UK takes down multibillion-dollar crypto laundering network, US appoints new head of AI and Crypto, Basel AML Index 2024 released & more

Good morning, we hope you had a relaxing weekend and found a moment to recharge.

This week’s round-up once again features headlines from the crypto space, although this time with some sharp focus on anti-money laundering (AML) efforts.

The UK's National Crime Agency dismantles a multibillion-dollar Russian crypto laundering network in its biggest money-laundering case of the decade.

Law enforcement last week announced a major AML win - the UK's National Crime Agency (NCA) dismantled a multibillion-dollar Russian money laundering network that operated through cryptocurrency exchanges. This network facilitated Russian oligarchs, spies, European drug traffickers in evading sanctions by converting illicit cash into cryptocurrencies, enabling the anonymous purchase of illegal goods without moving physical money across borders. During the UK's 2021 lockdown the network assisted domestic drug gangs in converting illicit cash into untraceable cryptocurrency, facilitating the laundering of drug profits and supporting Russian state espionage activities. ▶️ Watch a short video by the NCA.

The Basel AML Index 2024 assesses 164 jurisdictions' money laundering and terrorist financing risks, highlighting a rise in global risk levels and the need for stronger action against corruption, financial opacity and political instability.

Meanwhile in Europe, the European Banking Authority (EBA) has launched public consultation relating to crypto-assets. It will run until February 4, 2025. And here's also an AML crypto explainer from the regulator.

Former PayPal COO appointed as White House Head of AI and Crypto; corporate enforcement is likely to look a lot different in 2025 than it did in 2024.

In the US, Donald Trump said he is appointing former PayPal chief operating officer David Sacks as "White House AI and Crypto Czar", a newly established role aimed at developing a legal framework for the cryptocurrency industry. Coinbase policy chief expects speedy approval of crypto laws following Trump’s victory.

Just as compliance professionals across the US were reevaluating their programs to ensure they align with the Department of Justice (DOJ’s) latest updates to its compliance program guidance, the presidential election completely "changed their calculus." One thing seems to be clear - corporate enforcement will look a lot different in 2025 than it did in 2024.

KPMG's report "2025: the Year of Regulatory Shift" identified ten critical areas of regulatory focus.

KPMG's "2025: The Year of Regulatory Shift" report as well anticipated significant changes in the regulatory landscape due to the US elections, with the Republican administration potentially reducing regulatory activities. Areas such as AI and cybersecurity are expected to remain focal points for regulatory scrutiny.

2025 could be the turning point for Cybersecurity in financial services.

Could 2025 be the year that reshapes cybersecurity in the financial services industry for good? With increasingly sophisticated cyber threats and emerging technologies like AI impacting every sector, many believe the financial services industry is on the brink of a major transformation.

Two years after GenAI captured global attention, Agentic AI, defined by autonomous decision-making and learning, is being actively explored.

Almost exactly two years ago, the world was suddenly captivated by Generative AI (GenAI) which has since impacted many sectors. Unlike today’s GenAI models, which respond to specific human prompts, Agentic AI can independently perceive, reason, act and learn, without constant human guidance. It might have an effect on financial services in coming years. However, it also presents challenges including those related to labour markets, privacy and governance.

In other regulatory news and developments:

• Decentralised finance (DeFi) is making waves, with an estimated $130 billion in total value locked and the potential to surge to $1 trillion or even $5 trillion in the coming years. However, as the industry grows, the complexities and risks tied to its products also increase. The critical question from the Virtual Assets Regulatory Authority (VARA) is how to strike the right balance between fostering innovation in DeFi and ensuring robust regulation.
• Shifting focus to broader financial regulations, Insurance Europe has responded to the European Commission's consultation on the EU securitisation framework, advocating for simplified due diligence requirements to enhance the appeal of securitisations compared to other asset classes.

In the latest appointments:

• R.J. O'Brien & Associates (RJO), the US independent future brokerage and clearing firm, has appointed John Robbins as Global Chief Compliance Officer to oversee the firm's worldwide compliance initiatives, reflecting its continued international growth. 
• Equiom, a global professional services firm specialising in wealth protection and business support for private clients, corporate entities and funds, has announced the appointment of Naveed Shah as Chief Risk Officer.

In FinTech announcements:

• German fintech firm 21X has obtained regulatory approval from BaFin, the country’s federal financial supervisory authority, to establish a blockchain-driven tokenisation platform. To recall, Germany has proactively regulated digital assets by introducing a licensing scheme for digital asset services, following amendments to the EU's Money Laundering Directive.

In enforcement updates:

• JPMorgan Chase Bank was fined S$2.4 million (~$1.8 million) by the Monetary Authority of Singapore (MAS) over misconduct by relationship managers; the regulator said that JPMorgan lacked sufficient processes and controls to ensure adherence to client agreements.
• The Hong Kong Monetary Authority (HKMA) fined China CITIC Bank International HK$4 million (~$0.6 million) for AMLO breaches.

In other tech and AI developments:

• Federated learning enables multiple entities to collaboratively train machine learning models without centralising their data - thereby enhancing RegTech applications by improving financial crime detection and compliance while preserving data privacy.
• Deloitte's recently released 2024 Chief Data Officer (CDO) Survey highlights AI and generative AI as top priorities, alongside data governance and analytics to boost efficiency and compliance.
• The "Innovation, Regulation, and the Future of Finance" panel of the AI in Central Banking conference on December 10-11 will explore AI's impact on finance, central banks' roles in its responsible use, the sufficiency of current regulations for stability and safety. It is possible to register to attend the online conference for 580 CHF or for free if you qualify here. 

Quote of the Week and Podcast

David Sacks, the co-founder and general partner at Craft Ventures, and the newly appointed head of AI and Crypto, said:

“The crypto industry basically wants a really clear line for knowing when they’re a commodity and they want commodities to be governed, like all other commodities, by the CFTC (ed. note: the Commodity Futures Trading Commission). The days of Gensler (ed. note: Gary Gensler, the Securities and Exchange Commission’s chair) terrifying crypto companies, those days are about to be over.”

👉 David O. Sacks via Bloomberg Businessweek

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