FinTech Global Regulatory Round-up – w/e 17 September 2021

HoL: Call for evidence on CBDCs

The House of Lords (HoL) Economic Affairs Committee has launched an inquiry on central bank digital currencies (CBDCs) and published a call for evidence. The inquiry will look at the main issues around CBDCs in view of the work of HM Treasury (HMT) and the Bank of England (BoE) in this area. It will examine how a CBDC might affect the role of the BoE, monetary policy and the financial sector.

Feedback is requested by 15 October 2021. [16 Sep 2021]

EC: Updated consultation response deadlines – AML package, incl in relation to crypto-assets

The European Commission (EC) has updated the consultation response deadline for the following consultations under its anti-money laundering (AML) initiative to 12 November 2021:

• revision of EU rules on Anti-Money Laundering (recast) – new national mechanisms;
• revision of EU rules on Anti-Money Laundering (recast of a former instrument) – expanding traceability requirements for crypto-assets;
• EU Anti-money laundering supervisor; and
• revision of EU rules on Anti-Money Laundering (new instrument) – new rules for the private sector. [10 Sep 2021]

Experiences and developments shared at HKMA-hosted AML webinar on collaboration, data and technology

The HKMA has hosted an anti-money laundering (AML) webinar to share an updated risk assessment of the banking sector and showcase positive outcomes of the public-private partnership in information sharing.

The webinar involved representatives from across the AML ecosystem, including the banking and stored value facilities sectors, financial regulators, the Joint Financial Intelligence Unit (JFIU) of the newly formed Financial Intelligence and Investigation Bureau, and the Commercial Crime Bureau of the Police Force (which leads the Anti-Deception Coordination Centre (ADCC) and the Fraud and Money Laundering Intelligence Taskforce (FMLIT).

The following are some of the experiences and insights shared at the webinar, including in the welcoming remarks of Ms Carmen Chu (Executive Director (Enforcement and AML) of the HKMA):

• The banking sector remains at high risk of being abused for financial crime activities, especially in light of the increase of online banking and faster movement of funds. The HKMA is currently gathering further input and comments from the industry to better understand sectoral risks.

• Banks have been working collaboratively to report suspicions to the JFIU (85% of 57,130 suspicious transaction reports made in 2020 were from the banking sector), assist the ADCC (which intercepted HK$3 billion in 2020) and share typologies and cases through the FMLIT (reporting over 12,000 bank accounts which were previously unknown to law enforcement agencies, leading to restraint or confiscation of about HK$700 million mainly from fraud).

• Good progress in AML regtech adoption has been made under the HKMA's "Fintech 2025" strategy (see our previous update).  Later this year, the HKMA will launch the AML and Financial Crime Regtech Labs to facilitate the necessary testing environment for banks before adoption of regtech initiatives.

• The HKMA has launched a new dedicated online training platform, on which various presentation materials of this and other events will be made available for capacity building of AML staff at banks.  [16 Sep 2021]

#Data

#RegTech

MAS and RBI announce real-time payments systems link

The Monetary Authority of Singapore (MAS) and the Reserve Bank of India (RBI) have announced plans to link Singapore’s PayNow and India’s Unified Payments Interface (UPI) real-time payment systems by July 2022.  [14 Sep 2021]

BNM policy document: Merchant Acquiring Services

The Bank Negara Malaysia (BNM) has released a policy document setting out its requirements and expectations on merchant acquirers registered pursuant to section 17(1) and 18 of the Financial Services Act 2013. The requirements and expectations include those pertaining to governance, operational risk management, information technology (IT) and others.  The policy document comes into effect on 15 March 2022. However, for non-bank acquirers, paragraphs 17.1 to 21.3 come into effect on 15 September 2022 and paragraphs 9.1 to 9.3 come into effect on 15 September 2023.    [15 Sep 2021]

SEC Charges Three Media Companies with Illegal Offerings of Stock and Digital Assets

The SEC has charged New York City-based companies with conducting an illegal unregistered offering of common stock. The SEC also announced charges against the defendants for conducting an illegal unregistered offering of a digital asset security. The defendants have agreed to pay more than $539 million to settle the SEC's action.

According to the SEC's order, from April through to June 2020, the defendants generally solicited thousands of individuals to invest in stock offering. During the same period, the defendants solicited individuals to invest in the digital asset offering. The order finds that the defendants disseminated information about the two offerings to the general public through publicly available videos on the companies' websites, as well as on social media platforms such as YouTube and Twitter. Through these two securities offerings, whose proceeds were commingled, the respondents collectively raised approximately $487 million from more than 5,000 investors, including US investors. As stated in the order, no registration statements were filed or in effect for either offering, and the defendants’ offers and sales did not qualify for an exemption from registration. [13 Sep 2021]

NY Attorney General Shuts Down Virtual Currency Trading Platform and Stops Cryptocurrency CEO From Continuing Fraudulent Conduct

New York Attorney General, Letitia James, has secured a judgment against the virtual currency trading platform Coinseed, as well as its founder and CEO, Delgerdalai Davaasambuu, that permanently halts their illegal and fraudulent operations and puts in place a permanent receiver to protect investors’ funds. The receiver has also taken control of the company’s website so that it can no longer be used as part of the defendants’ fraudulent schemes. Additionally, the court awarded a $3 million judgment against the defendants. In February, Attorney General James filed a lawsuit against Coinseed and its CEO for defrauding thousands of investors across the nation out of millions of dollars. In the months since the suit was filed, Coinseed and its CEO have continued their fraud and commenced additional fraudulent conduct by trading in investors’ accounts without permission and then blocking investors from accessing those accounts [13 Sep 2021]

NY Attorney General Secures Nearly Half a Billion Dollars to Resolve Illegal Stock and Cryptocurrency Sales

New York Attorney General, Letitia James, has announced that she has secured a recovery of nearly half a billion dollars unlawfully obtained from investors who financially backed a company and its parent company. The agreement signed with the Office of the Attorney General lays out how the two companies – tied to a Chinese billionaire and, previously, to a US media executive, who briefly served as a non-executive director – unlawfully sold stocks and two digital instruments promoted as cryptocurrencies without registering in New York state, and forces the companies to pay $479.9 million to settle claims that they failed to register as securities dealers and/or commodities broker-dealers. [13 Sep 2021]