The Safety and Change 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 belongings, or “digital asset securities,” transferring 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 supplied a broad listing of particular procedural, bookkeeping and advisory steps the division shall be anticipating from securities corporations 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’ “achievement 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 non-public keys, and the division shall be examining private key management going forward.
Among the many most thorough sections is steerage round Anti-Cash Laundering concerns for broker-dealers, which the division appeared to indicate has been a degree of failure for some establishments.
“Sure pseudonymous points of distributed ledger expertise current distinctive challenges to the sturdy implementation of an AML program,” the division wrote.
“The workers has noticed broker-dealer AML packages that haven’t persistently addressed or carried out routine searches or, to the extent they carried out routine searches, haven’t up to date these searches to examine towards the Specifically Designated Nationals listing maintained by the Workplace of Overseas Belongings Management (“OFAC”) on the U.S. Division of the Treasury.”
The Danger Alert additionally famous “insufficient” AML procedures and documentation, noting that it will be inspecting for “submitting suspicious exercise studies and performing buyer due diligence.”