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Fintelekt-ABA Webinar on Crypto’s Evolution: Enforcement Risks, Asset Recovery and Best Practices: Key Takeaways

Fintelekt Advisory Services and the Asian Bankers Association jointly held their last webinar of 2021 on Crypto’s Evolution: Enforcement Risks, Asset Recovery and Best Practices. It was very well attended by participants from 45+ countries.

The webinar was moderated by Arpita Bedekar, Director – Strategy and Planning, Fintelekt Advisory Services. The speakers at the webinar were Vasu Muthyala, Partner, Kobre & Kim and Calvin Koo, Principal, Kobre & Kim. Kobre & Kim is an international disputes and Investigations firm and both speakers have had vast experience across cross-border government investigations and regulatory enforcement matters, especially in digital assets recovery and tracing.

Some of the key takeaways from the webinar are summarized below.

Recent trends in crypto evolution:

  • Statistics indicate that Asia plays a significant role in global developments around crypto.
  • Crypto has gone mainstream and is getting a lot of attention from traditional players in the financial institution space.
  • Regulators are studying and monitoring the developments in the space. In 2021 several regulators brought in regulation for virtual assets and virtual asset service providers.
  • The Updated Guidance by the Financial Action Task Force in October 2021 recommends a risk-based approach to virtual assets and virtual asset service providers.

“Even if you are not currently involved in crypto, it matters. If you are in the financial space, your company or customer or counterparties will have a blockchain or cryptocurrency touchpoint in the years to come.” – Calvin Koo, Principal, Kobre & Kim

Status of regulation on crypto in key jurisdictions in Asia can be thought of along the scale of extremely restrictive (bans) to welcoming.

Countries like China, Nepal and Bangladesh have banned crypto related activities. Countries like Thailand and Vietnam have more restrictive laws and policies. Further along the scale are Indonesia and Hong Kong which are welcoming but have some restrictions in place. South Korea and Japan have been seen to be more welcoming, while Singapore is currently seen as the leader or proponent of crypto technology.

Enforcement through regulation

Across the world, regulators are bringing to bear already existing laws on the crypto industry. The entry point into fiat currency is often in US dollars and hence US regulators such as the US Securities and Exchange Commission, US Commodity Futures Trading Commission, US Department of Justice, FINCEN, etc. – are more active than other global regulators. 

Recent enforcement cases have been in the areas of money laundering, fraudulent misstatements about business, failure to obtain license, failure to register security, KYC and record-keeping violation, ransomware, sanctions and tax or reporting violation.

Traditional tools that regulators have used for long in the financial services industries will be used against crypto players. They are going against facilitators and not so far against individuals engaged in crypto trading.

“Regulators will expect your compliance processes and procedures to take into account the new risk that the crypto offerings bring to light.” – Vasu Muthyala, Partner, Kobre & Kim

Asset Recovery Tools

Crypto transactions are not anonymous but ‘pseudonymous’. It is possible to track and trace and recover crypto currency, although not necessarily in all the cases.

Forensic tracing provided by professionals using sophisticated software that can track the chain of crypto transactions and can provide information instantaneously.

Crypto exchanges that are licensed and regulated have to comply with KYC and AML compliance guidelines and regulations, and therefore have information about their customers.

Courts around the world are increasingly receptive to asset recovery applications based on relevant traditional legal principles, such as property law.

What’s next?

The approaches across Asia and the world will be different, ranging from outright prohibitions, to embracing of the technology’s possibilities, and all sorts of regulation in between, and then expect rules to be revisited for refinement as technology advances.

For AML professionals, best practices include gaining a best understanding of what crypto is, how it is used and key terminology, staying up to date with latest laws and regulations, determining how your company is or may interface with digital assets, working with professionals who can assist with developments and evolving best practices, and understanding the tools available if something goes wrong.

A recording of the webinar is available on Fintelekt’s learning platform Fintelekt Academy at:

https://fintelekt.academy/courses/webinar-cryptos-evolution-enforcement-risks-asset-recovery-and-best-practices/

Registration on Fintelekt Academy is free and more than 80% of the content is free to view. Visit https://fintelekt.academy/register/