Regulatory Updates

SEC Releases Fiscal Year 2025 Examination Priorities

The SEC has released its examination priorities for 2025, and these priorities include guidance on working with investment advisers and investment firms, self-regulatory organizations, clearing agencies, and other participants, such as transfer agents or security-based swap dealers. Certain risk factors are also identified and considered, such as information security, emerging financial technology, cryptocurrency, regulatory compliance, and money laundering. The opening statement reflects that, should additional risks be discovered throughout the year, the SEC will continue to publish its risk alerts.

Corporate Transparency Act Update: Treasury Will Not Pursue Enforcement

In an ongoing decision regarding if the CTA will be upheld, the U.S. Treasury has determined that fines and penalties will not be imposed on U.S. citizens or businesses that do not register their beneficial ownership information. The Treasury also announced that it plans to amend this rule to apply to foreign entities. Experts advise that business owners continue to keep an eye out for further potential changes that may occur.

FATF Identifies Jurisdictions with AML, CFT, and Counter-Proliferation Finance Deficiencies

In February, the FATF added Laos and Nepal to its list of Jurisdictions Under Increased Monitoring while removing the Philippines from the list. Financial institutions are obligated to comply with increased due diligence associated with countries on this list to properly monitor customers. With the addition of these countries, banks and MSBs must determine if their risk profile is adequate to continue banking with these customers. While the Philippines was removed from the list, customers should not automatically be de-risked, and a separate process for determining that risk should be performed.

Enforcement Updates

Treasury Intensifies Sanctions Against Russia by Targeting Russia‘s Oil Production and Exports

On January 10, 2025, the U.S. announced a sanctions action that covered 183 Russian controlled fleet ships. The UK also joined the Treasury in sanctioning two major Russian oil producers. The aim in this is to reduce Russia’s energy revenues by blocking natural gas projects, a Russian oil project, and third-world countries supporting Russia’s exports.

SEC Enforcement Blitz Targets 7 Financial Firms as Biden Administration Winds Down

The SEC announced seven multi-million-dollar charges and settlements with the goal of enforcing strict rules for broker-dealers, investment advisers, and exchanges. Vanguard was fined $106.41 million for providing misleading statements to its customers. Wells Fargo and Merrill Lynch were each fined $60 million in civil penalties for not implementing investment advising rules and failure to follow cash sweep program rules. Another notable lawsuit that the SEC filed in January is against Elon Musk for improperly waiting to disclose Twitter stockholdings.

CashApp Fined $255 Million in Back-to-Back Settlements

CashApp’s parent company, Block, agreed to pay $80 million to 48 states for violating laws that were intended to keep illegal transactions off the platform. Block and the federal Consumer Financial Protection Bureau reached a settlement where the company would pay up to $120 million to CashApp customers and another $55 million to the CFPB for weak security measures, putting customers at risk and making it more difficult for customers to get help in the case of fraud.

Charlotte Area Financial Services Firm LPL to Pay $18M to settle AML Charges

Charlotte-based financial services firm LPL was ordered to pay $18 million for AML violations. Between May 2019 and December 2023, the firm failed to meet its own AML policies by not accurately verifying new accounts and did not close accounts that did not pass screening measures in a timely fashion. It also failed to restrict high-risk accounts, such as cannabis-related accounts or foreign accounts, which their program states are prohibited customer types. LPL was also disciplined for AML program failures in May 2015 and October 2018.

Judge Orders BitMEX to Pay $100M Fine Over U.S. Banking Law Violations

A federal judge sentenced HDR Global Trading Limited, parent of cryptocurrency exchange BitMEX, to two years of unsupervised probation and a $100 million fine, which follows BitMEX pleading guilty for violating the BSA. BitMEX was operating without “any meaningful” AML program. The founders were sentenced to probation in 2022 and were ordered to pay $30 million, and in 2021, BitMEX agreed to pay $100 million in consent payments to the CTFC and FinCEN.

Barclays Faces Probe from UK Regulator over Money Laundering Controls

The Financial Conduct Authority (FCA) is UK’s main financial services regulator. Currently, the FCA is investigating London-based Barclays for the “historical oversight and management” of high-risk customers. The probe focuses on Barclays Bank UK, which is retail banking for individuals and small businesses, instead of the overarching global Barclays Bank, which mainly caters to larger corporate clients. Barclays has not indicated how the investigation was going and did not provide an estimate of potential fines.

OKX Settles U.S. DOJ Charges, Pays Over $500M Penalty and Forfeiture

One of the largest cryptocurrency exchanges, OKX, settled charges with the DOJ after facilitating over $5 billion in suspicious transactions and failing to obtain a license to operate as a money transmitter. Because of this, OKX will pay over $500 million in penalties and various fees. For years, OKX failed to obtain a license, and a knowledgeable individual noted that there have been allegations of fraudulent and non-compliant activity within the company for years.

Brink’s Global Services Faces Major Fines: The DOJ and FinCEN Crack Down on AML Violations

In a recent enforcement action, FinCEN and DOJ announced a civil monetary penalty of $42 million over the span of three years for BSA/AML violations. Brinks facilitated the transmission of around $800 million between the U.S. and Mexico for unregistered MSBs. While Brinks is one of the largest money transmitters, they failed to register as an MSB and failed to file SARs. With the DOJ, Brinks has an obligation to appoint an independent third-party to assess its AML compliance, improve training and resources, and provide the DOJ and other relevant authorities with progress updates.

Formal Agreement between Patriot Bank, NA, and the OCC

Patriot Bank and the OCC came to a formal agreement regarding the bank’s BSA/AML compliance. The bank agreed to a three-year strategic plan to cover deficiencies, with the plan including goals to accomplish, a risk, operations, and staffing assessment, as well as policies and procedures. Specifically, to BSA/AML, the bank should present the board of directors with an updated plan regarding CIP, due diligence, suspicious activity identification and reporting, a SAR lookback, and training.

Hot Topics

China’s Retaliatory Tariffs on $14 Billion worth of U.S. Goods Now in Effect

After President Trump imposed tariffs on several countries, China retaliated by imposing tariffs on approximately $14 billion worth of U.S. goods. While the U.S. tariffs are a blanket amount ranging from 10% to 15%, China is targeting specific American exports, such as natural gas, crude oil, farm equipment, and other key manufacturing products. Analysts see this approach as China leaving the door open for potential negotiations. The tariff amounts for these products are either 10% or 15%, depending on the product type, and went into effect on February 10.

AmEx Closed 30 Accounts Potentially Tied to Iran’s Government

In 2024, American Express closed 30 personal accounts that had possible connections to the Iranian government. While these accounts were for personal uses, American Express also terminated a relationship with a third-party ATM provider, who is connected to an Iranian bank that is sanctioned by the U.S. American Express noted in its report to OFAC that gross revenue and net profit involved with these accounts was negligible.

FBI Seeks Crypto Industry to Help Track and Block Laundering of Bybit Hack Funds

One-and-a-half billion dollars in cryptocurrency was stolen from Bybit by North Korean hacker group TraderTraitor. The funds were intended to be laundered. In turn, the FBI is asking the cryptocurrency industry to track and block these transactions, which the FBI believes will be further laundered and converted to fiat currency.

This market update was prepared with assistance from Alexandra Bartkoske.