The Safety and Trade Fee’s Division of Examinations published on Friday a blueprint for funding managers and establishments on how the division will examine the dealing with of crypto property, or “digital asset securities,” shifting ahead.
The division (previously the Workplace of Compliance Inspections and Examinations) is the second-largest wing of the SEC and is tasked with overseeing securities trade gamers to make sure regulatory compliance.
Focused towards funding advisors, broker-dealers, exchanges and switch brokers, this Danger Alert offered a broad listing of particular procedural, bookkeeping and advisory steps the division shall be anticipating from securities firms in future examinations.
“As extra securities trade contributors search to interact in digital asset-related actions, this Danger Alert offers transparency about areas of focus for the Division’s future examinations,” the workplace wrote.
Funding advisors ought to concentrate on risks associated with forks and airdrops, and the Division shall be reviewing advisors’ “success of their fiduciary responsibility with respect to funding recommendation,” a remark presumably associated to disclosing the risks associated with crypto.
Funding custodians, in the meantime, ought to have “continuity plans” in conditions the place key executives have entry to personal keys, and the division shall be examining private key management going forward.
Among the many most thorough sections is steering round Anti-Cash Laundering issues for broker-dealers, which the division appeared to indicate has been some extent of failure for some establishments.
“Sure pseudonymous facets of distributed ledger expertise current distinctive challenges to the sturdy implementation of an AML program,” the division wrote.
“The employees has noticed broker-dealer AML applications that haven’t constantly addressed or applied routine searches or, to the extent they applied routine searches, haven’t up to date these searches to verify towards the Specifically Designated Nationals listing maintained by the Workplace of International Property Management (“OFAC”) on the U.S. Division of the Treasury.”
The Danger Alert additionally famous “insufficient” AML procedures and documentation, noting that it could be inspecting for “submitting suspicious exercise reviews and performing buyer due diligence.”