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FinCEN Encourages Banks to Share Customer Data With Each Other- CoinDesk

New FinCEN guidance seemingly lowers the obstacles for sharing personal customer information among institutions, from banks to crypto firms.



Dec 11, 2020 at 10:15 p.m. UTCUpdated Dec 11, 2020 at 11:34 p.m. UTC

FinCEN director Kenneth Blanco (U.S. Customs and Border Protection)

FinCEN Encourages Banks to Share Customer Information With Each Other

A U.S. agency that fights financial crime is encouraging financial institutions, ranging from banks to cryptocurrency exchanges, to share customer information with one another to catch wrongdoers.

The Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department, issued a fact sheet Thursday spelling out that the 2001 Patriot Act gives institutions wide latitude in what kind of information they are permitted to share.

Overall, the sheet seemingly lowers the obstacles for further sharing of personal customer information among banks, the threshold of what qualifies as “suspicious” activity and whether the entities sharing customer information even need to be financial institutions.

Among other matters, the fact sheet clarifies that Section 314(b) of the act, and the regulations putting it into practice, “impose no limitations on the sharing of personally identifiable information.” The sheet added that institutions have to protect the security and confidentiality of this data, and use it only for the purposes laid out in the nearly 20-year-old law, passed a month after the 9/11 attacks.

Still, the guidance is likely to chafe privacy advocates inside and outside the crypto community who are already uneasy about the honeypot of personal data that FinCEN’s suspicious activity report (SAR) database has become. The more places information is shared, after all, the more ways it can be misused or stolen.

“It seems that in the spirit of ‘protecting our communities and preventing crimes and bad acts,’ FinCEN’s guidance is dramatically expanding its expectation of banks to share data, at the expense of individuals’ privacy, while potentially exposing them to very real cyber risks, when it is not clear that such a move is necessary,” said Nizan Geslevich Packin, an associate professor of law at City University of New York.

In a speech Thursday, FinCEN Director Kenneth Blanco framed interbank data sharing as a public safety measure.

“Information sharing among financial institutions through 314(b) is critical to identifying, reporting and preventing crime and bad acts,” he said in prepared remarks for a virtual gathering of bankers and lawyers. “It is an important part of how we protect our national security.”

However, he suggested institutions have been reluctant to take part.

“Many have been calling for clarity in this area for a long time,” so the agency saw fit “to clarify in greater detail the circumstances where 314(b) applies, with the hope of enhancing participation,” Blanco said.

Lowering the bar

The information that can be shared is not limited to activities suspected of involving proceeds of a specified unlawful activity (SUA), Blanco said.

Institutions do not need “specific information that these activities directly relate to proceeds of an SUA, or to have identified specific proceeds of an SUA being laundered” in order to share data with each other, he said. Nor must they have made “a conclusive determination that the activity is suspicious.”

The FinCEN fact sheet claims additional reporting can shed “more light upon overall financial trails” and build “a more comprehensive and accurate picture of a customer’s activities that may involve money laundering or [where] terrorist financing is suspected.”

Angela Angelovska-Wilson, co-founder of DLx Law and former chief legal and compliance officer at blockchain software firm Digital Asset, recognized that while multiple financial entities handling sensitive data could create additional vulnerabilities, it may ultimately be a positive.

If banks can share data about what might be suspicious among each other, it could stop some entities from acting with blinders on, she argued. For example, if someone is engaging in one kind of activity in a certain account, and then behaving differently in another, that might seem suspicious to both banks. But if they communicate about this data before filing a SAR, it could benefit the customer as a more holistic picture of their financial activities could illuminate that they’re not doing anything suspicious.

“Basically what 314(b) has done in the past is it has hampered people’s ability to share information in order to figure out whether or not something is actually suspicious and be able to thoughtfully report to FinCEN,” said Angelovska-Wilson.

Yet others read FinCEN’s continued efforts to widen the information-snagging net as a sign of policy failure.

“This shows that Congress has not been performing its oversight function,” said Michael German, a former FBI special agent, privacy expert and a fellow at the Brennan Center for Justice. “It’s waiting for the Treasury Department to claim that this is an effective measure against terrorism or money laundering. But after two decades of increased sharing of suspicious activity reports, it has not resulted in measurable successes against terrorism or money laundering. It’s time for our elected representatives to protect our data, the way that is promised under the Bank Secrecy Act, rather than these exceptions for sharing.”

FinCEN, he said, “is only going to keep pushing for more information and more information, even if that information is useless to its stated goals.”

Don’t tell a soul

Financial institutions are still forbidden to disclose that a SAR exists, and that applies even when the report was filed jointly with another company, FinCEN’s fact sheet stated.

“However, financial institutions participating in Section 314(b) that are considering filing or have filed a joint SAR may freely discuss the prospective or already filed joint SAR [among] themselves,” the fact sheet said.

While crypto exchanges aren’t explicitly listed, money services businesses and securities brokers are. Both categories include cryptocurrency businesses.

Compliance vendors and associations of financial institutions, including unincorporated ones governed by a contract between members, are also permitted to take part in information-sharing, FinCEN added.

“The big takeaway from this seems to be that FinCEN is encouraging people to engage in more data sharing,” said Michael Yaeger, a shareholder at the law firm of Carlton Fields, who focuses on government investigations and cybersecurity matters. “They are doing so in a variety of ways, including pointing out that a financial institution does not need to have made a conclusive determination that activity is suspicious or closely tied to a specified unlawful activity. An institution need not have concluded a SAR must be filed.”

As CoinDesk reported Thursday, over the years there has been a move toward so-called defensive filing, meaning that if there is any question something could be deemed suspicious, banks are encouraged to file a SAR.

This has led to what one compliance officer called an “avalanche of data” because financial institutions have been filing more and more to FinCEN.

“Many questions about the safety of the information collected by FinCEN, as well as the bureau’s failure to provide clear guidelines regarding how and when it eventually deletes the data it has, remain unanswered,” Packin said. “This is concerning … in an era in which cybersecurity [has] become a major concern.”




World’s Oldest Central Bank Extends Digital Currency Test Till 2022

Riksbank said it would continue developing a technical solution for a central bank-issued e-krona under its pilot project.



Sweden’s Riksbank said it would continue work with Accenture on a potential e-krona digital currency until next year.

(Mario Ortiz/Shutterstock)

Feb 17, 2021 at 10:12 a.m. UTC

World’s Oldest Central Bank Extends Digital Currency Test Till 2022

The world’s oldest central bank, Sweden’s Riksbank, is to extend its pilot project for a potential central bank digital currency (CBDC) for another 12 months.

According to a press release on Friday, the project, which is being carried out with assistance from professional services firm Accenture, will run until February 2022.

The Riksbank said it would continue developing a technical solution for a central bank-issued e-krona “as a complement to cash,” with the primary objective being for the bank to increase its knowledge around the technology.

For 2021, the institution will continue developing its potential digital currency offering with a focus on performance and scalability. Testing offline functions and bringing external participants into the test environment is also on the table.

The project has raised some concerns from Sweden’s commercial banking sector over the viability of a sovereign CBDC and how that would impact the entire banking system.

There is no final decision over the issuance of the e-krona despite strong lobbying from the central bank to government last year. But with traditional cash seeing falling use, even more so during the coronavirus pandemic, Sweden has been mulling a switch to the CBDC.

However, questions still remain over the digital currency’s ultimate design and underlying technology, according to Friday’s release.



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Bitcoin Mining: Wasted Energy or a Better, Greener System?

Harry Sudock, VP of strategy at GRIID Infrastructure on the modern energy landscape, how far we’ve come and where bitcoin mining fits.



Is it wasteful to use electricity mining bitcoin? As the Biden Administration settles into power with an ambitious agenda around clean energy, notably promising to eliminate carbon emissions from the US power generation sector by 2035, the question of bitcoin mining and it’s ever-growing use of energy bubbles up once more.

In this episode of ‘On Purpose, With Tyrone Ross,’ Harry Sudock, VP of strategy at GRIID Infrastructure joins the show to discuss the modern energy landscape, how far we’ve come and where bitcoin mining can fit into a sustainable energy system.

The greatest number of people living in poverty are children, we need to change that. If you can, get involved and give back to Love and Light. I appreciate you!

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Deutsche Bank Quietly Plans to Offer Crypto Custody, Prime Brokerage- CoinDesk

The bank’s game plan was hidden in plain sight in a widely overlooked report by the World Economic Forum.



The bank’s game plan was hidden in plain sight in a widely overlooked report by the World Economic Forum.

Deutsche Bank headquarters in Frankfurt, Germany (Thomas Lohnes/Getty Images)

Feb 13, 2021 at 2:10 a.m. UTCUpdated Feb 13, 2021 at 2:18 a.m. UTC

Deutsche Bank Quietly Plans to Offer Crypto Custody, Prime Brokerage

Deutsche Bank has joined the growing ranks of large financial institutions exploring cryptocurrency custody, with aspirations to offer high-touch services to hedge funds that invest in the asset class.

The Deutsche Bank Digital Asset Custody prototype aims to develop “a fully integrated custody platform for institutional clients and their digital assets providing seamless connectivity to the broader cryptocurrency ecosystem,” according to a little-noticed report by the World Economic Forum, host of the annual gathering of muckety-mucks in Davos, Switzerland.

In a passage buried on page 23 of the December 2020 report, Germany’s largest bank says it plans to create a trading and token issuance platform, bridging digital assets with traditional banking services, and managing the array of digital assets and fiat holdings in one easy-to-use platform.

Big banks are now announcing plans to enter crypto custody on an almost daily basis, with Bank of New York Mellon, the world’s largest custodian bank, joining the party earlier this week.

U.S. banks were given some regulatory clarity thanks to last year’s interpretation letters from the Office of the Comptroller of the Currency. In Germany, firms are queuing up to get their hands on special crypto custody licenses from the country’s regulator, BaFIN.

Deutsche, the world’s 21st largest bank, said it aims to “ensure the safety and accessibility of assets for clients by offering an institutional-grade hot/cold storage solution with insurance-grade protection.” No specific cryptocurrencies or tokens are mentioned.

The digital asset custody platform would be launched in stages. It would eventually provide clients with the ability to buy and sell digital assets via a partnership with prime brokers (which act sort of like concierges for hedge funds), issuers and vetted exchanges.

The bank says it would also provide “value-added services such as taxation, valuation services and fund administration, lending, staking and voting, and provide an open-banking platform to allow onboarding of third-party providers.”

The service would be aimed at asset managers, wealth managers, family offices, corporates and digital funds, the bank said.

In terms of a business model, the bank would start out collecting custody fees, it said, later charging fees for tokenization and trading.

Deutsche said it has completed a proof of concept and is aiming for a minimum viable product in 2021, while exploring global client interest for a pilot initiative.

The bank’s press office could not be reached for comment Friday evening. A spokesperson had declined to comment on potential plans for a digital asset custody business when contacted last week by CoinDesk.



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