On June 22, 2022, the Financial Crimes Enforcement Network (FinCEN) issued a Statement on Bank Secrecy Act Due Diligence for independent ATM owners and operators.  The purpose of the statement is to “provide clarity to banks on how to apply a risk-based approach to conducting customer due diligence (CDD) on independent Automated Teller Machine (ATM) owners or operators, consistent with the requirements set out in FinCEN’s 2016 CDD Rule.”

Under FinCEN’s 2016 CDD Rule, banks are required to establish and maintain written policies and procedures reasonably designed to identify and verify “beneficial owners of legal entity customers.”   This Rule extends to conducting CDD on independent ATM owners and operators who maintain bank accounts to supply cash for their ATMs and to settle the electronic funds transfers used to process ATM transactions.

Continue Reading FinCEN Issues Statement on BSA Due Diligence for Independent ATM Owners and Operators

On June 3, 2022, the Financial Crimes Enforcement Network (FinCen) issued an Advance Notice of Proposed Rulemaking  proposing public comment on the enactment of a no-action letter process.  This Advanced Notice follows FinCen’s Report to Congress submitted in June 2021 that was based on FinCen’s consultation with the Attorney General, State bank supervisors, State credit union supervisors, and other Federal agencies and regulators.  In its report, FinCen evaluated the difficulties it faces because of the overlap between its enforcement authority and other regulators.  FinCen also examined the benefits and concerns on how a no-action letter process could affect illicit finance risks.  FinCen stated that the primary benefits of a no-action letter process “are that it could promote a robust and productive dialogue with the public, spur innovation among financial institutions, and enhance the culture of compliance and transparency in the application and enforcement of BSA.”  Ultimately, FinCen concluded that it should establish a rulemaking to create a no-action letter process.

Continue Reading FinCEN Proposes No-Action Letter Process

Fintech lender Opportunity Financial (“OppFi”) and the Department of Financial Protection and Innovation (“DFPI”), California’s financial-services regulator, filed dueling claims as they battle over state efforts to enjoin the company’s branded loans, which exceed California’s 36% interest-rate cap. This is the latest effort by fintech lenders to cement the True Lender Rule against state opposition.

Continue Reading Opportunity Financial’s Lawsuit Against California’s Financial-Services Regulator Signals Continued Fight Over “True Lender” Principles

Blockchain regulation continues to be the topic du jour, with increasing scrutiny from government agencies across the board. The latest comes from the New York State Department of Financial Services (DFS), which has been a leader in the space since the 2015 “BitLicense” framework under the New York Financial Services Law. On April 28, 2022, new DFS Superintendent Adrienne A. Harris issued fresh guidance encouraging cryptocurrency companies to adopt blockchain analytics tools as a best practice.

Continue Reading New York State Department of Financial Services Takes Aim at Blockchain Entities Circumventing Sanctions on Russia

Reflecting its determination to monitor the crypto markets, the Security and Exchange Commission has renamed the Cyber Unit the “Crypto Assets and Cyber Unit” and is nearly doubling its size from  30 to 50 members, according to a May 3 press release from the agency. The additional permanent positions will include investigative staff attorneys, trial

On April 25, the Consumer Financial Protection Bureau announced that it will begin examining nonbank “covered persons” that it has determined pose risks to consumers. What is most striking about the announcement is not that the CFPB will start examining this category of nonbanks — it’s had that authority since its inception — but that

As tax season approaches, cryptocurrency investors and their advisors are facing heightened scrutiny. The New York State Office of the Attorney General recently announced its commitment to hold “cryptocurrency tax cheats accountable.” Taxpayers who fail to properly declare their crypto income could face treble damages, interest, and penalties under the New York False Claims Act, in addition to criminal prosecution and separate liabilities and penalties under the tax law.

Continue Reading Enforcers Eye Crypto Tax Dodgers, Their Accountants and Lawyers

On February 14, 2022, the Securities and Exchange Commission announced a settlement with a crypto lending company in a “first-of-its-kind enforcement action” for failing to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).  In the novel settlement, BlockFi Lending LLC (“BlockFi”) agreed to pay $100 million in penalties — $50 million of which will be paid to the SEC, and the remaining $50 million allocated to 32 different state regulators for similar charges.  As part of the settlement, BlockFi has undertaken to comply with the Investment Company Act either by registering as an investment company or by proving to the SEC Staff that it is not required to do so.  BlockFi has 60 days from entry of the order to comply and may obtain an extension of another 30 days.  Should BlockFi successfully come into compliance, it could be the first SEC-registered entity to offer a digital asset lending product.[1]  Despite BlockFi’s groundbreaking settlement, BlockFi still faces a putative class action by investors.

Continue Reading Despite BlockFi’s $100 Million Settlement with the SEC for Failing to Register as an Investment Company, BlockFi is Under Fire From Investors

In late January 2022, the Federal Reserve released “Money and Payments: The U.S. Dollar in the Age of Digital Transformation,” its much-anticipated discussion paper on central bank digital currencies (CBDCs). In the paper, the Federal Reserve provides a framework and summary of its initial analysis on the potential adoption of a U.S. CBDC and invites the public and other stakeholders to provide their views. The paper does not advance a specific policy outcome or signal any imminent action; rather, it marks an important first step in public debate and engagement on the issue of CBDCs.

Continue Reading Fed: Let’s Talk Central Bank Digital Currencies

Throughout 2021, the SEC followed through on its commitment to aggressively enforce the federal securities laws in digital assets markets.[1] These efforts have resulted in the SEC sharpening its focus on cryptocurrency exchanges and lending products.

Continue Reading 2021 Brought SEC Focus on Crypto Exchanges and Lending Platforms