Law360 — New York’s move to penalize Deutsche Bank AG for what state officials said were lapses in the bank’s relationship with convicted sex offender Jeffrey Epstein is a wake-up call for how financial institutions and their compliance departments should approach high-risk clients, experts told Law360.
A financial institution in Virginia recently alerted the Secret Service after growing suspicious of a foreign government’s $320 million payment for what investigators later determined were nonexistent face masks, according to U.S. officials.
New York’s top financial services regulator isn’t yet satisfied with Deutsche Bank’s progress on strenghening its anti-money laundering compliance programs under a 2017 consent order and is moving to keep an outside monitor for the bank for longer.
The move by German police to raid Deutsche Bank’s AG’s offices as part of a money laundering probe could lead to further scrutiny from U.S. Authorities for both the bank and its correspondent banking partners.
After Matthew Mellon, scion of the Mellon banking fortune, died on April 16 of a drug-related heart attack in Mexico, his family was unable to locate the pass code needed to retrieve his fortune — said to have been worth as much as $1 billion — in XRP cryptocurrency, according to the Daily Mail.
Despite rising to prominence in recent years, cryptocurrency still carries a stigma that big banks just can’t seem to shake. In the absence of major institutional attention, the market for banking crypto has opened up to a small band of industry-forward, local lenders.
Most big banks are avoiding cryptocurrencies. To a few small lenders, that means more business for them. To many banks, bitcoin and other digital currencies are a mania, or worse. But to a handful of small lenders, they are a moneymaker.
Startup gets it tech cred in part because the producers retained a fin-tech consultant, Brian Stoeckert, who provided advice about the world of bitcoin as well as issues like money laundering and off-shore accounts. In an interview, Stoeckert said the writers and cast were brand new to bitcoin but soon came to understand it.
The 10-episode drama will debut on Sony Pictures’ streaming platform Crackle, and centers around three strangers who find themselves enmeshed in a digital currency scheme (hello, bitcoin!) while fighting the FBI. “StartUp,” which includes actors Martin Freeman and Adam Brody, has already released its first episode for viewers to watch on Reddit.
Brian Stoeckert, of Stratis Advisory and a risk management and money laundering expert, served as a consultant to the show in an effort to inject the narrative with accuracy. He explained to CNBC in a recent interview that the idea of a cryptocurrency is still relatively unknown to the broader public.
“When we look at a lot of cryptocurrency environments—and so much of it is negative based—people don’t understand anything beyond the headline aspect it,” Brian Stoeckert, a partner at Stratis Advisory, which advises fintech firms, and consultant to the show, told the Observer in a phone call. “I think this will help people understand how digital payments and digital money will have an impact.”
One show that takes some creative liberties with technology as it exists today is “StartUp,” which hits Sony’s Crackle next month. The drama is about a fictional crypto-currency called GenCoin, created by a Miami coding savant, which supposedly succeeds where the real-world BitCoin failed by incorporating self-governing artificial intelligence to be impervious to tampering and fraud.
“It’s 100% in the realm of possibility,” insists showrunner Ben Ketai, the show’s creator, writer, director and exec producer, who vetted the concept with digital-currency experts. But he acknowledges there’s a “level of dreaming” with “StartUp” because no one has made anything like GenCoin yet. “If I could have created this,” he quips, “I wouldn’t be making TV shows.”
There is much work to be done to bridge a cultural and informational divide between the fintech and traditional banking sectors, experts said. Among the ideas for engaging a new generation: “SWAT teams,” where technical units can operate with fewer bureaucratic constraints….
But in the end, bank compliance units, and even bank regulators, will have to find ways to make positions more palatable to tech experts if they hope to keep up as the financial services market “continues to innovate right through and around the traditional financial institutions,” Stoeckert said.
The goal is to provide high-tech risk management and transaction monitoring tools capable of bridging the divide between banks and the realm of digital currency, but much work remains to be done, say sources familiar with the matter. The effort has drawn the involvement of at least one major bank, Barclays. “Traditional transaction-monitoring is a very costly and inefficient exercise, so some banks are looking at the financial benefits of taking this new approach…” Brian Stoeckert, managing partner at Stratis Advisory.
Other issues covered included AML officers offering strategies on how to ensure broad awareness and training on cyber-related issues; a discussion pre-program on hiring challenges given the three generations (boomers, Gen X’ers, and millennials) of potential AML professionals, and how to retain or recruit them; and how these same new entrants into the financial market will shape products and eventually new financial crime vulnerabilities.
The New Jersey State Legislature is holding a public hearing on bitcoin and digital currency today.
The Assembly Financial Institutions and Insurance Committee has invited select guests to testify to the applications, consumer protection risks and concerns, advantages and current US regulatory schemes related to digital currency use…The committee oversees money transmission regulators and those with potential jurisdiction over digital currencies, some of which are expected to attend the hearing.
New York gave a Bitcoin company the green light to operate under state regulations Thursday, in what may be the first in a series of charters intended to mitigate concerns about virtual currencies.
itBit’s relatively unique business strategy is designed to attract large, institutional clients rather than to process remittances for individual customers like a typical virtual currency exchange, said Stoeckert.
Under a Bank Secrecy Act rule that took effect in 1996, financial institutions must include data in interbank messages on the originators and beneficiaries of payments valued at $3,000 or more.
As with Bitcoin, Ripple’s protocol doesn’t necessarily allow transactions to include such information, said Stoeckert. As a consequence of Tuesday’s fine, some virtual currency exchanges may choose to permit only transactions that fall below the $3,000 threshold, he said.
Emerging digital currency protocols have enormous potential to transform payments as we know them today. And with more time and more clarity, industry insiders believe that promise can manifest in digital banking and digital identities.
This was the subject of a day-long meeting hosted by US-based journal Foreign Affairs at the Council on Foreign Relations townhouse in New York on Thursday, during which three expert panels spoke in front of an assembly of bank and tech experts and enthusiasts…
Gaining access to the banking system is also a major concern for emerging digital currency companies and startups. These regulatory variations – at the state level and the level of the traditional financial system – present the next level of friction in the ecosystem, according to Brian Stoeckert, managing director of digital currency consulting firm CoinComply.
A group of nine business owners and legal experts pitched a panel of New Jersey legislators this week on why they should make the Garden State a hub for bitcoin development.
The 5th February hearing was hosted by the New Jersey Legislature’s Assembly Financial Institutions and Insurance Committee…Speakers at the event included New York Law School professor and Coin Center fellow Houman Shadab, CoinComply managing director Brian Stoeckert, Ziftr CEO Robert Wilkins and Coinware general counsel Quentin Page.
While bitcoin might want to play outside the framework of the traditional financial system, it may be inevitable that the two interact if bitcoin is going to become more legitimate and more widely used.
Brian Stoeckert, managing director of digital currency consulting firm CoinComply, said: “You have all these companies that are struggling to gain access to the traditional financial system in order to get their businesses on the ground, into market, gathering customers and surviving like any other business.”
Stony Brook University has announced the recipients of its inaugural 40 Under Forty alumni achievement awards. Selected from a large nominee pool of Stony Brook graduates, the honorees include groundbreaking researchers, innovators and leaders in social media and highly accomplished professional athletes, including Brian Stoeckert ’98, CoinComply Inc.
CoinComply managing director Brian Stoeckert reiterated the importance of acquainting the general public with mobile payments, as well. In his remarks, he emphasized that younger consumers will be the most likely target for both bitcoin and Apple Pay, as this demographic is general quicker to adopt digital technology.
Stoeckert said that, at some point, bitcoin could even power products like Apple Pay, but that for now, Apple’s product will do a lot to further the adoption of mobile payments.
“There’s a lot more advocacy on the financial institution side to learn more about Bitcoin,” said Brian Stoeckert, chief strategy officer at CoinComply, a digital currency consultancy. “Banks are thinking about Bitcoin…as can they be market leaders in attracting these types of companies.”
“Initially the market first came out with guidance that certain types of digital currency companies needed to be regulated as money services businesses (MSBs),” Stoeckert explained. “The original focus was registering as a MSB, the next focus was on establishing policies and procedures, then the next great focus was know-your-customer (KYC).”
Earlier today a group of influential bitcoin entrepreneurs and lawyers gathered for the first ever Bitcoin Law Conference held at the New York Law School in downtown Manhattan.
The deadline for comments regarding New York State’s BitLicense proposal — the industry will lawyer-up. On that very day, the New York Law School will present “Bitcoin Law: Regulations and Transactions,” a half-day conference from 8:45 a.m. until 11:30 a.m. on “the Internet of money.” Speakers include: …Brian Stoeckert, managing director of CoinComply…
The New York Law School is hosting a panel on bitcoin, law, and regulations next week at its lower Manhattan campus…Called “Bitcoin Law: Regulations and Transactions,” it will bring together legal, financial, and technical experts to discuss how the lawless bitcoin meshes with the lawful world…Panelists include …Brian Stoeckert, managing director at CoinComply…
But with most states yet to weigh in on digital currency protocols that inherently entail interstate and international transactions, “there is definitely a yearning from the industry to get some clarity,” said Brian Stoeckert, managing director of CoinComply, a digital currency compliance provider. As the industry develops, “there is a lot more momentum for mass adoption,” he said. “[Regulatory] growth is somewhat inevitable.”
“Both [the Bitcoin Foundation and DATA] are relatively young organizations that are advocating in a rather traditional, conservative environment,” said Brian Stoeckert, chief strategy officer for CoinComply, which offers compliance solutions to Bitcoin companies.
The e-money market is fast-growing in the U.K., according to a July 2013 report by the FCA. Of the 53 firms included in the British government’s e-money Financial Services Register, 43 percent received approval in 2013, the agency said. More is needed to assure users of another form of electronic payment: digital currency, according to Brian Stoeckert.
Virtual currencies expert Brian Stoeckert [pictured], JD, CAMS, CFE, will address attendees at this year’s Financial Crime & Compliance Seminar and will walk them through the “C” change for virtual currencies, understand the nuances of Bitcoin, how Bitcoin companies operate, and address the associated risks.
“Virtual currency is no longer unregulated,” said Brian Stoeckert, chief strategy officer for New York-based CoinComply. “There is a lot more guidance today there previously was.”
When one budding Bitcoin entrepreneur said he was planning on fighting government attempts to regulate his business under money transmitter laws, BitAngels cofounder David Johnson recommended partnering with an established institution to handle all of the financial back end, along with its attendant regulatory heavy lifting, while exclusively focusing on directly interfacing with customers. Johnson also pointed to CoinComply, a company that helps Bitcoin startups deal with anti-money laundering rules, as an excellent resource for young organizations.
The dust has settled from the virtual currency hearings in New York City this week. We saw a mixture of speakers, including law enforcement agents warning of digital currencies’ many potential dangers, VCs getting hot under the collar over the regulation debate, regulators musing about whether they should license miners or not, and one vehemently anti-bitcoin academic.
Two men who operate bitcoin exchange businesses, including an official in the leading industry bitcoin trade group, have been charged with money laundering for helping drug merchants exchange $1 million in cash for the digital currency, U.S. prosecutors said on Monday. The case, and related comments made by a top federal prosecutor, make clear that the Justice Department plans to ensure bitcoin exchanges meet their obligations to police transactions for money laundering activity, experts said.
On a mission to convince the world that Bitcoin is enduring and serious, enthusiasts convened at a place that symbolizes the ephemeral and the glitzy: Las Vegas. At the Inside Bitcoins conference on Dec. 10 and 11—sponsored by BubbleCoin, BitDeliver, CoinComply.
After clashing with regulators and being blacklisted by many banks and credit unions, many emerging-payments companies are seeking a warmer welcome outside the U.S.
In order for a MSB to convince a bank that it is a suitable customer, it typically has to build a strong Bank Secrecy Act/Anti-Money Laundering program and tout it to the bank, though that is not always enough to land an account or keep one open, said Brian Stoeckert, chief strategy officer at CoinComply, a firm that helps virtual currency firms, which are considered MSBs, build BSA/AML compliance programs.
“The particular challenges a lot of these companies are facing happens to be what are the regulations, how do they actually get bank accounts, and what do they actually have to do to stay in business from a risk mitigation perspective,” says Brian Stoeckert, chief strategy officer at CoinComply.
To avoid regulatory trouble, some Bitcoin firms have also started employing IP blockers in order to avoid customers residing in certain U.S. states, said Brian Stoeckert, founder of Coin Comply, a consultancy that designs AML programs for digital currencies.
“Internally we are calling it ‘pre-compliance’.” We enquired with him where the company is at now, in the run up to its public beta. He told us, “We’ve been working with a company called CoinComply to get all of our regulatory ducks in order.