AMLFinTech

Adapt or die

By June 27, 2018 No Comments

Adapt or die – the future of FinTech in the US

Despite the US being home to some of the largest tech companies in the world, compared to other markets in Europe such as the UK, the US is home to only a handful of leading FinTechs. A lack of regulatory clarity is often touted as the main barrier to entry for emerging firms. This could all be about to change however, with the announcement last week that the Treasury is getting ready to release its hotly anticipated report on regulatory reform of the FinTech sector. At the annual SIFMA conference Craig Phillips, the Counsellor to the Treasury Secretary said that it is time to “adapt or die” to changing consumer behavior and the increasingly digitized world of finance by embracing FinTech.  

What can we expect from the report? Hopefully it will give some clarity to FinTech licensing, which has been debated for some time. Last year, the then Comptroller of Currency, Thomas Curry lobbied for a federal “FinTech Charter” but received considerable push back from states who believed the Charter would stifle innovation. Little progress has been made on the topic since, leaving FinTechs and investors in a regulatory no man’s land. The report is also expected to recommend setting up regulatory sandboxes to allow for greater experimentation in the space. The Treasury weren’t the only ones encouraging innovation in US finance last week. In a hearing, the Senate Banking, Housing and Urban Affairs committee also encouraged the use of innovative technology to modernize anti-money laundering compliance.

Under the spotlight – AML at Japanese crypto-exchanges

Over the weekend the price of Bitcoin fell to $6400, just $400 more than its lowest valuation so far this year. What was the cause for this slump? On Friday, the Japanese Financial Services Agency (FSA) ordered the country’s six largest cryptocurrency exchanges to review their anti-money laundering policies and to submit plans for their improvement by July 23rd. In response the largest exchange, BitFlyer suspended the opening of all new accounts until they can be confident that the quality of their AML/CFT checks will placate the regulator.

It is is hardly surprising that this action by the FSA caused the price of Bitcoin to plummet. More cryptocurrency is exchanged with Japanese Yen every day than any other fiat currency, making the FSA very influential in the world of cryptocurrencies. As the only regulator to view cryptocurrencies as legal tender they are under increasing pressure to defend their position or risk losing face. Recent hacks and sustained accusations that cryptocurrencies enable financial crime have not helped. Neither has the Bank for International Settlements, who last week said cryptocurrencies will never be viable due to inherent flaws in their technology. With cryptocurrencies once again in a precarious position it will be up to Japan’s exchanges and its regulator to shore them up.

The Panama Papers Part II: Financial Crime Fatigue?

With little fanfare The Panama Papers: The Aftermath were quietly dropped by the ICIJ and the German newspaper, Süddeutsche Zeitung last week. “The Aftermath” is the second leak from the embattled Panamanian law firm, Mossack Fonseca covering what happened at the firm in the days and months following the original leak. The new tranche reveals emails from the law firm to clients desperately trying to establish a paper trail of ownership for anonymous companies, as regulators and banks came calling for basic KYC information that was never collected.

Unlike the original leak “the Aftermath” has failed to garner much attention. This is a shame, as it contains fascinating detail on how those caught on the wrong side of the Panama Papers reacted. It shows for example, how the President of Ukraine, Petro Poroshenko desperately tried to distance himself from a front company, which he then tried to buy with his own foundation. Light is also shed on cases that made the headlines during the first leak. Previously unseen data reveals richer insight on the network of front companies owned and used by the footballer, Lionel Messi to evade paying taxes on his image rights. This leak may have slipped under the radar of the press, but we believe ongoing investigations and follow up reports such as these give valuable insights to the financial crime community.

To make sure you get a great experience on our website, we use cookies. To confirm you consent to this, please click below.
Read more about our Cookie Policy

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close