The Department of the Treasury’s recently issued Illicit Finance Risk Assessment of Decentralized Finance is principally intended to provide insight on how illicit actors are abusing decentralized finance (DeFi) services, as well as anti-money laundering (AML) and countering the financing of terrorism (CFT) vulnerabilities unique to DeFi. However, the report also contains critical insight on how Treasury, and, presumably, the Financial Crimes Enforcement Network (FinCEN) within Treasury, view the applicability of existing US AML/CFT regulations, issued pursuant to the Bank Secrecy Act (BSA), to DeFi projects.
Decentralized Finance
OFAC and FinCEN Announce Enforcement Actions Against Bittrex
By Sophia Breggia, Jack Hayes, Dave Stetson, Evan Abrams & Jason Weinstein on
On October 11, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) announced enforcement actions against Bittrex, Inc. (Bittrex), a privately-owned digital asset trading platform based in Bellevue, Washington, for apparent violations of anti-money laundering (AML) laws and of multiple sanctions programs. A settlement of over $24 million was announced by OFAC and a $29 million fine was announced by FinCEN. FinCEN will credit payment of the OFAC settlement amount toward Bittrex’s potential liability with FinCEN, meaning Bittrex will pay just over $29 million in total. Joint enforcement action between OFAC and FinCEN is uncommon—the settlements mark the first instance of parallel enforcement actions by OFAC and FinCEN in the digital asset sector.
…
Continue Reading OFAC and FinCEN Announce Enforcement Actions Against Bittrex
New UK Sanctions Legislation Expands Mandatory Financial Sanctions Reporting Obligations to Include Crypto Providers
By Alexandra Melia & Elliot Letts on
Posted in Decentralized Finance, UK Sanctions
On August 30, 2022, further amendments to the UK’s nine thematic and 29 geographic sanctions regulations came into effect, which expand financial sanctions reporting obligations to cryptoasset exchanges and custodian wallet providers. The amendments, which were introduced under the Sanctions (EU Exit) (Miscellaneous Amendments) Regulations 2022 and the Sanctions (EU Exit) (Miscellaneous Amendments) (No.2) Regulations 2022 (Amending Regulations), revise the definition of a “relevant firm” to which mandatory financial sanctions reporting obligations apply.
…
Continue Reading New UK Sanctions Legislation Expands Mandatory Financial Sanctions Reporting Obligations to Include Crypto Providers
DFS’s First Enforcement Action Against a Blockchain Company: Lessons Learned
By Jason Weinstein, Dave Stetson, Evan Abrams & Ryan Pereira on
Posted in Anti-Money Laundering, Decentralized Finance
On August 1, Robinhood Crypto, LLC (RHC) entered a consent order with the New York State Department of Financial Services (DFS) requiring RHC to pay a $30 million fine for violating (1) New York’s virtual currency regulatory regime known as the BitLicense, (2) a Supervisory Agreement entered with DFS as a condition of its BitLicense, (3) anti-money laundering (AML) requirements applicable to money transmitters, and (4) other requirements related to transaction monitoring, filtering, and cybersecurity. The consent order, which is DFS’s first enforcement action under the BitLicense regime or against a digital currency business, offers several important takeaways for blockchain companies operating or seeking to operate in the state, including (1) the importance of scaling up compliance processes commensurate with business growth, (2) the risks of relying on compliance programs of affiliated entities, (3) the importance of well-developed reporting lines in compliance programs, and (4) the consequences of filing “improper” certifications under DFS’s transaction monitoring and cybersecurity rules.
…
Continue Reading DFS’s First Enforcement Action Against a Blockchain Company: Lessons Learned