Banking and Blockchain: Why We Need an AML/KYC Safe Harbor


In 1970, legislators supporting the Bank Secrecy Act (BSA) emphasized that the new law would not be a burden to financial institutions because they already kept most of the records required and the Secretary of the Treasury would have broad latitude to provide exemptions in cases where regulatory costs exceeded benefits.

Since then, each of the 11 additional laws has added more requirements for banks and money transmitters. Today, this compendium of regulation is generally referred to as the anti-money laundering (AML) and know-your-customer (KYC) rules.

In addition to reporting transactions above certain levels, banks are now required to know who their customers are, and to report any ‘suspicious activity’. Ask any financial institution today what its largest burden is, the answer is invariably “compliance”.

Uncertainty and de-risking

Regulatory burdens on financial institutions are expensive, and growing bank fees and service charges have reflected this. However, after the financial crisis of 2008, regulators added uncertainty to the mix.

They began to use the broad authority granted them by Congress to impose large fines, levying $321bn in penalties on banks between 2009 and 2016. The perceived randomness of who might be fined next and how much, added enormous uncertainty to the world of banking.

In addition to the financial impact of nine- and 10-figure fines, being singled out as a supporter of terrorism and organized crime carries an enormous reputational risk for any company.

Banks got the message. Their response was to sever ties with virtually any foreign correspondent bank with customers that regulators might deem ‘suspicious’ using 20/20 hindsight.

They are also careful not do business with customers or industries that might later turn out to be ‘suspicious’. It’s a rational course of action with devastating results.

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Residence and Luxury Vehicle Seized in Ottawa Area


A joint forces police operation involving the Ottawa Police Service (OPS) and the Royal Canadian Mounted Police (RCMP) “O” Division Ottawa Detachment Financial Crime unit has resulted in one property being restrained, and a 2016 Chevrolet Corvette being seized. The property and the vehicle which belonged to Peter Pavlovich Jr., are valued at approximately $900,000.00. Peter Pavlolich Jr. was a subject of this investigation which resulted in charges being laid against him and eleven other individuals, and the dismantling of an Ottawa-based drug trafficking network in 2016. This media release is a follow up to a news release issued by Ottawa Police Service, December 14, 2016 at 4 pm titled “Project STEP results in 12 people charged with drug offences”. These matters are presently before the courts. Reports provided by FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) assisted in this proceeds of crime investigation.

The RCMP plays an active role in the fight against proceeds of crime by identifying, assessing, seizing, restraining and dealing with the forfeiture of illicit wealth accumulated through criminal activities. Criminal network groups such as this one, seek to profit from their illegal activities. Illicit profits undermine the social and economic well-being of Canadians and increase the power and influence of organized criminals and their illegal enterprises.

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Anti-money laundering: Diamonds in Dubai


Money laundering is surely one of the most persistent and pervasive risks faced by banks. The practice is said to be just as common in the Middle East as anywhere else. So how do financial institutions there train their staff to deal with this threat?

The firm’s employees eventually arrive. They explain that staff received anti-money laundering training the previous day and did not clear the table after the session. They also describe the answer one of the board members gave: “I’d convert the money into diamonds; that way it’d be easier to ship out of Dubai.” A joke, Euromoney is certain. When the tale is repeated to the chief executive of a Kuwaiti bank, he rolls his eyes and sighs. “That’s not money laundering training, that’s just basic ethics!” He is astonished anyone would need to be taught what to do in such a case.

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AIB Slapped With Fine for Compliance Failures as IPO Looms


Allied Irish Banks Plc, preparing for what could be one of the biggest share sales in London this year, was fined more than 2 million euros ($2.2 million) by the Irish central bank over compliance failures in relation to anti-money laundering and terrorist financing laws.

The central bank fined AIB about 2.3 million euros and reprimanded it for six breaches of the law, which the lender has admitted to, the regulator said in an emailed statement Tuesday. AIB said separately that the settlement related to issues occurring between July 2010 and July 2014.

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South Africa president signs anti-money laundering law


South African President Jacob Zuma signed the anti-money laundering Financial Intelligence Centre Amendment (FICA) [text, PDF] on Saturday to combat tax evasion and money laundering in the country. The global Financial Action Task Force (FATF) [official website] organization had threatened to oust South Africa if the amendment had not been passed before June 20. Supporters say the law is a tool against international financial crime, making it easier to identify the actual owners of accounts around the world and would apply to Zuma and other prominent figures in South Africa. The legislature passed the bill last year, but Zuma originally refused to sign it, citing concerns about its constitutionality [Bloomberg report]. In February the Legislature approved changes to the bill to meet Zuma’s concerns.

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AML’s Silver Bullet


As banks and payments companies endeavor to meet anti-money laundering (AML) regulations to avoid hefty fines for non-compliance, easily identifying customers in the digital channel becomes paramount to their success. Some “old school” methods that worked in the past aren’t working anymore. Sarah Clark, GM of identity at Mitek, joined Karen Webster to discuss what process and technology can do to help meet AML requirements to truly authenticate who people are.

Though money laundering is a dangerous and enormous aspect of fraud, it’s often overshadowed by high-profile data breaches and other cybercrime activities.

However, both regulators and authorities around the globe are cracking down on businesses who are failing to adequately prevent money laundering activities. Despite the fact that many institutions are investing heavily in their anti-money laundering activities, bad guys are still slipping through.

Clark explained that many businesses continue to fall short in this area because the status quo of AML solutions are no longer cutting it.


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Stricter anti money-laundering reforms introduced for real estate agents and lawyers


Real estate agents, lawyers and accountants will soon face tougher anti-money-laundering rules under a bill introduced to Parliament today.

The reforms will require companies to put in place systems which guard against money laundering and to carry out due diligence on customers, including identity verification.

A first tranche of reforms was passed in 2013 and covered banks, financial services and casinos.

The bill introduced today will extend anti money-laundering obligations to lawyers, conveyancers, accountants, real estate agents, the sports and betting industry, and businesses that deal in high value goods such as cars, jewellery or art.

The reforms were fast-tracked following the release of the Panama Papers last year, which raised concerns about the use of New Zealand’s foreign trusts to hide money.

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Anti-money laundering law extension balances cost to businesses


Lawyers, conveyancers, accountants, real estate agents, and sports and racing betting are now subject to money laundering legislation after it was fast-tracked in the fallout from the Panama Papers last year.

The second phase of the Anti-Money Laundering and Countering Financing of Terrorism Act was introduced by Justice Minister Amy Adams on Monday.

Banks, casinos and financial service providers were already covered, but the amendment extended the law to cover more professions.

This move was accelerated last year after the release of the Panama Papers and the Government launching the Shewan Inquiry into New Zealand’s foreign trust regime.

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Money laundering watchdog scrutinizes Facebook, social media.


MP calls for parliamentary committee to investigate threat to privacy

Canadians who make large cash transactions, international wire transfers or win big at the casino could end up with a federal agency scrutinizing their Facebook pages and other social media posts, CBC News has learned.

The Financial Transactions and Reports Analysis Centre (FINTRAC), the federal government body charged with monitoring financial transactions to detect money laundering and terrorist financing, has been quietly scrutinizing the social media posts of Canadians whose transactions attract its attention.

FINTRAC defends the practice, saying the rules that govern it allow it to collect a variety of information.

“FINTRAC’s mandate is to detect, deter and prevent money laundering and terrorist financing activity,” spokesperson Renée Bercier wrote in response to questions from CBC News.

“It is important to remember that the perpetrators of these crimes oftentimes have an online presence and actively use the web, including social media, to connect with associates, facilitate their activities and, in the case of terrorism financing, even raise funds.”

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FinCEN Seeks to Extend AML Requirements to All Banks


The U.S. Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, proposed a rule that would require banks lacking a federal regulator to establish an anti-money laundering compliance program.

The proposal would eliminate what FinCEN called a “gap” in anti-money laundering coverage between banks with and without a regulator. The rule would require unregulated banks to have essentially the same compliance programs as regulated financial institutions, and unregulated banks could use their existing policies and procedures to fulfill the new obligations, FinCEN said in a brief statement.

“Banks without a federal functional regulator may be as vulnerable to the risks of money laundering and terrorist financing as banks with one,” the proposal said.

FinCEN said Thursday it estimated the proposal would affect a total of 740 banks across the country, most of which are private banks, as well as certain trusts and credit unions. Although these banks haven’t historically haven’t been required to establish anti-money laundering programs, they are required to comply with many other aspects of the Bank Secrecy Act, including the filing to FinCEN of suspicious activity reports and currency transaction reports.

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