthly RegTech roundup. 

Let’s get to our stories this month!

EU ministers agree to set up EU anti money laundering body

Earlier this month finance ministers in the European Union agreed to establish a EU body with the sole purpose of fighting against money laundering across its 27 countries. This move comes out of a proposal from the European Commission this past May. 

While Europe is often looked to as a leader in the fight against anti-money, this move indicates a need for further consistency across the continent as many EU countries are left to their own devices when it comes to coordinate their AML efforts. This is why, as Reuters reports, “ the council of finance ministers also gave their backing for the Commission to harmonise EU anti-money laundering rules and provide coordination and support for national Financial Intelligence Units of EU countries.”

The ministers went on to say, “The Council supports setting up an EU-level supervisor with direct supervisory powers over a selected number of high-risk obliged entities, as well as the authority to take over supervision from a national supervisor in clearly defined and exceptional situations,

Expect to see legal proposals that will lay the foundation for the construction of a new official group in the first part of 2021. While some critics might balk at the establishment of yet another body with additional regulations to follow, there are many eager members struggling to meet the latest anti-money laundering directives who will surely benefit from the additional attention and assistance from its fellow union members. 

US Banking Regulators Issue CDD Guidance for Charities, Non-Profits

Federal authorities in the United States have recently issued a fact sheet that highlights new guidance for banks providing their services to charities and non-profit organizations (NPOs) with the goal of helping such groups retain access to financial pipelines.

Jointly released by the Federal Reserve, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., Financial Crimes Enforcement Network and National Credit Union Administration, the fact sheet mentions that while charities and NPOs do not present “a uniform or unacceptably high risk of money laundering or terrorist financing” it’s the compliance risks of banking such non-profits that can “vary dramatically depending on the operations, activities, leadership and affiliations of the organization,”

Currently, NPOs in the United States are obliged to annually report certain information to the IRS, including ”data on their finances, donors and cross-border payments”. Many organisations opt to follow voluntary self-regulatory standards which are “intended to improve governance and internal controls.”

And while banks are not required to obtain such information from these types of customers as part of their current due diligence processes, regulators said that could greatly benefit from knowing the following information when determining the risk profiles of the groups:

  • Purpose and nature of the NPO (including mission, stated objectives, programs, activities, and services)
  • Geographic locations served, including headquarters and operational areas, with specific interest in higher-risk areas where terrorist groups are most active
  • Organizational structure, including key principals, management, and internal controls  
  • State incorporation, registration, and tax-exempt status by the IRS and required reports with regulatory authorities
  • Any voluntary participation in self-regulatory programs
  • Financial statements, audits, and any self-assessment evaluations
  • General information about the donor base, funding sources, and fundraising methods, and for public charities, level of support from the general public
  • General information about beneficiaries and criteria for disbursement of funds, including guidelines/standards for qualifying beneficiaries and any intermediaries that may be involved
  • Affiliation with other relevant groups (including governments and other NPOs)

FinCEN’s bureau director, Kenneth Blanco was careful to mention the organisation’s appreciation for the charities and NPOs who have been on the front lines of the pandemic this year as well as acknowledging their need for access to financial services, while also highlighting the need to protect the financial system at large. 

Crypto and VASP expert says FATF must rethink its approach to virtual assets; claims current standards are 'not fit for purpose'

Moving things to the global landscape for our final story, the Financial Action Task Force (FATF) is facing pressure to completely reconsider its approach to how it will govern the virtual asset industry. 

Industry expert, Sian Jones, senior partner at crypto asset consultancy firm XReg Consulting, is speaking up by calling on FATF to develop a new model for cryptos that leaves out intermediaries entirely. Jones says that “one of the central aims of cryptocurrencies from the very beginning was to eliminate the need for middle-operators, so FATF’s strategy was taking the industry in the wrong direction”

She goes on to claim that a core component of FATF’s cryptocurrency strategy – the ‘travel rule’ – would not work when it comes to a decentralist finance virtual asset market. 

“FATF must consider developing entirely new approaches to manage money laundering...The tried and test methods work in the traditional world of money. Arguably, they can be made to sort of fit the intermediated crypto world. They do not necessarily fit a DeFi world where they are not fit for purpose.”

As members of FATF usually adapt what the organisation recommends, it remains to be seen what will come from Jones’ call to shift focus away from virtual assets and virtual asset service providers. The Cayman Islands, Hong Kong and Singapore have already announced tougher regulations on VASPs as a result of the latest FATF standards. 

AML Intelligence says that Jones’ comments are predicted to cause some friction “with the global watchdog’s goals for the near future.” Before concluding Sian Jones made a call for the virtual asset industry to join together and speak as one to FATF, which would effectively eliminate the “near-two-dozen separate stakeholders currently providing feedback.”

Will FATF take these comments into consideration? Will the virtual asset industry amalgamate its stakeholder groups? Affected entities will surely be watching closely. 

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

In case you missed us in the news this month we’ve been busy announcing exciting new partnerships, participating in panel discussions and sitting down for interviews with our fellow community members. Here’s three things you can watch, listen and read to finish off the month:

CoinGeek Conversations: Our CTO and Co-founder Peter Bainbridge-Clayton talks about KYC onchain  

Susan White, our Director of Business Development for the Americas, hosted a discussion on the next generation of RegTech for KYC & AML compliance in North America.

We're kicking off a new partnership with fellow RegTech TruNarrative, to serve more clients around the world and invite you to learn more by clicking here.

Finally, never miss important news from us again by subscribing to our newsletter and we’ll keep you informed each and every month. And if you enjoyed the read, follow us on LinkedIn and Twitter! You’ll receive next month’s news round up and stay informed on the latest happenings in all things RegTech, compliance and regulatory news.

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