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FinCEN announces sweeping money laundering regulations overhaul

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The U.S. Financial Crimes Enforcement Network (FinCEN) has announced it will be changing the anti-money laundering (AML) and counter-terrorist financing (CTF) rules within the financial sector.

The announcement stated that FinCen will be seeking public feedback on forthcoming regulatory proposals intended to modernize and strengthen rules governing the reporting and monitoring requirements of financial institutions.

The new policies seek to address “the evolving threats of illicit finance, such as money laundering, terrorist financing and related crimes” which suggests that crypto firms and exchanges will be firmly in the sights of the coming regulatory changes.

They will also impact the compliance obligations of banks, credit unions, casinos, insurance companies, mutual funds, and dealers or brokers of futures, commodities, precious stones, and precious metals.

The new AML regulations aim to identify and combat illicit financial activity through robust record-keeping and risk assessment requirements and the regulator hopes to tighten up the definition and requirements of an “effective and reasonably designed” AML program under the Bank Secrecy Act (BSA). It notes the term currently “has no specific, consistent definition in existing regulation.”

“The regulatory amendments under consideration are intended to modernize the regulatory regime to address the evolving threats of illicit finance, and provide financial institutions with greater flexibility in the allocation of resources, resulting in the enhanced effectiveness and efficiency of anti-money laundering programs.”

FinCEN is currently considering policy recommendations from the Anti-Money-Laundering Effectiveness Working Group — an entity comprising representatives of state and federal law enforcement agencies, financial institutions, and trade groups operating under BSA regulations.

The working group has advocated the establishment of specific guidance for politically exposed persons, and greater clarity regarding the requirements for suspicious activity monitoring and reporting.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.