US regulators remind FIs of AML obligations for digital assets
US regulatory bodies have issued a statement reminding financial institutions (FIs) working in digital assets to pay attention to their anti-money laundering and counter-terrorism financing (AML/CFT) obligations under the Bank of Secrecy Act (BSA).
The US Commodity Futures Trading Commission (CFTC), the US Securities and Exchange Commission (SEC) and the Financial Crimes Enforcement Network (FinCEN) bureau in the Treasury have all pointed to requirements for firms to establish and implement an effective AML program, with record-keeping and reporting requirements met which include suspicious activity reporting (SAR).
Within the umbrella of financial institutions affected by these SAR requirements are “introducing brokers” or “futures commission merchants”. Under BSA regulations, these are people who are registered or who are required to register as an introducing broker or futures commission merchant with the CFTC according to the Commodity Exchange Act (CEA).
These registered companies include oil company BP, as well as major banks Deutsche Bank, Goldman Sachs, Bank of America, Credit Suisse and Wells Fargo Bank. This list of registered swap dealers was last updated on 30 September 2019.
The authorities point out that: “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”. Under the BSA and AML/CFT requirements, digital assets are securities, commodities, and security- or commodity-based instruments such as futures or swaps.
Categorisation of a digital asset is down to “the facts and circumstances underlying an asset, activity or service, including its economic reality and use”, rather than terminology.