​Firms looking to get authorised in Ireland as a CASP or registered in near future as a VASP should note the following extracts from a speech today by Gerry Cross, Director for Financial Regulation, Policy and Risk at Blockchain Ireland's excellent event this week (see link at end of article) 

•  authorisation is a two way process. A successful process depends crucially on the preparation and approach of the applicant.

 

• key aspects of a successful application, include:

 

1. TRANSPARENCY: (a) firms should act in a fully transparent and open manner with respect to their proposed application; (b) if an applicant is applying in multiple EU jurisdictions for a MiCAR activity the CBI says the firm must disclose this in its application;
2. PREPARATION: (a) firms should prepare well and be appropriately resourced to engage with the CBI 'in a comprehensive and timely manner throughout the assessment process'; (b) preparation also means that firms understand the local regulatory environment.
3. SUPERVISIBILITY: authorised firms should operate with strong local autonomy and be accountable for all aspects of the local entity. Where we identify obstacles to firm’s meeting this expectation, they will not be authorised.
4. CONSUMER FOCUS: firms should ensure that securing customer interests is at the core of their business. This is particularly the case for retail facing business models. [and remember, a 'consumer' are not just people; it covers certain legal persons too].

Source: Technological innovation and financial regulation – a maturing relationship - Remarks by Gerry Cross, Director for Financial Regulation, Policy and Risk, Wednesday 29th May 2024

​Linkedin Post:  https://www.linkedin.com/posts/peteroakes_micar-virtualasset-activity-7201513163152834560-N6m7

Of the many points made by ESMA in its letter, the following ones caught our eye.

 

1. NCAs (national competent authorities) need to establish as early as possible their supervisory procedures related to the authorisation regimes set out in the MiCA Regulation, including simplified authorisation procedures for entities already authorised to provide crypto-asset services under national law.
2. each Member State to designate without delay the NCAs responsible for carrying out the functions and duties provided for in the MiCA Regulation.
3. that NCAs are granted adequate powers and resources to exercise their supervisory, investigative and enforcement responsibilities.
4. ESMA is concerned that an extensive use of the grand-fathering clause for entities already providing crypto-asset services would weaken the effectiveness of the MiCA rulebook. This is because the clause may allow these entities to continue operating for up to 18 months in accordance with applicable national laws.

• Copy of ESMA 17 October 2023 letter - HERE
  
• Linkedin Post - HERE

Australia to regulate digital asset platforms

Regulating digital asset platforms - Australia
​
What is this about?
The Australian government intends to introduce a regulatory framework to address consumer harms in the crypto ecosystem while supporting innovation.

The introduction of a regulatory framework for entities providing access to digital assets and holding them for Australians and Australian businesses is an important step in the government’s approach to crypto reform in the Australian context.

The proposed regulatory framework would apply to digital asset platforms that present similar risks to entities that operate in the traditional financial system. It proposes to leverage the Australian financial services framework to regulate digital asset platforms to ensure consistent oversight and safeguards for consumers.

The government seeks views from interested parties on the proposed framework for regulating digital asset platforms. Specific consultation questions are outlined within the paper.

Responding
You can submit responses to this consultation up until 01 December 2023. Interested parties are invited to comment on this consultation.
While submissions may be lodged electronically or by post, electronic lodgement is preferred. For accessibility reasons, please submit responses sent via email in a Word or RTF format. An additional PDF version may also be submitted.


All information (including name and address details) contained in submissions will be made available to the public on the Treasury website unless you indicate that you would like all or part of your submission to remain in confidence. Automatically generated confidentiality statements in emails do not suffice for this purpose. Respondents who would like part of their submission to remain in confidence should provide this information marked as such in a separate attachment.

Legal requirements, such as those imposed by the Freedom of Information Act 1982, may affect the confidentiality of your submission.

Key Documents

• Proposal paper:  PDF Format - WORD Format 
• Factsheet:  PDF Format - WORD Format 

How To Respond

• Email - [email protected]

 

• Post - Address written submissions to:

Director, Crypto Policy Unit
Financial System Division
Treasury
Langton Cres
Parkes ACT 2600

Further Reading: https://treasury.gov.au/consultation/c2023-427004

Further to my post on Linkedin, here is access to a better quality image of the group structure of FTX.  The image above should be of high quality.  Otherwise see page 30 in the DECLARATION OF JOHN J. RAY III in support of Chapter 11 Petitions and First Day Pleadings.

The Guardian leads with "New FTX boss, who worked on Enron bankruptcy, condemns ‘unprecedented failure’"

• In a stinging court filing posted on Thursday, John Ray III, the new boss of the bankrupt crypto exchange FTX, said the company had suffered an “unprecedented and complete failure of corporate controls”.
• Cryptocurrency FTX’s logo reflected in an image of former chief executive Samuel Bankman-Fried.
• Ray has overseen some of the biggest bankruptcies ever, including the collapse of the energy giant Enron, and has 40 years of experience in restructuring companies. He said he had never seen anything as bad as FTX.
• He wrote in a filing with the Delaware bankruptcy court: “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.

Posted by: Peter Oakes, Founder of CompliReg a leading specialist governance, regulatory and compliance strategy firm.  Peter established and led the Enforcement and AML/Supervision Directorate of the Central Bank of Ireland as its inaugural Assistant-Director General, then later Director of Enforcement and AML/CFT Supervision. ​

CompliReg, your first choice for regualtory authorisations, licences and registrations is proud to support Fintech UK and its endeavours to Map the FCA registered cryptoasset market in the UK.

Fintech UK is looking to partner with registered / regulated (or soon to be) cryptoasset firms on building out a cryptoasset section on our website.  If you are senior executive at a UK registered cryptoasset firm, please contact us here to discuss the proposed project.  Also happy to hear from senior executives at businesses which support crypto firms to support the project. See our CRYPTO page for more information

If you are are crypto firm seeking regulatory advice or director services, please contact CompliReg for assistance at the details appearing here and check out its VASP registration and other authorisation services here.

Hope you like the Map (Version 2.0)!

Don't forget to sign up to our Newsletter (we don't spam) by clicking here.  We use MailChimp, which means you can unsubscribe whenever you like.
Welcome to the second edition (version 2.0) of Fintech UK's and CompliReg's (a leading provider of fintech consulting services to crypto asset firms) UK FCA registered Cryptoasset Firms Map.

There are now 35 registered Cryptoasset firms appearing on the Financial Conduct Authority's (FCA) website as at Monday 18th July 2022.

The first 5 of these firms were registered in 2020. According to the FCA's records, the first registered Cryptoasset firm was Archax on 18 August 2020.  Then in 2021, the FCA registered 22 crypto firms.  Thus far in 2022, the FCA has registered 8 crypto firms.  The most recent to be registered is DRW (7 June 2021).

As we pointed out when we released Version 1.0 of the Map, 2021 saw a flurry of activity and especially in the last quarter of 2021 when 16 firms received their Cryptoasset registration from the FCA - that was a  whopping 60% of the total pool of registered firms at that time. At the current rate, the number of firms registered in 2022 may be less than that in 2021, unless the FCA registers a large pile of crypto firms in the second half of 2022.

As we continue to Map registered Cryptoasset firms, expect to see certain logos appear more than once as several brands will be registering several Cryptoasset firms for different purposes, such as - for example - services for (1) trading and (2) custody. 

At the time we released Version 1, there were 218 (thereabouts) unregistered cryptoasset business listed on the UK FCA's website that appear, to the FCA, to be carrying on cryptoasset activity, that are not registered with the FCA for anti-money laundering purposes.  As of today, that number has increased to 248.

The firms thus far registered by the FCA include:

2020: Archax Ltd, Gemini Europe Ltd, Gemini Europe Services Ltd, Ziglu Limited, Digivault Limited, 

2021: Fibermode Limited, Zodia Custody Limited, Ramp Swaps Limited, Solidi Ltd, Coinpass Limited, CoinJar UK Limited, Trustology Limited, Commercial Rapid Payment Technologies Limited, Iconomi Ltd, Skrill Limited, Paysafe Financial Services Limited, Crypto Facilities Ltd, Fidelity Digital Assets LTD, Payward Limited, Galaxy Digital UK Limited, BABB Platform Ltd, BCP Technologies Limited, Zumo Financial Services Limited, Baanx.com Ltd, Bottlepay Ltd, Genesis Custody Limited, Altalix Ltd, 

2022: X Capital Group Limited, Enigma Securities Ltd, Light Technology Limited, eToro (UK) Ltd, Uphold Europe Limited, Wintermute Trading LTD, Rubicon Digital UK Limited and  DRW Global Markets Ltd

When we released Version 1 we noted that there were 37 firms Cryptoasset firms with Temporary Registration.  You will see 39 on the previous list, but two of those firms were in fact registered - thus there seemed to be a timing issue of the records at the FCA. Regardless, some of the 37 achieved FCA registration in 2022 and others have dropped of the current list.  Revolut Ltd, as of today, is the only firm listed on the Temporary Registration list and it was listed on December 2021 list too.  Interestingly, in addition to a cryptoasset registration, the Revolut group hasn't achieved the obtaining of its much talked about bank authorisation in the UK either.  ​

We are looking forward to seeing how many more will be registered before the end of the year.
This post also appears at:

• Fintech UK: https://fintechuk.com/fintech-uk-news/uk-registered-cryptoasset-map-version-20-monday-18th-july-2021 
• LinkedIN: https://www.linkedin.com/posts/peteroakes_fintechuk-crypto-digitalasset-activity-6954800838179491840-lCjM?utm_source=linkedin_share&utm_medium=member_desktop_web

Today (Monday 11 July 2022) the Central Bank of Ireland issued a press release highlighting weaknesses in Virtual Asset Service Providers’ (VASP) AML/CFT Frameworks.

As of today, according to the Central Bank's website, the total number of VASPs registered in Ireland is ZERO.  See image below.

Question: If there are no firms appearing on the register, does that mean that there are no VASPs operating lawfully in Ireland?  

Answer: No.  VASPs established in Ireland and carrying on business as a VASP immediately prior to the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021  coming into force, who applied to the Central Bank for registration before 23 July 2021 are permitted to continue to offer VASP services pending the outcome of their application ('transitional period'). 

While we have heard stories of firms operating as VASPs in Ireland in circumstances where they do not fall under the transitional period, such firms should be subject - if they came to the attention of the Central Bank -  to criminal and/or regulatory investigation.

​Accompanying today's press release is a bulletin in relation to Virtual Asset Service Providers (VASPs), seeking to assist applicant firms to strengthen both their applications for registration and their Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Frameworks.

The Central Bank says while it seeks to anticipate and support innovation in the financial services industry, firms operating in novel areas must ensure their businesses will not be used to launder the proceeds of crime or to finance terrorism.  The Central Bank issued the bulletin to VASPs to assist them in strengthening their applications and frameworks.

Background: Since 23 April 2021, VASPs are required to comply with the relevant AML/CFT obligations under the Criminal Justice Act 2010 to 2021. Any firm wishing to conduct business as a VASP must apply to the Central Bank for registration. The Central Bank says it is currently progressing the assessment of registration applications, and has provided feedback to 90% of applicants on their proposed AML/CFT frameworks.

Findings: The Central Bank identified, in the vast majority of applications:

• a lack of understanding and compliance with key AML/CFT obligations; and
• significant control weaknesses.

See below for further details on the Central Bank's 'findings' observations.
​
The Central Bank reported that the lack of compliance, coupled with control weaknesses, resulted in a significant number of the applicant firms not being able to demonstrate that they could meet their AML/CFT obligations.

Actions: The Central Bank has reconfirmed that it will only register a firm when it is satisfied that the firm can meet its AML/CFT obligations on an ongoing basis. It has said that all current and potential VASP applicants should:

• take actions to rectify weaknesses;
• review the bulletin; and
• be aware that if they fail to register they may face significant criminal and/or administrative sanctions.

The Central Bank also too the opportunity to remind that:

• VASPs are supervised by it for AML/CFT purposes only, and that consumers do not enjoy the Central Bank’s consumer protection mandate in their dealings with VASPs.
• as with all other supervised financial institutions, registered VASPs will be subject to a supervisory levy which will be driven by the level of resources applied to their supervision.

Incomplete Applications: A number of registration applications did not contain the required information and documentation and consequently such applications did not progress to the assessment phase.

• some firms had submitted policies but no accompanying procedures.
• a number of firms submitted a copy of the firm's internal risk register in place of a documented risk assessment.
• majority of firms that did not progress to the assessment phase had not availed of the pre-application meeting and/or had not given consideration to the guidance documents issued by the Central Bank.

Assessment Phase: In undertaking its assessment of registration applications, the Central Bank noted recurring fundamental issues preventing approving of registration applications as the applicants could not meet their AML/CFT legislative obligations or the Central Bank’s expectations. The Central Bank communicated its concerns and expectations to the applicants for further consideration.

The Central Bank helpfully provided a couple of pages in its bulletin (pages 4 - 6) giving an overview of recurring issues identified during the assessment of VASP registration applications.  These are repeated below.

Money Laundering and Terrorist Financing (ML/TF) Risk Assessment: An effective AML/CFT control framework is built on an appropriate ML/TF risk assessment that focuses on the specific ML/TF risks arising from the firm’s business model. This risk assessment should drive the firm’s AML/CFT control framework such that it ensures there are robust controls in place to mitigate and manage the specific risks identified through the risk assessment. The Central Bank identified a significant number of issues with the ML/TF risk assessments conducted by VASP applicant firms, including: 

• A number of firms had not assessed or documented the ML/TF risks as they pertain to the firm’s customers and business activities. The Central Bank expects a Risk Assessment to be specific to the firm and the specific risks that pertain to that firm’s activities and customers. 
• Several VASP applicant firms did not document the inherent ML/TF risks that pertain to the firm or document how, after assessing the effectiveness/strength of the firm’s control environment, the firm had determined the residual risk rating for each of the risk factors as set out in the CJA 2010 to 2021.
• A number of firms did not consider relevant information in the National Risk Assessment, CJA 2010 to 2021 and/or guidance on risk issued by the Central Bank, when documenting the firm’s risk assessment. This included consideration of inherent risk factors, such as Nature, Scale, Complexity, Geographical Risk, Products and Services risk, etc.

Policies and Procedures: When developing AML/CFT policies, controls and procedures (“AML/CFT P&Ps”), firms should maintain a detailed documented suite of AML/CFT P&Ps, which are:

• supplemented by guidance
• accurately reflect operational practices; and
• fully demonstrate consideration of and compliance with all legal and regulatory requirements. 

The Central Bank identified a number of recurring issues with the AML/CFT P&Ps submitted by applicant firms including; 

• Several firms submitted AML/CFT P&Ps that did not meet the Irish legislative and regulatory requirements, in many instance referring to legislative frameworks in other jurisdictions where parent/group entities are situated. Where firms rely on group policies and procedures, these must be sufficiently detailed, applicable to the Irish entity that is applying for VASP registration and meet the Irish legislative and regulatory requirements.
• The Central Bank received several registration applications that included the firm’s policies but failed to include the firm’s procedures that document how the firm meet their legislative obligations. As detailed in the application guidance, applicant firms are required to submit AML/CFT P&P relating to Customer Due Diligence (“CDD”), Transaction Monitoring, Suspicious Transaction Reporting, Financial Sanctions, Record Keeping, Training and Assurance Testing

Customer Due Diligence (“CDD”): 
CDD involves more than just verifying the identity of a customer. Firms should collect and assess all relevant information in order to ensure that the firm:

• Knows its customers, persons purporting to act on behalf of customers and their beneficial owners, where applicable;
• Knows if its customer is a Politically Exposed Person (“PEP”)
• Understands the purpose of the account and therefore understands the expected activity; and;
• Is alert to any potential ML/TF risks arising from the relationship.

The Central Bank identified a number of recurring issues with the CDD AML/CFT P&Ps submitted by applicant firms including;

• A number of applicant firms failed to demonstrate compliance with the legislative obligation to obtain information reasonably warranted by the ML/TF risk on the purpose and intended nature of the business relationship with a customer prior to the establishment of the relationship.
• The Central Bank received several registration applications where the firm failed to demonstrate how screening is conducted for PEPs for both new and existing customers. A number of firms also failed to document how PEP customers are managed including documenting requirement for Senior Management approval, the application of Enhanced Due Diligence (“EDD”) measures to PEPs and enhanced on-going monitoring measures.
• Several firms failed to document policies and procedures relating to the refresh of CDD documentation.

Financial Sanctions Screening: The Central Bank’s expectation is that firms have an effective screening system in place, appropriate to the nature, size and risk of their business. In addition to this, firms should have clear escalation procedures in place to be followed in the event of a positive match.

• Several firms failed to document the frequency of Financial Sanctions screening, how the firm screens (including what, if any, software is used) and also the steps the firm would take in the case of a Financial Sanctions hit.

Outsourcing: A firm can outsource certain AML/CFT Functions, but are reminded that the firm remains ultimately responsible for compliance with its obligations under CJA 2010 to 2021. It is expected that, where firms outsource AML/CFT functions, a documented agreement is in place that clearly defines the obligations of the outsource service provider. Firms should also evidence that sufficient oversight is conducted on the outsourced activity.

A number of VASP applicant firms outsource certain AML/CFT functions to group-related parties and/or non-group related parties.

• Several firms did not include their policies around outsourcing or submit their service level agreements
• In addition to this, several firms have failed to demonstrate sufficient oversight of the outsourced activities or failed to evidence that appropriate regular assurance testing of the outsourced activities takes place.

Individual Questionnaires for proposed Pre-Approval Controlled Function role holders:
A number of firms have failed to or delayed in submitting Individual Questionnaires (IQs) for each of their proposed Pre-Approval Controlled Function (PCF) role holders. IQs should be submitted for each individual proposed to hold a PCF role as soon as practical.

The Central Bank’s expectation on a firm’s presence in Ireland.
In line with the principle of territoriality enshrined in the EU AML Directives and Section 25 of the CJA 2010 to 2021, the Central Bank expects a physical presence located in Ireland and for there to be at least one employee in a senior management role located physically in Ireland, to act as the contact person for engagement with the Central Bank. In addition, in accordance with Section 106 H of the CJA 2010 to 20212 , the Central Bank may refuse an application where the applicant is so structured, or the business of the applicant is so organised, that the applicant is not capable of being regulated to the satisfaction of the Central Bank. 

Further Reading: ​Press Release - Central Bank highlights weaknesses in Virtual Asset Service Providers’ AML/CFT Frameworks 11 July 2022 

​ 
Welcome to the first edition (version 1) of Fintech UK's and CompliReg's (a leader provider of fintech consulting services to crypto asset firms) registered Cryptoasset Firms.

There are 27 UK registered Cryptoasset firms appearing on the UK's Financial Conduct Authority's (FCA) website as at Monday 20th December 2021.

The first of these firms were registered in 2020.  According to the UK FCA's records, the first registered Cryptoasset firm was Archax on 18 August 2020.  The most recent to be registered is Altalix (today!).  While four (4) firms were registered in 2020, 2021 has seen a flurry of activity and especially in the last quarter of 2021 when 16 firms (so far) received their Cryptoasset registration from the FCA - that is whopping 60% of the total pool of registered firms.  We are looking forward to seeing how many more will be registered before the end of the year.

As we continue to Map registered Cryptoasset firms, expect to see certain logos appear more than once as several brands will be registering several Cryptoasset firms for different purposes, such as - for example - services for (1) trading and (2) custody. 

According to other records at the FCA, there are 37 firms Cryptoasset firms with Temporary Registration.  Following a quick look through that list, it seems that some of those firms may now appear on the list of registered Cryptoasset firms - so the FCA may need to revisit both lists to check there is no double counting. 

Worryingly, there are 218 (thereabouts) unregistered cryptoasset business listed on the UK FCA's website that appear, to the FCA, to be carrying on cryptoasset activity, that are not registered with the FCA for anti-money laundering purposes.  And that is not a complete list of all unregistered cryptoasset businesses operating in the UK.

Fintech UK is looking to partner with registered / regulated (or soon to be) cryptoasset firms on building out a cryptoasset section on our website.  If you are senior executive at a UK registered cryptoasset firm, please contact us at the details here to discuss the proposed project.  Also happy to hear from senior executives at business which support crypto firms on the proposed project. Note that a search on the words "Fintech UK" on google returns our website as the #1 or #2 organic search result.  A compelling reason to partner with us.

If you are are crypto firm seeking regulatory advice or director services, please contact CompliReg for assistance at the details appearing here and check out its VASP registration and other authorisation services here.

Hope you like the Map!

This post also appears at:

• ​https://fintechuk.com/news/uk-registered-cryptoasset-map-by-fintech-uk-complireg-v10​
• https://www.linkedin.com/posts/peteroakes_cryptoasset-cryptoasset-moneylaundering-activity-6878800276321554433-SZpd