anti-money laundering

AML BitCoin Lobbyist Abramoff to Pay $55K in Convicted Guilt Plea for ICO Fraud

In the civil case filed against Jack Abramoff for his role in the 2018 Initial Coin Offering (ICO) scandal, the AML BitCoin lobbyist is expected to pay $55,000 in disgorgement and interest for his conspiracy in fraud.

During the 2018 ICO marketing campaign, Abramoff and founder of AML BitCoin Marcus Andrade were reported to have provided misleading information concerning their prized token, in an attempt to obtain crypto funds from interested sponsors.

In the recent development of Abramoff’s case, the Securities and Exchange Commission (SEC) and the San Francisco court behind the ruling have decreed that Abramoff will not only pay $55, 000 for his financial offenses, but he will also be permanently barred from any future securities offerings.

2018 Initial Coin Offering Fraud Case

According to the SEC’s previous report, the Nevada-based NAC Foundation founded by Marcus Andrade raised at least $5.6 million from more than 2,400 investors in an ICO that could later be converted to Anti-Money Laundering (AML) BitCoin.

During the marketing campaign of the cryptocurrency, Andrade, and Abramoff also claimed that the AML BitCoin was superior to the original Bitcoin, falsely stating that their token had a theft-resistant, anti-terrorism and anti-money laundering technology integrated into it that offered superior security. They also assured investors that their prized token ran on NAC’s very own “privately regulated public blockchain.” AML BitCoin was promoted on social platforms and forums.

Abramoff and Andrade went on to issue tokens to raise funds for the development of the AMC BitCoin and said that these “funds” would be exchangeable later for AML BitCoins when the latter launched. They estimated the launch to be in effect within 6 months.

Abramoff Not a First-Time Offender

Aside from being charged with multiple counts of conspiracy in fraud and for violating the Lobbying Disclosure Act, Abramoff was also sentenced for felonies dating as far back as 2006.

He was sentenced to a 6-year sentence that he served in 4 years instead. Abramoff pleaded guilty to felony counts that pertained to illegal lobbyist practices, such as lobbying a member of Congress on behalf of an undercover FBI agent impersonating a businessperson.

SEC to Regulate Binance Chain With Blockchain Analytics Firm CipherTrace

The US Securities and Exchange Commission plans to award CipherTrace blockchain analytics firm with a contract pertaining to Binance Chain.

SEC Awards Contract to Regulate Binance Chain

Binance Chain is a blockchain created to host the Binance coin “BNB” and it underlies Binance Dex, which is a decentralized exchange built by Binance, the largest crypto exchange on the market by volume.

The Securities and Exchange Commission (SEC) would like to see CipherTrace analytics firm in charge of regulating Binance Chain, as it declares that the blockchain-based firm is “the only known blockchain forensics and risk intelligence tool that can support the Binance coin (BNB) and all tokens on the Binance network. CipherTrace is reputed in the crypto industry for protecting financial institutions from digital assets fraud and cybercrime, among other things. It prides itself on “growing the blockchain economy by making it safe for users, and it is trusted by the government.”

The contract is to be granted to CipherTrace tomorrow by the SEC. Though Binance Chain runs on a public blockchain system, the SEC would like to see more regulatory order with transactions, as anti-money laundering is on the rise and regulatory compliance needs to be instilled on the platform for it to operate smoothly.

CipherTrace To The Rescue of Coin Exchanges

CipherTrace, which was initially founded in 2015 and funded by the US Department of Homeland Security, makes software products that help blockchain forensic analysts trace miscellaneous transactions. For law enforcers, these tools are essential for verifying whether crypto exchanges have been compliant with local anti-money laundering policies and for tracing the source and the amount of fraudulent transactions on the blockchain.

Tracking Binance is essential to the growth of the crypto exchange. The coin exchange, founded by Changpeng Zhao (CZ), is among the biggest crypto exchanges in the world. BNB coin ranks among the tenth-largest by market cap on digital trading platforms. Since 2019, CipherTrace has conducted business with Binance to further the cause of eradicating anti-money laundering schemes and fraudulent transactions.

Binance Dreams of Expanding Their Crypto Empire

With the regulatory contract set in motion for this week, Binance Chain will greatly benefit from CipherTrace’s contract, as the blockchain analytics firm is reputed to possess the only known blockchain forensics and risk intelligence tool that can possibly support the volume of transactions on the Binance network and the hundreds of digital assets on the platform.

Binance has been making some major power moves in the crypto industry. The blockchain crypto exchange has come up with some major upgrades since 2017. Just a year ago, Binance had introduced staking, cryptocurrency trading, and margin trading on its platform. Also, it has introduced new projects this year, which include a successful upgrade to its trading platform.

Earlier in April, Binance released its whitepaper and added smart contracts to Binance Chain. The smart contract functionality, known as “Binance Smart Chain,” runs in parallel with the chain and allows for more complex transactions to take place on the blockchain network. It is also compatible with Ethereum.Just like Ethereum, Binance Chain is looking to broaden its horizons and adopt decentralized applications (DApps) like their competitor.

Pakistan Banks Develop Blockchain-based KYC Platform

The Pakistan Banks’ Association (PBA), a group of 31 traditional banks operating in Pakistan, has signed off on the development of a blockchain-based Know Your Customer (KYC) platform. The move aims to strengthen the country’s Anti-Money Laundering (AML) capabilities while countering terror financing – an initiative led by the State Bank of Pakistan (SBP).

As reported by the Daily Times, the PBA signed a contract on March 2 to develop Pakistan’s first blockchain-based national eKYC banking platform. The Avanza Group has been tasked to develop the blockchain-based eKYC platform named “Consonance,” which will be used by member banks to standardize and exchange customer data via a decentralized and self-regulated network. This will enable banks to assess existing and new customers, and to share customer details based on consent.

The member banks of PBA include international establishments such as the Industrial and Commercial Bank of China, Citibank, and Deutsche Bank. The blockchain platform will improve operational efficiencies, primarily aimed at improving customer experience during onboarding.

Joining other countries in the race to develop a central bank digital currency (CBDC), Pakistan has recently signed new laws to ensure the launch of a CBDC by 2025. The SBP will issue licenses to electronic money institutions for CBDC issuance. “These landmark regulations are a testament to the SBP’s commitment toward openness, adoption of technology, and digitization of our financial system,” said Deputy Governor of SBP Jameel Ahmad.

The use of blockchain technology for KYC purposes offers numerous benefits to the banking industry, including reduced costs and enhanced security. The development of Pakistan’s first blockchain-based national eKYC banking platform is a significant step towards the country’s digitalization of its financial system. By standardizing and sharing customer data, Pakistan’s banking industry will be better equipped to fight money laundering and terror financing while improving customer experience during onboarding.

Overall, the development of the blockchain-based KYC platform demonstrates the PBA’s commitment to providing its members with cutting-edge technology to improve operations and customer experience. The move also reflects Pakistan’s willingness to embrace blockchain technology as a means of strengthening its financial system and combatting financial crimes.

BaFin Declines to Classify NFTs as Securities, Recommends Case-by-Case Approach

The fact that there is now a discussion going on over the appropriate approach to classify these digital assets is reflected in BaFin’s decision to not recognize NFTs as securities. This argument has been going on for quite some time. Even if there are many who think of non-fungible tokens (NFTs) as investments or crypto assets, there are also others who believe that NFTs are nothing more than one-of-a-kind digital collectibles that have no value apart from the rarity or desirability of their presence. Despite the fact that some individuals regard non-traded stocks and bonds to be investments, this is the case. It is possible that, at some time in the future, the case-by-case method that BaFin utilizes will make it possible to get greater clarification about the classification of NFTs.

Yet, it is difficult to apply current legal frameworks to non-fiat currencies such as NFTs since these assets are not standardized and cannot be exchanged. This makes it difficult to apply existing legal frameworks. Those in charge of regulation are presented with a challenge as a result of this. The phrase “crypto assets” refers to non-fungible tokens that cannot be traded for other currencies and is an exception to this norm. BaFin is under the impression that non-financial transactions will not be in conformity with the licensing requirements outlined in the Payment Services Supervision Act, nor will they be subject to BaFin’s supervision regarding the prevention of money laundering. This is due to the fact that non-bank financial transactions are not regulated in the same manner that payment services are.

Notwithstanding the difficulties that are associated with recognizing them, non-fungible tokens are becoming an increasingly popular category of digital collectibles. This is despite the fact that identifying them may be difficult. The majority of non-fungible token (NFT) collectors acquire NFTs for reasons related to status, distinctiveness, and aesthetics rather than with the purpose of utilizing them as an investment, according to research that was undertaken by the metaverse site Metajuice. As the market for non-traditional assets (NFTs) continues to increase, the legal frameworks that control it will need to change in order to provide investors and collectors a higher degree of transparency and protection. This will be necessary in order to accommodate the market’s growing size.

Binance Responds to U.S. Senators Letter, Excludes Financial Data

Binance has been the subject of regulatory scrutiny on a global scale, with a number of nations implementing limits or completely banning its services as a result of allegations of regulatory infractions. The Securities and Exchange Commission (SEC) in the United States initiated an investigation into Binance.US in February over trading entities that are reportedly tied to Changpeng “CZ” Zhao, the CEO of Binance. An investigation report indicated that Binance was likely responsible for the transfer of around 400 million dollars in money from a Binance.US account to a trading business run by Zhao.

In their letter, the senators from the United States, lead by Elizabeth Warren, expressed their worries over the operations of Binance and asked for the firms’ balance sheets, AML rules, and documentation regarding the link between Binance and Binance.US. The senators charged that Binance and its American affiliate intended to circumvent authorities in the United States, evade sanctions, and assist the laundering of at least $10 billion in illicit funds. Previous statements made by Binance indicate that the two businesses are distinct organizations, each with its own autonomous management and activities.

Binance’s Hillman mentioned in his response to the senators’ letter that the cryptocurrency exchange uses both in-house and third-party tools to monitor user transactions and profiles in real time. As a result of alerts generated by transaction monitoring, Binance was able to halt more than 54,000 transactions between August 2021 and November 2022. Binance didn’t address the senators’ concerns about the exchange’s lack of openness, despite the fact that it had already provided the financial data that had been sought to the U.S. authorities. Instead, it omitted the information from the letter it had sent to the senators.

As a whole, it is probable that Binance’s answer is an effort to soothe worries and strengthen its relationship with U.S. authorities, who have been clamping down on cryptocurrency exchanges and other participants in the sector. Yet, Binance’s regulatory difficulties are far from being resolved, and it is possible that the exchange may be subjected to more scrutiny in the months ahead as authorities work to assure compliance with AML and other legislation.

EU Proposes Cap on Anonymous Crypto Transfers

The European Union has taken a step towards greater financial transparency with a proposal to limit anonymous crypto transfers to 1,000 euros ($1,083) to combat money laundering and terrorist financing. According to a statement from the European Parliament published on March 28, the new limit would apply to transfers where a customer cannot be identified. Cash transactions would also be capped at 7,000 euros ($7,585).

The proposal is part of the Anti-Money Laundering and Countering the Financing of Terrorism package and is expected to be confirmed in a plenary session in April. Negotiations on the final shape of the bills will then begin. The new regulations will be enforced by the European Anti-Money Laundering Authority (AMLA), which was formed in June 2022.

The AMLA’s co-rapporteur, Emil Radev, stressed the importance of close cooperation between the new authority and national supervisors. He also called for the AMLA to directly supervise the riskiest crypto asset service providers and companies in the financial sector that operate in several member states.

Lawmakers overwhelmingly approved the text relating to anonymous instruments, including crypto assets, with 99 votes in favor, eight against, and six abstentions. The move is part of a wider push towards greater transparency in the financial sector, with the EU seeking to tackle the threat of money laundering and terrorist financing.

Crypto assets have long been seen as a potential haven for illicit activities due to the ease with which they can be transferred anonymously. The new regulations seek to address this issue by increasing transparency and accountability in the crypto sector.

The proposal is part of a wider push by the EU towards greater financial regulation. The European Central Bank has previously called for a global approach to regulating cryptocurrencies, warning that they could pose a threat to financial stability. The EU’s proposals also follow recent moves by other countries, such as China, to tighten regulations on crypto assets.

While the EU’s proposals have been welcomed by many in the financial sector, some have raised concerns about the potential impact on privacy and the practicalities of enforcing the new regulations. Nonetheless, the EU remains committed to tackling money laundering and terrorist financing, and the new regulations are just one step towards achieving this goal.

Richard Teng Signals Unchanged Core Values at Binance Amid Leadership Transition

Within a recent post on social media, Richard Teng, who was recently hired as the CEO of Binance, provided reassurance to stakeholders over the exchange’s commitment to maintaining its key principles. His message, which comes after a turbulent era for the corporation, is a promise of stability and a focus on the user from the company’s perspective. Given the recent legal problems that have involved his predecessor, Changpeng Zhao, this promise is especially noteworthy in light of those specific occurrences.

Teng’s Reassurance Amidst Leadership Shift

The following is a tweet from Richard Teng: “Over the next few weeks, I will be doing a lot of talking.” More than just interviews, events, and AMAs. Excited to meet a good number of you in the near future. One thing that should be emphasized right now is that the fundamental principles that Binance upholds will not be altered. We continue to be committed to safeguarding users and developing a platform that people really enjoy using. This comment may be seen as a strong indicator of Teng’s intentions as the new CEO, which include putting an emphasis on user safety and ensuring that the platform continues to be appealing.

Zhao’s Departure and Legal Settlement

Following Changpeng Zhao’s departure as part of a $4.3 billion settlement with U.S. authorities, Teng has taken over as the head of the organization. Zhao entered a guilty plea to the anti-money laundering statutes of the United States, which resulted in one of the highest corporate fines in the history of the United States. Binance was found to have broken various laws in the United States, including neglecting to disclose suspicious transactions and being involved in ransomware profits. Zhao was the one who directed Binance to commit these violations.

Financial Implications for Binance

In accordance with the terms of the legal settlement, Binance is obligated to make a payment of $1.81 billion within a period of 15 months, in addition to forfeiting an extra $2.51 billion. The seriousness of the compliance challenges that Binance encountered when Zhao was in charge is shown by the considerable financial burden that was imposed on the company.

Teng’s Focus on Stability and Compliance

Binance has reached a pivotal juncture with Teng’s appointment to the position of Chief Executive Officer. According to him, a strategy move toward increased regulatory compliance and openness is shown by the fact that he places a strong emphasis on preserving key values and concentrating on user safety. The implementation of this strategy is very necessary in order to regain and preserve the confidence of users in the aftermath of the legal problems and the changes in leadership.

Zhao has resigned from his position at Binance; nevertheless, he continues to have a considerable investment in the firm, which suggests that he may continue to exert some influence over its activities. Due to this particular element, doubts are raised over the future course of Binance and the manner in which Teng’s leadership will handle these problems.

Circle Formally Refutes Allegations of Illicit Financing and Connections to Justin Sun

Circle, a leading issuer of stablecoins, has recently addressed and strongly refuted allegations regarding its involvement in illicit financing and alleged connections with Justin Sun, the founder of Tron. These claims, brought forward by the nonprofit watchdog organization, Campaign for Accountability (CfA), prompted Circle’s Chief Strategy Officer and Head of Public Policy, Dante Disparte, to write a formal response to U.S. Senators Elizabeth Warren and Sherrod Brown.

In the letter, Disparte emphatically denies any involvement of Circle in facilitating or financing activities related to Hamas or any other illicit actors. He highlights Circle’s unwavering commitment to combating illicit financial activities. Circle has been an active partner with regulators and law enforcement in the United States, Israel, and other jurisdictions, ensuring that their stablecoin, USDC, is not used for illicit activities. The company’s dedication to legal compliance was recently acknowledged by the U.S. Secret Service, recognizing Circle’s efforts in identifying fraud and assisting in fund recovery.

Addressing specific allegations, Disparte referred to an incident where the National Bureau for Counter Terror Financing of Israel identified digital wallets linked to the Palestinian Islamic Jihad (PIJ) with assets amounting to $93 million. A report by the blockchain firm Elliptic initially suggested that all assets in these wallets were used to finance PIJ, but this was later corrected. Public blockchain ledgers revealed that of the $93 million, only $160 in USDC was transferred among those wallets, and none of that amount originated from Circle. This example underscores Circle’s stance against the misrepresentation of its role in alleged illicit activities.

Furthermore, Circle clarified its relationship with Justin Sun, stating that it does not provide banking services to him or his associated entities, including the TRON Foundation or Huobi Global. Despite the absence of specific designations by the U.S. government, Circle terminated all accounts associated with Mr. Sun and his affiliated companies in February 2023.

Circle also emphasized its status as a highly regulated financial entity. It operates under the regulatory frameworks of multiple U.S. states and federal bodies, including the Ohio Department of Commerce Division of Financial Institutions and the New York Department of Financial Services. As a Money Services Business registered with FinCEN, Circle adheres to the Bank Secrecy Act, anti-money laundering laws, and other regulatory standards. This regulatory compliance is a cornerstone of Circle’s operations, reflecting its commitment to legal and ethical business practices.

In its advocacy for regulatory reforms, Circle has been a vocal proponent for a comprehensive federal framework governing stablecoins. The firm has actively participated in legislative processes, seeking to establish robust reserving, redemption, disclosure, liquidity, and operational risk management standards for stablecoin issuers. Circle’s CEO, Jeremy Allaire, has testified before Congress, advocating for standards that would elevate the safety and reliability of stablecoin issuers.

Circle’s response to the allegations made by the CfA is a strong affirmation of its dedication to regulatory compliance and ethical practices in the digital assets space. The company remains committed to collaborating with regulatory bodies to enhance the regulation of digital asset markets and to combat money laundering and terrorism financing effectively.

US Court Orders Binance and Changpeng Zhao to Pay $2.7 Billion in Settlement with CFTC

Binance, the largest cryptocurrency exchange in the world, and Changpeng Zhao (CZ), the company’s former chief executive officer, have been ordered to pay a hefty financial penalty according to the United States District Court for the Northern District of Illinois. A significant enforcement action that was begun by the Commodity Futures Trading Commission (CFTC) has been brought to a successful conclusion by this ruling.

The decision that was granted by the court on December 18, 2023, represents the completion of an enforcement process that had begun in November. The investigation conducted by the Commodity Futures Trading Commission (CFTC) revealed that Binance and CZ aggressively targeted clients from the United States, especially quantitative trading companies, for digital asset derivative trades on the Binance platform. Binance’s own Terms of Service and US legislation were both violated by this behavior, which was a blatant violation of both. Based on the findings of the investigation, it was discovered that Binance, under the supervision of CZ, had let at least two prime brokers to create sub-accounts that circumvented the Know Your Customer (KYC) requirements of the platform. This enabled clients from the United States to trade directly on the platform. With regard to the Commodity Exchange Act (CEA) and the Commodity Futures Trading Commission (CFTC) rules, the court determined that Zhao and Binance were aware of the legal obligations that were in place in the United States but decided to disregard them.

As part of the settlement, Binance and CZ have reached an agreement to implement more stringent policies and procedures. This involves the construction of a formal corporate governance structure, the deletion of existing sub-accounts that circumvented compliance measures, and the adoption of stringent Know Your Customer (KYC) onboarding processes for all clients. A Compliance Committee, an Audit Committee, and a Board of Directors that includes individuals who are not affiliated with the organization are anticipated to be included in this structure. Furthermore, Zhao and Binance are obligated to attest the presence of these upgraded compliance measures, as well as their use and efficacy, as part of the settlement.

Changpeng Zhao is subject to legal implications in addition to the financial fines that he is faced with. As part of his agreement to plead guilty to breaking federal anti-money laundering rules, he has acknowledged that he would stand down from his position as CEO of Binance. It is anticipated that Zhao will continue to reside in the United States until his sentencing on February 23, 2024, and he may impose a sentence of up to 18 months in jail. Following Zhao’s decision to step down from his position as CEO of Binance, Richard Teng, who had previously served as Binance’s global head of regional markets, has been nominated to the position.

FINRA's 2024 Oversight Report Emphasizes Crypto Asset Compliance

The Financial Industry Regulatory Authority (FINRA), a key self-regulatory organization in the United States, recently published its 2024 Annual Regulatory Oversight Report. This report is of particular interest due to its inclusion of a dedicated section on crypto assets for the first time, reflecting the growing significance of cryptocurrencies in the financial landscape. This section is aimed at guiding member firms engaged in or planning to engage in crypto-related activities to adhere to compliance standards and SEC regulations.

Crypto Asset Developments

FINRA’s Membership Application Program (MAP) aligns with the SEC’s guidelines, focusing on evaluating member firms’ business plans in the realm of crypto asset securities. This includes assessing financial responsibility and adherence to customer protection rules. The report provides guidance for firms contemplating engaging in crypto asset-related activities, highlighting the importance of due diligence and compliance with applicable regulations.

Advertised Volume and Cybersecurity

The report touches on topics such as inflated trade volumes and unreasonable supervision. It also emphasizes the increasing variety, frequency, and sophistication of cybersecurity incidents. Firms are guided on identifying, preventing, and mitigating such incidents.

Anti-Money Laundering and Fraud

Member firms are required to develop and implement written Anti-Money Laundering (AML) programs. The report outlines the necessary steps to ensure compliance with these programs, along with the need for robust fraud and sanctions screening processes.

Retail Communications and Compliance

Retail communications involving crypto assets are noted for having a significantly higher non-compliance rate compared to other products. The report suggests that firms establish written policies, procedures, and controls related to crypto asset activities conducted by the firm and its associated persons.

Potential Implications of Pending Supreme Court Decision

The report mentions a pending Supreme Court decision that could impact regulatory practices involving in-house judges, which could have implications for FINRA’s regulatory mechanisms.

Implications for the Industry

The inclusion of a crypto assets section in FINRA’s annual report is a testament to the organization’s responsiveness to the dynamic nature of financial markets. By setting compliance standards and providing detailed guidance, FINRA is equipping its members to navigate the complex and rapidly evolving crypto sector. This proactive approach is crucial for maintaining market integrity and protecting investor interests in the face of new financial technologies and trends.