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Written by Jackie Whiting
on November 29, 2021

The snow is falling outside our home offices here in Vienna and that means it is time for the final RegTech roundup of 2021. We’ll be wrapping up the year’s biggest news story in a different story later next month, so keep an eye out for that. 

But before we get into our choice for this month’s can’t miss news stories, we want to add a few things to your radar. 

Later this week our CEO and Co-Founder, Russell E. Perry will be joining a panel of experts to answer the question, “How can you internationalize in the age of travel restrictions and social distancing?” Scaling during a pandemic is no easy task, especially when trying to break into a new market, but kompany is uniquely positioned to answer this question as a digital-first RegTech platform. You can join the webinar for free this Wednesday to listen in on the discussion between key players and experts across Austria and Asia. Sign up here!

We’re also pleased to reveal that kompany has made the 100 Best Startups list, as ranked by Trend Magazine, for another year. Since 2019, we have managed to climb 10 spots to position 22. We are joined by a list of other impressive organisations that include Austrian-unicorn Bitpanda, headline-making challenger bank N26 and many others. You can purchase the special edition of Trend to discover the full list by clicking here.  

Now let’s get on to this month’s news stories in which we explore FATF’s latest regulatory guidance for the crypto industry, just how much was lost to fraud during the peak of the covid crisis in the United Kingdom and the solution to snow-washing in Canada. 

FATF Updates Regulatory Guidance For Crypto Industry

The Financial Action Task Force recently published an update to their guidance on virtual assets and virtual assets service providers (VASPs) with the intention of serving as a guide for countries implementing crypto regulations. The 109 page document covers many of the industry’s hottest topics, including “stablecoins, peer-to-peer transactions, non-fungible tokens (NFTs) and decentralized finance (DeFi)”. 

The update comes on the back of FATF’s previous year-long review of crypto usage and regulation in which the global organisation concluded that many countries were not sufficiently implementing their standards. With this latest update, regulators and industry players should have the clarity they need to build a stronger financial system that accommodates the strengths and vulnerabilities of virtual assets. 

So what’s been updated?

As reported by forkast, FATF’s latest guidance covers:

“Stablecoins: Countries are to take measures to manage the mitigate ML/TF risks of stablecoins, particularly those that could be adopted as mass and that can be used for peer-to-peer transactions, before launch, and on an ongoing and forward-looking basis.

Peer-to-peer (P2P) transactions: Countries will need to understand the risks, types and drivers associated with P2P transactions in their jurisdiction and consider implementing controls that facilitate visibility of P2P activity such as transaction reports.

NFTs: NFTs are generally not considered to be virtual assets under the FATF’s definition. However, some NFTs could be considered as virtual assets if used for payment or investment purposes. Countries would need to consider the application of the FATF standards to NFTs on a case-by-case basis.

DeFi: A DeFi application (or the software program) is not a VASP but creators, owners, operators or persons who hold control or sufficient influence over the DeFi arrangement would be considered a VASP and be subject to AML regulations.”

The updated guidance also takes the opportunity to emphasize to regulators the urgent need to implement the travel rule, which requires crypto companies to share identifying information on the originator and beneficiary of crypto transactions. 

Over £5.5bn of Covid support funds lost to fraud or error

The ongoing costs of the coronavirus crisis are still being tallied and the price tag is steeping than many previously thought. As explained in a November article from The Guardian, more than “£5.5bn of taxpayer money from the government’s coronavirus assistance schemes including furlough, self-employed support and “eat out to help out” was paid out to fraudsters or given out incorrectly.”

Her Majesty’s Revenue and Customs, the UK's tax, payments and customs authority, revealed in its annual report that nearly 10% of the £60bn it paid out during the 2020-2021 tax year’s furlough scheme has been lost entirely to a variety of bad actors. 

An HMRC spokesperson said “the schemes were created quickly to support people in dire need, and had been subsequently strengthened to crack down on fraud” - but not before a staggering number of people took advantage of the program’s various vulnerabilities. However, it’s not all bad news. 

So far HM Revenue and Customers has reported that they’ve managed to stop or recover £840m of over-claimed grants throughout the 2020/21 tax year. The investigations will continue 

It’s expected that the Taxpayer Protection Taskforce will recover £1bn from fraudulent or incorrect payments over the next two years. Currently there are 23,000 ongoing investigations.

“HMRC will now be hunting down those who made fraudulent claims, particularly through the Fraud Investigation Service. There will be a wave of civil and criminal penalties, including prison sentences. The Treasury has already clawed back £98m from fraudulent or erroneous Covid claims and a number of arrests have already been made.”

Ownership registry needed to end 'snow-washing' in GTA real estate: experts

Snow-washing. We’ve talked about it in past roundups but for those joining us for the first time, it may be a bit of a perplexing term. Unique to Canada, snow-washing is the term coined to describe the act of money laundering throughout Canada. James Cohen from Transparency International Canada explains the concept as bringing your dirty money to Canada to make it as “clean” as fresh snow. 

Unfortunately, it’s a term well earned as Global News reports that “billions of dollars in Canadian real estate transactions can be attributed to money laundering." This specific type of crime has played a notable role in inflating the price of homes throughout the Greater Toronto Area, the most populous metropolitan area in Canada. 

“According to a joint study published by the End Snow Washing coalition in 2019, different corporations acquired nearly $30 billion in GTA housing from 2008-2018. The majority of them were privately owned and no information on beneficial owners was provided.”

Transparency International Canada, a chapter of the global anti-corruption coalition, believes the purchases made through numbered companies, “with no external financing, could indicate serious criminal behaviour involving massive amounts of money.” The chapter’s spokesman, James Cohen, goes on to explain “There’s a lot of room in there for nefarious actors to park their dirty money in Toronto condos and use them as safety deposit boxes in the sky.”

The same study also discovered that at least $35 billion in residential mortgages across the GTA were provided by unregulated lenders - making understanding the ultimate beneficial owners an even more arduous task than one might expect. 

Cohen has stated that there is an ever-increasing need for a land ownership registry “which would provide a publicly accessible database that shows the owners of private companies investing in real estate.”

Canada has been called out before for being slow to react to the call for more transparency in the real estate market despite the country being home to two of the largest housing bubbles in the world. 

But a change is in the works as the federal government has already indicated in its budget earlier this spring, “that a new database with details on beneficial landowners is being planned and is expected to be complete by 2025.” The RCMP also announced that they would be investing $20 million into divisional money laundering investigative teams over the next five years.

That's it for this month! But before you go...

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