The following is an excerpt from an article published on NASDAQ.com and Bitcoin Magazine in which BitAML founder, Joe Ciccolo, analyzes the recent FinCEN enforcement action with Western Union, and lessons learned.
There are several takeaways from the experience of this legacy organization for money transfers that their counterparts in the Bitcoin space would be wise to note. In an exclusive interview with Bitcoin Magazine, Joe Ciccolo, Founder of the U.S.-based BitAML , agreed to explore the findings and offer his thoughts on the potential implications for Bitcoin money transmitters. BitAML provides regulatory compliance solutions for digital currency startups.
For starters, Ciccolo who has an extensive background in bank regulatory compliance, said that FinCEN made the determination that Western Union failed to adequately perform due diligence on several of its agents and sub-agents, thereby preventing the monitoring of these agents and any subsequent corrective actions.
Due diligence, he says, is a vital component of onboarding company agents. Routine background checks, the collection of agent information, and onsite visits are instrumental to the vetting process. In addition to the obvious AML compliance benefits, these actions, he notes, are just good business practices.
Says Ciccolo: “Money transmitters should strive to build and maintain a strong class of agents to properly and ethically represent their brand. This is especially true for Bitcoin money transmitters whose relatively small size – coupled with larger, more rapid growth potential – may increase the likelihood of overlooking prudent and proper agent due diligence. AML programs, policies and procedures should ideally be designed to scale along with the money transmitter, whether legacy or Bitcoin.”
Ciccolo also noted that as a principal money transmitter, Western Union is responsible for understanding and appropriately accounting for the risks associated with its agents. He asserted that this should be of no surprise to anyone in the industry. In fact, FinCEN just recently reminded principal money transmitters of their responsibilities when it reiterated existing agent monitoring compliance obligations in March 2016.