Welcome to the December 2023 summary of news you can use as your bank or other financial institution attempts to stay up to date on the world of BSA/AML compliance. Our monthly series of curated news about financial crime developments, resources and stories.
In this edition, three main stories emerge:
- At $4.4 billion, Binance receives the largest fines in FinCen and OFAC history
- New US legislation request would give Treasury the right to police crypto markets
- Indonesia to receive full FATF membership
- FATF amends Recommendation 8 to protect NPOs from terrorist financing abuse
We hope you find the following information useful to your efforts in fending off financial crimes and staying in compliance with increasingly complex regulatory regimes.
Binance receives the largest fines in FinCen and OFAC history
On November 21, 2023, Binance Holdings Ltd. pleaded guilty to US federal charges and admitted that it engaged in money laundering, unlicensed money transmitting, and sanctions violations. As a result, Binance has also agreed to pay a settlement with FinCen of $3.4 billion and a settlement with OFAC of $968 million – for a total just shy of $4.4 billion. Binance Chief Executive Changpeng Zhao will step down as part of the agreement.
Binance admits that it willfully operated as an unregistered money services business (MSB) while obscuring its ties to the U.S. and maintaining its most commercially important U.S. customers.
As an MSB, Binance was required to report suspicious transactions to FinCEN through suspicious activity reports (SARs). FinCEN’s investigation revealed that Binance’s former Chief Compliance Officer told personnel that the CEO’s policy was to not report such activity, and Binance never filed a single SAR with FinCEN. Binance willfully failed to report over 100,000 suspicious transactions. Binance chose to “prioritize growth over compliance with U.S. legal requirements,” said Treasury Secretary Janet Yellen.
Binance admits that it willfully failed to establish, implement, and maintain an effective anti-money laundering program, particularly by failing to perform Know Your Customer (KYC) on a large number of its users. FinCEN’s investigation revealed that Binance also failed to mitigate the risks of anonymity-enhanced cryptocurrencies that allowed its users to obscure information about the origin and destination of transactions.
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New US legislation request would give Treasury the right to police crypto markets
On November 28, 2023, the Biden Administration sent a letter to Congress, requesting new legislation that would grant Treasury the authority to police crypto marketplaces used by actors the U.S. government deems illicit. It’s clearly not a coincidence that the move to expand Treasury’s authority comes on the heels of Binance’s settlements with FinCen and OFAC for its blatant violations of US AML regulations.
“Our actions over the last year send a clear message: we will not hesitate to bring to bear tools across government to protect our national security,” said Deputy Treasury Secretary Wally Adeyemo while speaking at an event hosted by the Blockchain Association. Adeyemo said that crypto companies need to do more to curtail the flow of illicit finance, and that the lack of action across the sector presents a risk to the U.S.
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Indonesia to receive full FATF membership
The FATF has accepted Indonesia at its 40th member and has granted full membership to Indonesia. The country underwent a mutual evaluation which the Plenary discussed and approved in February 2023. Speaking at the Merdeka Palace in Jakarta on November 6th, Indonesian President Jokowi said that he expects full membership status will raise positive perceptions of the Indonesian financial system as well as confidence and trust in the country’s investment climate.
To gain full membership, Indonesia had to deliver an action plan to address the key technical and effectiveness issues identified during the 2022 FATF evaluation of Indonesia. Based on the country’s strong political commitment to complete the remaining items on its action plan and the continuing progress to improve its national AML/CFT/CPF program, the Plenary agreed to grant Indonesia membership in the FATF, effective at the end of this Plenary. Indonesia will benefit from full membership rights and will be expected to meet the obligations of FATF membership. With Indonesia’s accession to membership, there are now 40 members in FATF, including all G20 countries.
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FATF amends Recommendation 8 to protect NPOs from terrorist financing abuse
The FATF has updated its Best Practices to reflect the amendments to Recommendation 8 and to help countries, the non-profit sector and financial institutions understand how best to protect relevant NPOs from abuse for terrorist financing.
With the revisions to Recommendation 8 and the updated Best Practices paper, the FATF has fully clarified how its Standards apply to the non-profit sector in line with the risk-based approach. “This leaves no room for implementation of measures that are not proportionate to the assessed terrorist financing risks,” said a recent FATF statement on the matter. The revisions do not unduly disrupt or discourage legitimate NPO activities.
In a first for FATF, the new best practices paper also includes examples of bad practices and specifically explains how not to implement the FATF’s requirements. The paper’s updated best practices paper resulted from discussions and active consultations with public and private sector stakeholders, including through a public consultation that ended in August 2023
To read the fully amended best practices, download the paper here:
To access in-depth insights on how your organization can more effectively and efficiently overcome BSA/AML compliance challenges, visit the Resources page at WorkFusion to gain in-depth insights and a wide range of best practices information.