Specific pronouncements in this guidance are somewhat vague , with statements such as : “ Banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type , as permitted by law or regulation .” 25 However , it is said that issuing or holding cryptoassets can represent unsafe / unsound banking practices . In addition , any concentration in such a crypto-asset sector could cause a major liquidity risk to the banking organization . Building off this , banks are expected to incorporate any crypto-asset exposure into internal liquidity and asset-liability management controls , risk assessments and committee meetings .
In a further interagency statement , 26 agencies continue to place emphasis on risk management practices when assessing liquidity risks related to certain sources of funding from cryptoasset-related entities . The agencies cite the following :
• Understanding direct / indirect drivers of deposit behavior
• Assessing concentrations
• Incorporating crypto volatility into contingency funding planning
• Enhanced due diligence and monitoring of all the cryptoasset-related entities that establish deposit accounts
What to look out for moving forward
In situations where regulatory guidance lacks specificity , FIs , AML departments and AML officers should continue to remember that the bank ’ s AML / Bank Secrecy Act policies / procedures set the standard for the institution . The exposure that a bank has to crypto-asset holders and individuals / businesses processing these transactions will have to be commensurate with the level of due diligence controls performed and documented .
Watch out for additional regulatory steps over cryptocurrency companies . A “ discussion draft ” released on June 2 by lawmakers intends to provide guidance for cryptocurrency companies to register with regulatory agencies , clarifying supervisory responsibilities for the agencies as well . 27
Donald “ DJ ” Antonacio , CPA , CAMS , managing director , Verittas Risk Advisors , Miami and Tampa , FL , USA , donald . antonacio @ verittas . com
1
Marc Jones , “ Study shows 130 countries exploring central bank digital currencies ,” Reuters , June 28 , 2023 , https :// www . reuters . com / markets / currencies / study-shows-130-countries-exploring-central-bank-digital-currencies-2023-06-28 /
2
“ The Chainalysis 2023 Crypto Crime Report ,” Chainalysis , https :// go . chainalysis . com / 2023-crypto-crime-report . html ; Note that 2022 illicit addresses do not include firm failures that were also tied to improper governance .
3
Ibid .
4
Elizabeth Napolitano , “ The Fall of Celsius Network : A Timeline of the Crypto Lender ’ s Descent Into Insolvency ,” CoinDesk , July 15,2022 , https :// www . coindesk . com / markets / 2022 / 07 / 15 / the-fall-of-celsius-network-a-timeline-of-the-crypto-lendersdescent-into-insolvency /
5
“ SEC Files 13 Charges Against Binance Entities and Founder Changpeng Zhao ,” U . S . Securities and Exchange Commission , June 5 , 2023 , https :// www . sec . gov / news / press-release / 2023-101
6
“ National Money Laundering Assessment ,” U . S . Department of the Treasury , February 2022 , https :// home . treasury . gov / system / files / 136 / 2022-National-Money-Laundering- Risk-Assessment . pdf
7
“ Treasury Sanctions Russia-Based Hydra , World ’ s Largest Darknet Market , and Ransomware-Enabling Virtual Currency Exchange Garantex ,” U . S . Department of the Treasury , April 5 , 2022 , https :// home . treasury . gov / news / press-releases / jy0701
8
“ U . S . Treasury Issues First-Ever Sanctions on a Virtual Currency Mixer , Targets DPRK Cyber Threats ,” U . S . Department of the Treasury , May 6 , 2022 , https :// home . treasury . gov / news / press-releases / jy0768
9
“ Treasury Sanctions Russia-Based Hydra , World ’ s Largest Darknet Market , and Ransomware-Enabling Virtual Currency Exchange Garantex ,” U . S . Department of the Treasury , April 5 , 2022 , https :// home . treasury . gov / news / press-releases / jy0701
10
“ Ohio Resident Pleads Guilty to Operating Darknet-Based Bitcoin ‘ Mixer ’ That Laundered Over $ 300 Million ,” U . S . Department of Justice , August 18 , 2021 , https :// www . justice . gov / opa / pr / ohio-resident-pleads-guilty-operating-darknet-based-bitcoin-mixerlaundered-over-300-million #
11
“ The Chainalysis 2023 Crypto Crime Report ,” Chainalysis , https :// go . chainalysis . com / 2023-crypto-crime-report . html
12
“ Crypto Mixer Usage Reaches All-time Highs in 2022 , With Nation State Actors and Cybercriminals Contributing Significant Volume ,” Chainalysis , July 14 , 2022 , https :// blog . chainalysis . com / reports / crypto-mixer-criminal-volume-2022 /
13
“ U . S . Treasury Issues First-Ever Sanctions on a Virtual Currency Mixer , Targets DPRK Cyber Threats ,” U . S . Department of the Treasury , May 6 , 2022 , https :// home . treasury . gov / news / press-releases / jy0768
14
“ Application of FinCEN ’ s Regulations to Certain Business Models Involving Convertible Virtual Currencies ,” Financial Crimes Enforcement Network , May 9 , 2019 , https :// www . fincen . gov / resources / statutes-regulations / guidance / application-fincens-regulations-certain-business-models
15
Fred Plan , Van Ta , Michael Barnhart , et al ., “ APT43 : North Korean Group Uses Cybercrime to Fund Espionage Operations ,” Mandiant , March 28 , 2023 , https :// www . mandiant . com / resources / blog / apt43-north-korea-cybercrime-espionage
16
“ U . S . Treasury Issues First-Ever Sanctions on a Virtual Currency Mixer , Targets DPRK Cyber Threats ,” U . S . Department of the Treasury , May 6 , 2022 , https :// home . treasury . gov / news / press-releases / jy0768
17
“ The Chainalysis 2023 Crypto Crime Report ,” Chainalysis , https :// go . chainalysis . com / 2023-crypto-crime-report . html
18
Sabrina Willmer , “ Binance . US , SEC Working on Deal to Avoid Full Asset Freeze ,” Bloomberg News , June 13 , 2023 , https :// www . bloomberg . com / news / articles / 2023-06-13 / binance-us-sec-not-far-apart-on-deal-avoiding-full-assetfreeze ? srnd = premium-asia & leadSource = uverify % 20wall & sref = rhKd9Xvc
19
“ SEC Secures Emergency Relief to Protect Binance . US Customers ’ Assets ,” U . S . Security and Exchange Commission , June 17 , 2023 , https :// www . sec . gov / news / press-release / 2023-110
20
“ Application of FinCEN ’ s Regulations to Persons Administering , Exchanging , or Using Virtual Currencies ,” Financial Crimes Enforcement Network , March 18 , 2013 , https :// www . fincen . gov / sites / default / files / shared / FIN-2013-G001 . pdf
21
“ Prepared Remarks of FinCEN Director Kenneth A . Blanco at Chainalysis Blockchain Symposium ,” Financial Crimes Enforcement Network , November 15 , 2019 , https :// www . fincen . gov / news / speeches / prepared-remarks-fincen-director-kennethblanco-chainalysis-blockchain-symposium
22
“ Chief Counsel ’ s Interpretation Clarifying : ( 1 ) Authority of a Bank to Engage in Certain Cryptocurrency Activities and ( 2 ) Authority of the OCC to Charter a National Trust Bank ,” Office of the Comptroller of the Currency , November 2021 , https :// www . occ . gov / topics / charters-and-licensing / interpretations-and-actions / 2021 / int1179 . pdf
23
“ Joint Statement on Crypto-Asset Risks to Banking Organizations ,” Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency , January 3 , 2023 , https :// www . occ . treas . gov / news-issuances / news-releases / 2023 / nr-ia-2023-1a . pdf
24
Ibid .
25
Ibid .
26
“ Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto- Asset Market Vulnerabilities ,” Board of Governors of the Federal Reserve System , Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency , February 23 , 2023 , https :// www . fdic . gov / news / financial-institution-letters / 2023 / fil23008a . pdf
27
“ McHenry , Thompson , Hill , Johnson Release Digital Asset Market Structure Proposal ,” Financial Services Committee , June 2 , 2023 , https :// financialservices . house . gov / news / documentsingle . aspx ? DocumentID = 408838
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