Kenneth Blanco, the Director of the US Financial Crimes Enforcement Network (FinCEN) warned banks to seriously consider how virtual currencies should fit into their anti-money laundering (AML) policies.
FinCEN Director Kenneth Blanco discussed the banks’ obligation to implement effective AML policies and warned them to consider the risks associated with cryptocurrency—at the virtual 2020 ACAMs anti-money laundering conference in Las Vegas.
“To be clear, exchanges are not the only ones with crypto risk exposure. These risks are not unique to money services businesses or virtual currency exchanges; banks must be thinking about their crypto exposure as well.”
According to current FinCEN regulations—under regulation FIN-2019-A003—it is the responsibility of banks to identify and report suspicious financial activity pertaining to bad actors exploiting “convertible virtual currencies (CVCs) for money laundering, sanctions evasion, and other illicit financing purposes, particularly involving darknet marketplaces, peer-to-peer (P2P) exchangers, foreign-located Money Service Businesses (MSBs), and CVC kiosks.”
For most banks, it appears they are still unclear on the risk exposure of virtual currencies and how they could affect their financial institution.
During the webinar, Director Blanco put emphasis on the need for banks to proactively assess and their current AML policies in relation to cryptocurrency and warned that if they do not take this into consideration “it will be apparent” when they are examined.
“These are areas your examiners, and FinCEN, will ask you about when assessing the effectiveness of your AML program.”
Typically P2P exchanges have little to no AML or know-your-customer (KYC) policies in effect which could result in money laundering risks for banks and other financial institutes that choose to accept transactions from these platforms.
Major Banks Under Fire For Relaxed AML and KYC Compliance
Ever since Bitcoin’s inception, its reputation has been marred by its association to the Silk Road darkweb marketplace—where one could buy anything from weapons to drugs leveraging the cryptocurrency.
However, last week it was the major banking institutions that came under fire—after a leaked trove of US official, FinCen documents revealed that five major banks—Deutsche Bank, HSBC, JP Morgan, Bank of New York Mellon, and Standard Chartered Bank—were involved in illicit transactions pertaining to mobsters, crypto Ponzi schemes, and money laundering.
The official document disclosed that more than two trillion USD had been laundered and flagged as suspicious by financial institutions following the Anti-Money Laundering (AML) act. However, the dirty money was still reported to have been freely flowing through renowned global banking institutions.
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