KYC360 Weekly Roundup - 28th Apr 2023

Published on Apr 28, 2023

Top stories this week: 

Crypto Sector Regulatory Upheavals | Virtual Assets | Legislation, Reports, Analyses, & Opinions

In the US, the crypto regulatory war has escalated with Coinbase taking the SEC to court to force it to respond to the plea the company made last year for formal rule making on digital assets, even threatening to relocate to Bermuda if the regulatory rules aren’t clarified. Meanwhile, the EU has passed the long-awaited Markets in Crypto-Assets Regulation (MiCAR), establishing game-changing rules for the cryptocurrency industry, which is being seen by many as a future template for global regulation.

We also report on the latest developments in the broader field of virtual assets. The European Central Bank has laid out its plans for a digital euro which would come in 2026 at the earliest, a move which has already seen calls to make it obligatory for merchants to accept any future digital euro as legal tender.

This week’s coverage of legislation, reports, analyses, & opinions ranges from the UK’s biggest shake up of gambling laws in 20 years to how the landmark US reform aimed at stamping out anonymous companies that conceal dirty money is in danger of failing. The latest updates on sanctions also feature, and we complete this edition of the Roundup with a broad selection of items covering money laundering, bribery, fraud, & corruption.


Financial_ServicesCrypto Sector Regulatory Upheavals

Coinbase sues SEC following months of silence from federal regulator 

Crypto exchange Coinbase has filed a suit against the Securities and Exchange Commission (SEC) demanding the regulator be forced to publicly answer a petition on whether it would allow the crypto industry to be regulated using existing SEC frameworks. The July 2022 petition asked that the SEC “propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods.” To date, the SEC has not provided a specific public response, but in recent months has aggressively ramped up enforcement actions and warnings against crypto exchanges, including Coinbase. 

Coinbase secures Bermuda licence as frustration with US mounts 

Frustration with the US regulatory regime has resulted in CEO Brian Armstrong openly flirting with the idea of moving Coinbase out of the US by securing a licence to operate in Bermuda. Armstrong, who has been locking horns with American regulators for years, said “anything is on the table” about moving the company’s headquarters out of the US. Another crypto player, Bittrex, recently quit the US over regulatory concerns and has since been charged by the SEC with operating an unregistered securities exchange.

“Coinbase chose to become a public company in the US because we believe the US would best be served by embracing this fundamental innovation, but we’re also focused on international markets, many of which are moving forward with strategies to become “crypto hubs. We would like to see the US take a similar approach, but a regulation by enforcement approach in the US is instead leading to a disappointing trend for crypto development in the US.” 
Coinbase blog

Binance under mounting pressure as US crypto crackdown intensifies 

Binance is facing increasing legal pressure with US Justice Department prosecutors investigating the exchange for money-laundering violations and the SEC is looking into the company’s business practices. Yet another agency, the Commodity Futures Trading Commission (CFTC), is suing Zhao, accusing him of compliance failures that allowed criminals to launder money, with some saying the CFTC action could be “just the tip of the iceberg”. Any criminal charges against Zhao or his company could set off mass panic in the crypto markets, still reeling from the FTX exchange’s collapse last year.

“It’s the biggest exchange for crypto, and if it gets clamped down on, that’s going to be a big deal. It’s hard to see the rest of the crypto industry remaining unscathed.” 
Hilary Allen, a crypto expert at American University Washington College of Law

Crypto prices tumble as SEC actions continue 

Headlines about the cryptocurrency sector over the last seven days have been dominated by the US Securities and Exchange Commission (SEC) and its actions against cryptocurrency firms. The SEC has been criticised for its approach and is seemingly driving away crypto firms, causing cryptocurrency prices to fall dramatically

Opinion: “Crypto is dead in America” as US regulators target sector for threatening the establishment 

According to ‘SPAC King’ Chamath Palihapitiya, cryptocurrencies are paying the price for pushing economic boundaries. His comments came as the Securities and Exchange Commission stepped up efforts to crackdown on the sector. Recent examples of the SEC’s enforcement efforts include a February proposal to stop investment advisors from trading in crypto, and the threat of legal action against a number of Coinbase products. 

“Crypto is dead in America. Now you have [SEC Chair Gary] Gensler even blaming the banking crisis on crypto. So, the United States authorities have firmly pointed their guns at crypto.”
Chamath Palihapitiya, SPAC sponsor, and CEO of Social Capital

EU parliament passes ground-breaking MiCA crypto regulation 

This week, the European Parliament approved the Markets in Crypto-Assets Regulation (MiCAR), establishing game-changing rules for the cryptocurrency industry. It aims to create a comprehensive regulatory framework for certain crypto-assets, namely for stablecoins (being electronic money tokens or asset referenced tokens (ART)) and other crypto-assets that are not governed by existing financial EU law, such as utility tokens and – depending on details – also specific forms of non-fungible tokens (NFTs). 

Opinion: Is Europe’s MiCA a template for global crypto regulation? 

In this opinion piece, the centralised crypto market is reported to have fallen in love with MiCA. It offers a licence tailored to crypto-asset services and stablecoin issuers that is passport-able across 27 EU member states and 450 million people. Furthermore, it deliberately refrains from regulating decentralised finance (DeFi) or non-fungible token (NFT) activities. While banks, custodians and asset managers are currently wary of the reputational risk of dealing with crypto, MiCA stands to build institutional comfort with crypto as an asset-class. 


Money Laundering, Fraud & Corruption

FCA puts banks on alert over money laundering via the Post Office 

As banks continue to downsize their branch networks and hand over cash services to the postal service, the UK’s Financial Conduct Authority (FCA) has announced measures to reduce the risk of money laundering via the Post Office. The FCA also expects banks to improve their monitoring capabilities for suspicious transactions conducted over the Post Office network and reduce the time taken to report anomolous activities to the National Crime Agency (NCA).

Video: Investigating the Italian mafia’s money laundering operation 

This video is the first of a three-part investigation into a global Mafia money-laundering operation and explores how it is done and how it remains undetected. As this extraordinary People & Power report reveals, little in this complex and secretive world is quite what it seems.

US sentences former Venezuela treasurer to 15 years for money laundering 

A US court has sentenced the former treasurer of Venezuela, Claudia Patricia Díaz Guillén, and her husband, each to 15 years in prison for their involvement in a massive bribery and money laundering scheme. The DOJ announced the couple accepted over US$136 million in bribes from a Venezuelan billionaire businessman who owned Globovision news network, and laundered some of the money through the US financial system.

Bank Reyl yet again fined for money laundering and tax evasion in France. 

The Geneva-based private bank Reyl has once again been fined for money laundering and tax evasion. The bank has been fined a total of €5.75 million over its duration, while partner and general manager François Reyl was also convicted in the case involving practices at the bank from 2009 to 2013 and fined €500,000. 

GTBank fined N128.6 million over failure in money laundering test

According to a report, Guaranty Trust Bank (GTBank) has been fined N128.6 million by the Central Bank of Nigeria (CBN) for failing to meet several regulatory requirements. The CBN allegedly fined GTBank for offences relating to failure in the Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) examination. 

RequirementsLegislation, Reports & Analyses

UK government to set to introduce biggest shake up of gambling laws in 20 years 

The UK government is finally to publish its long-awaited proposals to crack down on problem gambling. The measures include forcing gambling firms to better scrutinise the financial resilience of players and the introduction of a tax on betting firms to fund help for problem gamblers. The changes would be the biggest overhaul to the £14billion industry since the Gambling Act in 2005. 

New UK legislation envisages powerful digital markets regime and reform to consumer law 

The UK competition and consumer authority will be given new powers to regulate the tech sector as well as stronger consumer law enforcement tools. The UK’s Digital Markets, Competition and Consumer Bill was presented to Parliament on 25 April 2023 and brings sweeping reforms to competition and consumer law.

US Treasury criticised over faltering push to unmask anonymous companies and track dirty money 

A landmark US reform aimed at stamping out anonymous companies that conceal dirty money is in danger of dying out at the hands of the federal agency tasked with implementing it. The US Treasury Department’s mission to build a database of company owners and lift the veil on millions of abuse-prone shell companies in the US has been beset by delays and disagreements

EU & US Regulators take a hard look at ‘Banking-as-a-Service’ platforms 

BaaS platforms, also known as “embedded finance,” have drawn the attention of both US and EU regulators. They have expressed concern that businesses featuring the service, which functions in much the same way as correspondent banking relationships, frequently neglect to adequately assess and monitor the financial crime-related risks of their direct clients. 

The Global Organized Crime Index releases 13 discussion papers in advance of second iteration 

In 2021, the Global Organized Crime Index was launched to provide an assessment of criminal markets, categories of criminal actors, and resilience capacity for 193 UN member states. As a prelude to the second iteration of the index in September this year, sees the publication of 13 discussion papers, one for each illicit market considered during the development of the tool.   

IMF report: Leveraging Anti-money Laundering Measures to Improve Tax Compliance and Help Mobilize Domestic Revenues 

This new paper from the International Monetary Fund (IMF) advocates leveraging anti-money laundering (AML) measures to enhance tax compliance, tackle tax crimes, and help mobilize domestic revenues. While AML measures have already been deployed to improve tax compliance, the benefits that they could bring to the integrity of the tax system are yet to be fully realized.  

Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime Strategy 2023-2026 

The federal government has just released Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime Strategy 2023-2026. It provides a brief survey of the current legal frameworks under which this “regime” operates, with additional information about the current state of play domestically and internationally.


Crypto-1Crypto & Virtual Assets

ECB sets out latest digital euro thinking 

According to the ECB’s latest progress report, a digital euro could be made available via existing banking apps or via a dedicated Eurosystem app. While a final decision has yet to be made, the ECB has been busy investigating options ahead of a potential launch, which would come in 2026 at the earliest. Initially, it would be accessible to euro area residents, merchants and governments. Non-resident euro area citizens might also have access, providing they held an account with a euro area-based payment services provider. 

ECB: Merchants should be obliged to accept digital euro 

According to ECB executive board member Fabio Panetta, merchants should be obliged to accept a future digital euro as legal tender. As Europe moves seemingly inevitably towards the creation of a digital euro, Panetta states that the ability to use it anywhere is crucial to its success, as a result a digital euro should be given legal tender status in the same way that bank notes are. 

“If introduced, the digital euro would be a public good, and Europeans would expect to be able to access and use it easily, anywhere in the euro area. So, it would be more beneficial and convenient for all users if merchants that accept digital payments were obliged to accept the digital euro as legal tender.”  
Fabio Panetta, ECB executive board member

SocGen digital asset unit launches EUR stablecoin 

SG-Forge, the digital asset division of French bank Societe Generale, has launched a euro-denominated stablecoin on the Ethereum public blockchain. Dubbed the EUR CoinVertible, the asset is designed to bridge the gap between traditional capital markets and the digital assets ecosystem. The French bank is among a number of major global banks to have minted their own stablecoins, including JPMorgan, National Australia Bank, ANZ and BTG Pactual.

“Digital assets with stabilisation mechanisms – i.e., stablecoins – built under a robust banking-grade structure will be a key element to increase trust and confidence in the native crypto ecosystem.” 
Jean-Marc Stenger, chief executive officer at SG-Forge

Trial kicks off in first NFT insider trading case 

A former employee of OpenSea, the world’s largest marketplace for non-fungible tokens (NFTs), is currently on trial for insider trading. Prosecutors have accused Chastain of secretly buying dozens of NFTs based on confidential information that the tokens, or others from the same creators, would soon be featured on OpenSea’s home page. Chastain allegedly chose which NFTs to feature, and then profited illegally by selling his tokens shortly after. 


US shares ways Russia is evading sanctions with European banks 

The US has shared information with European bankers, government officials and business leaders to crack down on Russia’s tactics to circumvent Western sanctions. Brian Nelson, Treasury undersecretary for terrorism and financial intelligence, held briefings in Switzerland, Austria, Germany and Italy to promote more effective policing of sanctions imposed over Russia’s invasion of Ukraine. 

British American Tobacco to pay $635m for North Korea sanctions breaches  

British American Tobacco has been ordered to pay $635m (£512m) plus interest after a subsidiary admitted selling cigarettes to North Korea in violation of sanctions. The Department of Justice stated the settlement was the “culmination of a long-running investigation”, describing it as “the single largest North Korean sanctions penalty in the history of the Department of Justice”. 

UK Ministers responsible for controversial sanction waivers 

New rules for issuing licences for sanctioned individuals to pursue legal action in the UK reveal that ministers should take decisions in controversial cases, not civil servants as previously claimed. The rules were updated at the end of March following an internal review conducted after openDemocracy reported that the government had granted special permission for sanctioned Russian warlord Yevgeny Prigozhin to sue a British journalist who exposed his crimes.

US imposes sanctions on companies accused of helping Iran manufacture drones 

The US has imposed sanctions on one individual and six entities named as members of a network that facilitated Iran’s drone programme and other military programmes. The sanctions target the head of the Iranian company Pardazan System Namad Arman (which has been under restrictions since 2018), as well as shell companies and suppliers based in Iran, Malaysia, Hong Kong and China, which have enabled the procurement of goods and technology.

Timeline of US sanctions on Iran 

Since 2005, the US has designated Iranian individuals, companies, and organizations for involvement in nuclear proliferation, ballistic missile development, support for terrorist groups, and human rights abuses. This report from the United States institute of Peace provides a full list of the sanctions imposed to date.

OFAC alert: Possible evasion of Russian oil price cap 

The Office of Foreign Assets Control (OFAC) has issued an alert to warn US persons about possible evasion of the price cap on crude oil of Russian Federation origin (Russian oil), particularly involving oil exported through the Eastern Siberia Pacific Ocean (ESPO) pipeline and ports on the eastern coast of the Russian Federation. 

President of Metalhouse LLC indicted for sanctions evasion and international money laundering 

The US Justice Department announced the indictment and arrest of John Can Unsalan (aka Hurrem Can Unsalan) the president of Metalhouse LLC. He is accused of engaging in a three-year scheme to violate US sanctions against oligarch Sergey Kurchenko and two of Kurchenko’s companies by providing those sanctioned parties with over $150 million in return for steelmaking materials. 

Swiss-owned company’s Russian gold trades expose gap in western sanctions 

In August 2022, Switzerland adopted the EU’s prohibition of “the direct or indirect import, purchase or transfer” of Russian gold including shipments into third countries. But a provision in Swiss law allows its companies’ overseas subsidiaries to trade Russian commodities as long as they are “legally independent”. As a result, a Swiss commodity trader’s Abu Dhabi subsidiary has been able to buy tens of millions of dollars of Russian gold, the latest evidence of a gap in western sanctions against the Kremlin. 


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