May 17, 2024

This Week in Compliance Vol. 4

What's been occupying our compliance attention lately? Here's a rundown of notable updates and regulatory happenings from the past weeks.

New CIP Requirements Proposed By FinCEN

On May 13, 2024, the SEC and FinCEN proposed a rule requiring SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to implement written customer identification programs (CIPs). This move aims to prevent illicit finance activities by ensuring identity verification processes, making it harder for criminals to misuse investment adviser services for money laundering or terrorism financing.

EU Adopts New Anti-Money Laundering Rule

On April 24, 2024, the European Parliament adopted comprehensive legislation to strengthen the EU's fight against money laundering and terrorist financing. The new laws enhance access to beneficial ownership information for authorities, journalists, and civil society organizations, introduce stricter due diligence measures for financial entities, and impose an EU-wide limit of EUR 10,000 on large cash payments. From 2029, professional football clubs will also be subject to these rules. A new Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) will oversee the riskiest entities from Frankfurt.

FINRA Fines SoFi $1.1 Million Over Consumer Identification Failures

On May 10, 2024, FINRA fined SoFi $1.1 million due to deficiencies in its customer identification and identity theft prevention programs within its SoFi Money cash management brokerage service. These flaws, present from December 2018 to April 2019, allowed fraudsters to misappropriate approximately $2.5 million through unauthorized account openings. SoFi's automated processes failed to adequately verify customer identities, leading to fraudulent activities totaling $8.6 million. In response, SoFi has enhanced staff training and improved its fraud detection and customer verification procedures.

FINTRAC Fines Binance Holdings $6 Million for Non-Compliance

On May 9, 2024, FINTRAC imposed a $6,002,000 administrative monetary penalty on Binance Holdings Limited for failing to register as a foreign money services business and not reporting large virtual currency transactions over $10,000. The violations breached Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

Authorities Shut Down Samourai, a Cryptocurrency Mixing Service

On April 29, 2024, authorities indicted Keonne Rodriguez and William Lonergan Hill, founders of the cryptocurrency wallet Samourai, for conspiracy to commit money laundering and operating an unlicensed money transmitting business. Samourai, a mobile wallet with privacy features like "Whirlpool" and "Ricochet," allegedly processed over $100 million in criminal proceeds and facilitated money transmission services exceeding $2 billion without a required license. The wallet's features were designed to obfuscate transaction sources, aiding users in concealing illicit funds.

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