FinCEN proposes a new rule for investment advisors; HKMA forms tokenization advisory group; 40% of global dirty money laundered through London and UK

The SEC and FinCEN have proposed a new rule that would require investment advisers to establish customer identification programs to prevent illicit finance activity. The rule aims to make it more difficult for criminals to use false identities to establish customer relationships with investment advisers. It complements a separate proposal to designate investment advisers as “financial institutions” under the Bank Secrecy Act and subject them to AML program requirements. The proposed rule will be published for public comment for 60 days.

The HKMA has formed an advisory group to develop industry standards for the region’s tokenization market. Described as the “Project Ensemble Architecture Community,” the group aims to support interoperability among wholesale CBDC, tokenized money, and tokenized assets. It includes members from regulators, international organizations, academia, local and multinational banks, digital asset industry players, and technology companies. These developments follow research conducted by the Boston Consulting Group (BCG) and Hong Kong Telecom, which revealed that digital currencies, including CBDCs, could add HK$160 billion (US$20.5 billion) to GDP by 2032 .

UK Deputy Foreign Secretary Andrew Mitchell has said that an estimated 40 percent of the world’s illicit funds flow through London and other crown dependencies. Mitchell emphasized the importance of Britain’s involvement in combating illicit funds, stating that crown dependencies and overseas territories will face new demands to comply with UK laws by setting up public beneficial ownership registers. The British Virgin Islands and the Cayman Islands have not yet introduced public registers, citing European Court of Justice rulings and human rights issues. However, the Cayman Islands government aims to introduce an enhanced framework to allow those with “legitimate interest” to access its registers by late 2024.

Until next week,

Andrew Davies, Global Head of Regulatory Affairs.

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