The first few are just summaries of the fines – the older ones have some detail…
Links:
FIU-India Compliance Orders page
Order Summaries – Punjab and Sind Bank, Indian Overseas Bank, Punjab National Bank, Prime Co-operative Bank
Compliance Orders – Urban Cooperative Bank, Nagaraja Samabay Bank, Jharkhand State Co-operative Bank, Solapur Social Urban Cooperative Bank, Allahabad Bank, Andrha Bank
Leaders of CFTC, FinCEN, and SEC Issue Joint Statement on Activities Involving Digital Assets
October 11, 2019
Washington, DC – The leaders of the U.S. Commodity Futures Trading Commission, the Financial Crimes Enforcement Network, and the U.S. Securities and Exchange Commission (the “Agencies”) today issued the following joint statement to remind persons engaged in activities involving digital assets of their anti-money laundering and countering the financing of terrorism (AML/CFT) obligations under the Bank Secrecy Act (BSA).
AML/CFT obligations apply to entities that the BSA defines as “financial institutions,” such as futures commission merchants and introducing brokers obligated to register with the CFTC, money services businesses (MSBs) as defined by FinCEN, and broker-dealers and mutual funds obligated to register with the SEC. Among those AML/CFT obligations are the requirement to establish and implement an effective anti-money laundering program (AML Program) and recordkeeping and reporting requirements, including suspicious activity reporting (SAR) requirements.
For the purpose of this joint statement, “digital assets” include instruments that may qualify under applicable U.S. laws as securities, commodities, and security-or commodity-based instruments such as futures or swaps. We are aware that market participants refer to digital assets using many different labels. The label or terminology used to describe a digital asset or a person engaging in or providing financial activities or services involving a digital asset, however, may not necessarily align with how that asset, activity or service is defined under the BSA, or under the laws and rules administered by the CFTC and the SEC. For example, something referred to as an “exchange” in a market for digital assets may or may not also qualify as an “exchange” as that term is used under the federal securities laws. As such, regardless of the label or terminology that market participants may use, or the level or type of technology employed, it is the facts and circumstances underlying an asset, activity or service, including its economic reality and use (whether intended or organically developed or repurposed), that determines the general categorization of an asset, the specific regulatory treatment of the activity involving the asset, and whether the persons involved are “financial institutions” for purposes of the BSA.
The nature of the digital asset-related activities a person engages in is a key factor in determining whether and how that person must register with the CFTC, FinCEN, or the SEC. For example, certain “commodity”-related activities may trigger registration and other obligations under the Commodity Exchange Act (CEA), while certain activities involving a “security” may trigger registration and other obligations under the federal securities laws. If a person falls under the definition of a “financial institution,” its AML/CFT activities will be overseen for BSA purposes by one or more of the Agencies (and potentially others). For example, the AML/CFT activities of a futures commission merchant will be overseen by the CFTC, FinCEN, and the National Futures Association (NFA); those of an MSB will be overseen by FinCEN; and those of a broker-dealer in securities will be overseen by the SEC, FinCEN and a self-regulatory organization, primarily the Financial Industry Regulatory Authority (FINRA).
Certain BSA obligations that apply to a broker-dealer in securities, mutual fund, futures commission merchant, or introducing broker, such as developing an AML Program or reporting suspicious activity, apply very broadly and without regard to whether the particular transaction at issue involves a “security” or a “commodity” as those terms are defined under the federal securities laws or the CEA.
Additional Comments by the U.S. Commodity Futures Trading Commission Chairman
The mission of the CFTC is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation. In advancing that mission, the CFTC regulates key participants in the derivatives markets, including boards of trade, futures commission merchants, introducing brokers, swaps dealers, major swap participants, retail foreign exchange dealers, commodity pool operators, and commodity trading advisors pursuant to the CEA. An “introducing broker” or “futures commission merchant” is defined in BSA regulations as a person that is registered or required to register as an introducing broker or futures commission merchant under the CEA. Introducing brokers and futures commission merchants are required to report suspicious activity and implement reasonably-designed AML Programs. These requirements are not limited in their application to activities in which digital assets qualify as commodities or are used as derivatives. The rules would also apply to activities that are not subject to regulation under the CEA.
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Additional Comments by the Financial Crimes Enforcement Network Director
As a bureau of the Department of the Treasury, FinCEN is the administrator of and lead regulator under the BSA — the nation’s first and most comprehensive AML/ CFT statute. FinCEN’s mission is to protect our financial system from illicit use, ensure our national security, and protect our people from harm. FinCEN has supervisory and enforcement authority over U.S. financial institutions to ensure the effectiveness of the AML/CFT regime. As such FinCEN mandates certain controls, reporting, and recordkeeping obligations for U.S. financial institutions. The BSA and its implementing regulations set forth the regulatory obligations that generally apply to financial institutions, including AML Program, recordkeeping, and reporting requirements.
FinCEN regulates, among other persons, money transmitters and other MSBs. FinCEN’s BSA regulations define a “money transmitter” as a person engaged in the business of providing money transmission services or any other person engaged as a business in the transfer of funds. The term “money transmission services” means “the acceptance of currency, funds, or other value that substitutes for currency from one person and the transmission of currency, funds, or other value that substitutes for currency to another location or person by any means.”
In May 2019, FinCEN issued interpretive guidance (2019 CVC Guidance) to remind persons subject to the BSA how FinCEN regulations relating to MSBs apply to certain business models involving money transmission denominated in value that substitutes for currency, specifically, convertible virtual currencies. The 2019 CVC Guidance consolidated current FinCEN regulations, and related administrative rulings and guidance issued since 2011, and applied these rules and interpretations to other common business models involving CVC engaging in the same underlying patterns of activity. Covered persons and institutions are strongly encouraged to review the 2019 CVC Guidance.
As set forth in the 2019 CVC Guidance, a number of digital asset-related activities qualify a person as an MSB that would be regulated by FinCEN. FinCEN’s BSA regulations also provide that any person “registered with, and functionally regulated or examined by, the SEC or the CFTC,” would not be subject to the BSA obligations applicable to MSBs, but instead would be subject to the BSA obligations of such a type of regulated entity. Accordingly, even if an introducing broker, futures commission merchant, broker-dealer or mutual fund acts as an exchanger of digital assets and provides money transmission services for the purposes of the BSA, it would not qualify as a money transmitter or any other category of MSB and would not be subject to BSA requirements that are applicable only to MSBs. Instead, these persons would be subject to FinCEN’s regulations applicable to introducing brokers, futures commission merchants, broker-dealers and mutual funds, respectively. These obligations include the development of an AML program and suspicious activity reporting requirements, as well as requirements under applicable CFTC or SEC rules. Furthermore, regardless of federal functional regulator, all financial institutions dealing in digital assets meeting the definition of “securities” under federal law must comply with federal securities law.
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Additional Comments by the U.S. Securities and Exchange Commission Chairman
The statutory mission of the SEC is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. In general, the SEC has jurisdiction over securities and securities-related conduct. Persons engaged in activities involving digital assets that are securities have registration or other statutory or regulatory obligations under the federal securities laws.
The SEC oversees the key participants in the securities markets, some of which may engage in digital asset activities. Key participants in the securities markets include but are not limited to national securities exchanges, securities brokers and dealers, investment advisers, and investment companies. Market participants receiving payments or engaging in other transactions in digital assets should consider such transactions to present similar or additional risks, including AML/ CFT risks, as are presented by transactions in cash and cash equivalents. With regard to SEC regulated entities, broker-dealers and mutual funds are defined as “financial institutions” in rules implementing the BSA. A “broker-dealer” is defined in rules implementing the BSA as a person that is registered or required to register as a broker or dealer under the Securities Exchange Act, while a “mutual fund” is defined as an investment company that is an “open-end company” and that is registered or required to register under the Investment Company Act of 1940.
Broker-dealers and mutual funds are required to implement reasonably-designed AML Programs and report suspicious activity. These rules are not limited in their application to activities involving digital assets that are “securities” under the federal securities laws.21
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Statement of inspection in Sparekassen Kronjylland (money laundering area)
In June 2018, the Danish FSA was inspected at Sparekassen Kronjylland. The inspection was an investigation of the money laundering area as part of the ongoing supervision of the savings bank. The inspection included the savings bank’s risk assessment, risk management, the savings bank’s policies and procedures in the area of money laundering, the savings bank’s customer knowledge, the savings bank’s handling of correspondent banks and the savings bank’s internal controls.
Risk assessment and summary
Sparekassen Kronjylland is a medium-sized financial institution whose primary market area is East and Central Jutland. Sparekassen focuses on private customers as well as small and medium-sized business customers.
The Danish Financial Supervisory Authority considers that the Savings Bank’s inherent risk of being abused for money laundering or terrorist financing is normal to high compared to the average of financial companies in Denmark. The assessment places particular emphasis on the fact that the Savings Bank has a number of foreign correspondent relations outside the EU / EEA.
The Savings Bank was instructed to ensure that the money laundering policy limits the savings bank’s risks in the area of money laundering and to ensure that the policy is arranged in such a way that it can form the basis for a reporting.
In addition, the Savings Bank was instructed to ensure that, in connection with the establishment of a correspondent relationship outside the EU / EEA, the Savings Bank assesses the information obtained as part of the customer knowledge procedure. The assessment must clarify the risk elements associated with the establishment of the specific correspondent connection. In cases where the Savings Bank considers that stricter requirements for the knowledge of the procedure for establishing a correspondent relationship within the EU / EEA apply, the
Savings Bank shall also assess the information obtained and clarify the risk elements associated with the establishment.
Sparekassen was also instructed to ensure that the business processes on correspondent relations are expanded to specify which elements should be included in the assessment of the customer knowledge material obtained prior to the establishment and in the ongoing monitoring.
In addition, the Savings Bank was instructed to draw up adequate procedures for the implementation of internal controls in the area of money laundering.
Finally, the Savings Bank was charged that the Savings Bank’s internal audit had not carried out an audit of risk management in the area of money laundering and terrorist financing. However, the Financial Supervisory Authority found during the inspection that the internal audit had planned a review of the money laundering and terrorist financing area during 2018.
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Statement of inspection in DFDS A / S (money laundering area)
In March 2019, the Danish FSA was on inspection in DFDS A / S. The inspection was an investigation of the money laundering area as part of the ongoing supervision of the company. The inspection included compliance with the rules of customer knowledge, monitoring, investigation, notification and listing.
Risk assessment and summary
The company is authorized to exchange currency pursuant to section 41 of the Money Laundering Act.
The company offers currency exchange to passengers (private customers) and to ship crew (employees).
The company offers currency exchange operations in Denmark from the two vessels “Crown Seaways” and “Pearl Seaways”, sailing on the route between Copenhagen and Oslo. The company receives both cash and card payments. The company’s private customers consist mainly of tourists who exchange for holiday purposes in connection with their stay on the ships.
The Danish Financial Supervisory Authority considers that the company’s inherent risk of being abused for money laundering or terrorist financing is normal to high assessed in relation to the average of financial companies in Denmark. In the assessment, the FSA has placed particular emphasis on the fact that currency exchange operations are generally considered to have a high inherent risk of being exploited for money laundering or terrorist financing.
Conversely, the assessment also emphasizes that the currency exchange business is exercised under special conditions, including the additional security measures as a result of the business being carried on board a ship. Among other things, this includes that all customers must buy a ticket and legitimize themselves before boarding the ships, and that DFDS must deliver passenger lists to customs and police authorities under other legislation.
Based on the inspection, there are some areas that give rise to supervisory reactions.
The company is instructed to ensure that the company retains identity and verification information and a copy of the credentials presented for currency exchange on the ship “Pearl Seaways”.
The company is required to have procedures to determine whether customers are politically exposed persons (PEP) or close or close partners of a politically exposed person.
The company is instructed to ensure that its customers are not listed in EU regulations containing financial penalties.
Finally, the company is being prosecuted for failing to keep proven credentials from exchanges on the ships before March 2018.
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Statement of inspection in DLR Kredit A / S
In December 2018, the Danish FSA was on inspection in DLR Kredit A / S (DLR). The inspection included large loans.
At the inspection, the Danish FSA reviewed 35 of DLR’s largest loans, including the institute’s 10 largest new loans. The inspection also included a review of, among other things. credit policies, credit instructions and business procedures, policies and management reports related to the credit area.
Summary and risk assessment
The Danish Financial Supervisory Authority found that the volume of large loans with objective indication of credit deterioration had decreased since the last study of the theme. However, it remains at a high level, not least in the light of the business cycle.
In the opinion of the Danish Financial Supervisory Authority, DLR’s assessment and rating of major credit cases is predominantly true. However, the Danish FSA found two cases where the rating was too high.
DLR must ensure that for all customer groups an assessment is required of a managerial supplement to the department’s write-downs. DLR was ordered to do so.
Several of the institute’s major new loans were pre-mortgages for properties under construction for rental. In the opinion of the Danish Financial Supervisory Authority, lending to rental properties under construction is characterized by an increased risk, not least in the current market.
For Q3 2019, DLR had calculated its solvency need at 9.1%. Actual solvency amounted to 16.5 per cent, which, in addition to the solvency need, would cover buffer requirements of a total of 4.0 per cent. The Danish Financial Supervisory Authority did not comment on the solvency need.
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The Danish FSA’s assessments of financial companies
The Danish Financial Supervisory Authority prepares a brief statement after each inspection in a financial company. The statement must be published on the company’s website and all statements can also be viewed here on the website.
The reports describe the Danish FSA’s assessment of the companies, including the central injunctions, prosecutions and risk information provided by the FSA on the basis of the inspections. The financial companies must publish the statements no later than 3 days after they receive them. Shortly after the companies’ own publication, the statements can also be found here.
The Inspectorate may also, between inspections, prepare a public statement of risk information, injunctions or prosecutions that are deemed to be of significance to the company’s customers, shareholders or others.
The statements can be sorted alphabetically, by date or by business area. Below you can see the last 20 statements.
There are 3 new ones, so we will be posting those – and checking in on this page periodically for new ones.
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Invitation to special meeting on money laundering and technological challenges and opportunities
The meeting focuses on how technology can help with the process of onboarding customers.
The meeting will be held on October 11, 2019, at 14-16, at the Danish Financial Supervisory Authority, Århusgade 110, 2100 Copenhagen Ø.
Registration
Please send to fintech@ftnet.dk stating your name and company by October 8, 2019 . The Financial Supervisory Authority may be required to limit the number of participants per year. organization / company.
Background
As part of the FSA’s fintech initiatives, we created the Fintech Forum in 2017. This spring, the FSA evaluated the format of the Fintech Forum. A need was identified to hold special meetings, which should focus on a specific topic and with the possibility of involving a wider circle of stakeholders. Against this background, the Danish FSA has decided to hold special meetings in addition to the regular meetings of the Fintech Forum. At the last meeting of the Fintech Forum, members expressed a desire for a special meeting focusing on fintech and money laundering. The Financial Supervisory Authority thus invites special meetings on challenges and opportunities by using technology for customer knowledge procedures .
Agenda
1. Welcome and introduction by the Danish Financial Supervisory Authority
2. What are the challenges and opportunities of using technology for customer awareness procedures?
Presentation by Tobias Jørgensen, e-net
Presentation by Jonas Kjær Leed, Lunar Way
Presentation by Christian Visti Larsen, NewBanking
3. Panel debate on the challenges and opportunities of using technology for customer knowledge procedures
This should include: it is discussed whether there are challenges that the sector can solve itself or whether the Danish Financial Supervisory Authority can / should help to solve them.
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