FinCEN Director Warns U.S Banks About Crypto Risk Exposure With AML Programs
September 30, 2020 9:36 am
The U.S. Financial Crimes Enforcement Network (FinCEN) Director Kenneth Blanco has warned U.S. banks to think seriously and that it is closely watching how they respond to crypto risk exposure with their AML programs.
In Las Vegas this week, during the virtual 2020 ACAMS anti-money laundering Conference, Kenneth Blanco discussed the obligations of banks in executing effective anti-money laundering (AML) policies.
According to the current FinCEN regulations (FIN-2019-A003), it is the responsibility of all financial institutions to identify and report suspicious activity concerning how criminals and other bad actors exploit card verification checks for money laundering, sanctions evasion, and other illicit financing purposes.
Several banks still don’t have any clue how virtual currencies affect their institutions. The director highlighted the need for banks to have another look at their AML policies and procedures, especially with cryptocurrencies, continuing that “if banks are not thinking about these issues, it will be apparent when examiners visit.”
“To be clear, exchanges are not the only ones with crypto risk exposure. These risks are not unique to money services businesses or virtual currency exchanges; banks must be thinking about their crypto exposure as well. These are areas your examiners, and FinCEN will ask you about when assessing the effectiveness of your AML program.”
As per the research in 2019, by crypto analytics firm CipherTrace Labs, Eight of the ten major U.S. retail banks had dealings with illegal crypto Money Service Businesses (MSBs). These MSBs accept cash payments in exchange for crypto, essentially running as unregistered P2P exchanges.
Also, many P2P exchanges have no AML or know-your-customer (KYC) programs in place, resulting in huge money laundering risks to banks and other financial institutes. Banks have long been criticized for failing to maintain robust AML and KYC programs.
Another big AML scandal was revealed yesterday by the International Consortium of Investigative Journalists (ICJI). As per the ICJI reports, more than $2 trillion of suspicious transactions already processed, have been identified by banks, that should be frozen. The amount of these suspicious transaction’s money could be many times larger, not identified by banks yet.