Diving brief:
- The New York Financial Services Department Present advice on Wednesday This orders the banks to use blockchain analysis tools if they are considering or already carrying out transactions related to cryptocurrency, to repel the money laundering and sanctions.
- The banks suggested by the NYDFS plan to use blockchain analysis tools when exposure of risk exposure thanks to portfolio screening and the verification of funds involving virtual asset service providers; Monitor the cryptographic ecosystem for exposure to illicit activity and risk management of third parties; Strengthen reasonable diligence controls to assess the expected activity compared to actual activity, such as dollar thresholds, customers engaged in cryptographic activity; And weigh the risks associated with a product or cryptographic service to offer.
- “As traditional banking institutions develop in virtual currency activities, their compliance functions must adapt, to integrate new tools and technologies to mitigate new and different risks”, NYDFS Superintendent Adrienne Harris said in a press release.
Diving insight:
The directives, which is based on the recommendations of the NYDFS issued to “commercial entities in virtual currencies” in 2022, emphasizes expectations of compliance and encourages those who are looking for or have already engaged in cryptographic activities to take advantage of new technology control measures, said the Harris office. These tools can improve compliance programs and prevent illegal activities, as banks are pursuing cryptographic activities, Nydfs said.
A regulatory environment considered to be more user -friendly towards the crypto has more banks and businesses exploring digital asset activities; The NYDFS stressed “an increase in the adoption of virtual currency”.
In light of this, New York banks should consider incorporating blockchain analysis as an additional risk management tool, Harris’ office said. The regulator highlighted the importance of regularly reassessing risk management frameworks, in particular “in the light of the evolution of commercial models, new types of customers and new entrants on the market”.
“Emerging technologies introduce new and evolving threats that require new tools, such as blockchain analysis, with improved capacities to help identification and attenuation of risks,” noted the directives. “With an increasing adoption of virtual currency, covered institutions play an essential role in safeguarding the integrity of the financial ecosystem to prevent illicit activities such as money laundering, terrorist funding and escape sanctions.”
The directives also stressed that all controls must be adapted to the commercial model of a bank, the appetite for risks and operations.
In August, Nydfs secured $ 48.5 million in paxos On reasonable diligence failures linked to its links with the former partner Binance and systemic failures in the anti-flange program of Paxos.
In April, the Harris office cited the Société de Techno Payments Block Over Lax Optinition of the Paying Paying Paying Paying Paying The Cash Application, including its inability to effectively monitor Bitcoin transactions; business agreed to pay a fine of $ 40 million.
“As a leader in virtual currency regulations, the DFS will continue to define clear and transparent expectations for institutions, to protect consumers and protect market integrity, while ensuring that regulated banking organizations in New York can remain resilient and competitive,” said Harris in the press release.
