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This course is tailored for professionals in compliance, risk management, and operations. It frames the entire topic through the lens of identifying and mitigating the unique risks presented by digital assets.

Target Audience

Portfolio/Fund/Investment Managers; Relationship Managers in Private Banking; and Financial Planners.

Course Objectives

Upon completing this course, you will be able to:

  • Analyse the primary ML/TF, fraud, and cyber threats associated with digital assets.
  • Evaluate how the PSA framework acts as a control system to mitigate these specific risks.
  • Implement enhanced due diligence procedures for clients with exposure to high-risk crypto activities.
  • Distinguish between the risk profiles of different digital assets and service providers.
  • Develop a risk-based approach to navigating the digital asset landscape within your firm.

Course Outline

Module 1: The Threat Landscape: A Deep Dive into Crypto-Related Crime

  • Focus on Predicate Offences:
    • Case Study: Syndicated laundering of scam proceeds through cryptocurrency trading (as detailed in the VA Risk Assessment Report).
    • Cyber-enabled Fraud & Investment Scams (e.g., Ponzi schemes like A&A Blockchain Innovation).
    • Ransomware: How crypto facilitates payments.
  • Laundering Methodologies:
    • Use of mixers, tumblers, and chain-hopping.
    • Exploitation of unhosted wallets and privacy coins.
    • The role of "money mules" in converting fiat to crypto.
  • Sanctions Evasion Risks:
    • Understanding how DPTs can be used to circumvent international sanctions.

Module 2: The PSA as a Risk Mitigation Framework

  • Mapping Regulations to Risks:
    • Risk: Illicit actors controlling service providers
      • Control: Stringent Fit & Proper requirements for licensing.
    • Risk: Anonymous fund transfers (ML/TF)
      • Control: Robust AML/CFT Notices (PSN01/PSN02), including CDD and the Travel Rule.
    • Risk: Loss of customer funds from hacks/insolvency
      • Control: Technology Risk Management (TRM) Notices and mandatory segregation/safeguarding of customer assets in trust (April 2024 amendments).
    • Risk: Consumer harm from speculative activities
      • Control: Prohibition on retail marketing and lending/staking services.

Module 3: Advanced Due Diligence & Red Flag Identification

  • Customer Risk Profiling:
    • Assessing clients involved with DeFi, NFTs, and online gambling.
    • Identifying transactions with unhosted wallets or high-risk jurisdictions.
  • Source of Wealth (SoW) / Source of Funds (SoF):
    • Corroborating wealth generated from crypto trading or ICOs.
    • Challenges and best practices.
  • On-Chain Analytics: A brief overview of how blockchain analysis tools are used by DPTSPs to screen for illicit activity.

Module 4: Your Role as a Gatekeeper

  • Strengthening Internal Controls: Reviewing your firm’s policies to account for digital asset risks.
  • Reporting and Escalation: When and how to file a Suspicious Transaction Report (STR) related to digital assets.
  • Collaboration and Information Sharing: The role of public-private partnerships like the AML/CFT Industry Partnership (ACIP).

Assessment – MCQ