FinCEN: crypto projects on social media cannot ignore the risk of money laundering


The Deputy Director of the Financial Crimes Enforcement Network (FinCEN) of the United States says that the cryptocurrency sector should not be “deteriorated” in the prevention of money laundering.

FinCEN Deputy Director Jamal El-Hindi made his comments during a speech at the Securities Industry and Financial Markets Association 20th Anti-Money Laundering (AML) and Financial Crimes Conference in New York City on February. 6.

El-Hindi opened his speech and pointed to the special complexity of the securities and futures industry, which includes a dense web of transactions and interactions between interconnected parties.

This “amazingly complex” landscape includes, but is not limited to, primary brokers, traders in futures commissions, executive dealers, transfer agents, clearing firms and investment funds, he noted.

According to him, this complexity is a challenge to the transparency – the collection of information and due diligence processes – that are needed to tackle money laundering and prevent financial crimes.

In many cases, information sharing and Know Your Customer processes can be discouraged due to the highly competitive nature of the sector – only 14% of all entities in the securities sector that are eligible to register for one of the most important business-to business information sharing mechanisms choose to do this, he noted.

In this very challenging climate, El-Hindi warned that new technologies could make the situation worse.

Curious cryptocurrency-curious social media and messaging platforms – the most controversial being Facebook’s Libra project – must meet the same compliance responsibilities as traditional actors in the financial sector, he emphasized:

“Social media and messaging platforms and others who are now focusing on establishing cryptocurrencies cannot close their eyes to illegal transactions that they may promote.”

The influence of these actors in the private sector and the new technology announced by cryptocurrencies brings back the same responsibilities in traditional finances:

“As far as the financial sector chooses to go further […] these emerging systems […] we are not going to allow it to fall back on the protections and appropriate transparency that we have worked so hard together to anchor in the financial system. “

At the beginning of December, the director of FinCEN, Kenneth A. Blanco, claimed that the cryptocurrency industry was increasingly coming into line with the agency’s rules on money transfer services.

In particular, he referred to FinCEN’s guidance from May 2019 as having a clear and positive influence on the agency’s supervision of the crypto space

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Author’s publication

Notes: 0Audience: 3158Registration: 11-07-2018


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