Cryptocurrencies pose a challenge to financial institutions, in part because of the risk of sanctions.
This was the finding of a survey carried out by the International Compliance Association (ICA), which is part of Wilmington PLC. The ICA helps companies to be compliant with regulation and standards.
The research was carried out on 401 respondents from industries such as banking, accounting, asset management, insurance, payment services, betting and gaming.
46% of respondents said that cryptocurrencies and emerging financial technologies need more training and education in relation to regulatory compliance.
Indeed, this is a new and evolving sector that is under the scrutiny of regulators due to its pseudo anonymity and associated risks of money laundering or terrorist financing.
Ross Savage, Course Director and Global Lead – Sanctions Compliance at ICA explained:
“With the rapid rise in crypto and digital currencies and emerging financial technologies, naturally, regulations continue to evolve. It means that organisations operating across multiple jurisdictions constantly need to review and assess the impact of new legislation and regulation. Therefore, we were keen to identify the main sanctions risk management challenges faced by business leaders and organisations operating around the world”.
Sanctions beyond cryptocurrencies
In reality, the survey highlights the need for more education on sanctions risk in general and not just cryptocurrencies.
The numbers speak for themselves:
- 70% of respondents have undertaken less than ten hours of sanctions risk management training in the last 12 months.
- 39.4% have undertaken less than five hours.
- 13% said that no specific training on sanctions was provided to staff.
- 10% had not undertaken any training.
Of those who have not had any training, more than 70% work in companies with more than 100 employees.
With regard to sanctions and consequences, these were the answers:
- 42% were concerned about reputational damage;
- 27% feared substantial fines;
- 13% feared that they would be an obstacle to doing business.
However, 68% of respondents also said that the company for which they work has initiated a sanctions risk assessment in the last 12 months. In addition, most companies have a person in charge of managing this type of risk, while “only” 24% do not.
Ross Savage adds:
“With 55% of respondents expecting to make changes to their sanctions risk programme in the next 12 months (20% major changes, 34% minor changes), this offers an opportunity to broaden training programmes to ensure staff are fully equipped to understand the changing nature of sanctions risk and control and the full consequences of non-compliance.
Putting sanctions into perspective, framework controls are now a matter for the whole senior management team and board members to ensure compliance with regulations and ultimately protect the firm across increasingly diverse supply chains, against the backdrop of an ever-changing landscape. At ICA, we are committed to helping our members and learners navigate the complex world of sanctions across multiple jurisdictions with our range of courses, qualifications, CPD and network support, aiming to go beyond training to affect behavioural change”.
The evolving landscape is reflected in what is happening in the US, for example. Overnight, the Infrastructure Bill was passed: when it becomes law, those involved in crypto transactions will be obliged to report to the IRS, the tax collection agency.
This implies the need for the sector to comply, or else risk sanctions or outright blockades.