The virtual asset market, which includes cryptocurrencies, continues to drive remarkable year over year growth, showing no signs of slowing down. With unprecedented growth and market volatility comes the need for the study of potential risks and liabilities for companies issuing new digital currencies, investors speculating on them, and the financial institutions ultimately servicing them. Our experienced multidisciplinary team of experts from government, law enforcement, and the virtual asset industry can assist with compliance program development, implementation and remediation, asset tracing and recovery, augmentation of staff through outsourced managed services and fraud investigations associated with virtual assets and virtual asset service providers. We provide a comprehensive approach in identifying critical business issues and providing effective solutions to help all types of virtual asset market participants keep up with the latest developments occurring within the new value-transfer virtual asset marketplace.
We can assist clients obtain licensing approval from the New York State Department of Financial Services for a BitLicense, or receive a limited purpose trust charter. Also, we can provide assistance in creating and implementing written Anti-Money Laundering (AML) compliance programs ahead of clients’ registering with the U.S. Department of the Treasury’s FinCEN as well as applicable state-level money service business licensing authorities.
We also help clients navigate and mitigate Bank Secrecy Act and Anti-Money Laundering (BSA/AML) compliance risks as they strive to establish new banking relationships and satisfy regulatory requirements domestically and internationally. We are also assisting clients as they update and implement new policies related to the European Union’s Fifth Anti-Money Laundering Directive, by helping to ensure that they have compliance programs in place that protect their customers and can withstand regulatory scrutiny.
We advise all types of financial institutions rationalize risk vs. reward in the virtual asset ecosystem, identify and authenticate digital identities to mitigate potential terrorist financing and economic sanctions risks, and design transaction monitoring and surveillance programs to detect potential fraud, illicit transactions and money laundering. We also offer bespoke advisory services to private banking clients, investment funds and family offices who seek to access or invest in the virtual assets ecosystem.
Rapid growth tied to these new technologies has also made virtual asset currency exchanges themselves susceptible to cybersecurity intrusion incidents, hacking, financial frauds and malfeasance. As experts in AML, Know Your Customer (KYC), Anti-Bribery and Corruption (ABC), fraud investigations, and cybersecurity programs, we offer event-driven remediation and corrective action plans.
Virtual Assets Outsourced Compliance Services
The recent surge in the global virtual asset market has led to the need for regulatory compliance solutions to keep up with this growth. From verifying customer identities during the application stage to ensuring the source of funds are legitimate, virtual asset service providers must adopt policies and procedures to ensure that virtual asset transactions are screened appropriately. K2 Integrity is a premier provider in a wide array of compliance related services including creating, developing or amending existing policies, training and business intelligence tools.
Tailored for the virtual asset ecosystem, K2 Integrity’s third-party managed services is an outsourced business process and technology service platform that integrates AML and anti-fraud functions with leading process management systems and business intelligence tools that enable financial institutions to meet ever evolving regulatory requirements surrounding virtual assets. Our managed services solution offers ongoing enhanced due diligence through periodic reviews and KYC remediation that lets you leverage its capabilities in a way best suited to your company. For those clients requiring a more comprehensive approach, we can leverage our own best-in-class technology and our experienced professionals to create and implement tailored unusual activity alert generating rules, which are appropriate and are applied correctly. Since our third-party managed services platform is a scalable solution, we can offer interim and peak-volume assistance.
Cryptocurrency Licensing Approval
We have assisted virtual asset exchanges in obtaining licensing approval enabling clients to open for trading. Our team of experts can craft AML and KYC policies and conduct Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) training for clients.
Virtual Assets within Financial Institutions
Around the world, financial institutions are surveying the rapidly evolving virtual asset ecosystem and as new technologies emerge, new sets of rules and regulations must be implemented. Due to the almost anonymous nature of virtual currencies, many companies are left to grapple with the challenges of managing these risks along with the compliance requirements to know their customers’ identities, monitor their transactions and detect suspicious activity. When FinCEN declared administrators or exchanges of virtual currency as money service businesses (MSBs), these entities were obligated to fulfill several requirements established by the Bank Secrecy Act (BSA) and the USA PATRIOT Act.
K2 Integrity’s multifaceted team of former regulators, law enforcement, intelligence agency and compliance professionals has the expertise to assist virtual asset service providers to meet regulatory requirements, create, implement and maintain an effective AML program, verify customer identities, monitor transactions for unusual activity, conduct customer due diligence and when needed, conduct enhanced due diligence. Implementing appropriate and tailored organizational compliance policies and procedures is integral in preventing a financial institution, including MSBs, from being used to facilitate money laundering or finance terrorist activities.
Our team has the expertise to assess, review, enhance, test and validate compliance programs and frequently conduct annual independent tests to ensure compliance with BSA/AML regulations and OFAC sanctions. Designed to monitor the adequacy of an institution’s anti-money laundering program, annual independent reviews determine whether the business is operating in compliance with both BSA and sanctions requirements and whether it is following its own established policies and procedures. We can review your customer base, perform periodic reviews updating all your due diligence, and help you know who your customer is and identify beneficial ownership. Our team of experts can create and implement regulator ready AML programs for your company designed to comply with U.S. standards.
Virtual Assets Fraud Investigations and Financial Crimes
Virtual assets designed with near anonymity have proven to be attractive targets for criminal activity. The ambiguous nature of some types of virtual currency transactions makes them susceptible to money laundering, tax evasion and other types of financial fraud. K2 Integrity can help mitigate risks that stem from such near anonymity and assist virtual asset companies with amending their existing policies and procedures. Our team can provide tailored solutions and guidance to virtual asset firms to accommodate the current regulatory framework.
Our talented professionals come from varied backgrounds that can help with tracking transactions, identifying fraud and mitigate emerging risks. K2 Integrity helps clients with fraud detection, investigative, and forensic services to minimize the possibility of fraudulent activities. We can advise businesses on how to protect their assets and avoid investment schemes, money laundering and other financial fraud. We diagnose and forensically analyze instances of embezzlement, procurement fraud, financial statement fraud, and other large-scale misappropriations from either inside or outside the client’s organization. We also provide asset tracing and recovery services. Our global asset tracing team, comprised of forensic accountants and skilled investigators, has a solid track record assisting clients with high profile and high value asset recovery investigations and are able to trace transactions on most virtual asset blockchains to further aid in the recovery process.
K2 Integrity combines a financial investigation and technical forensic accounting skill set with the ability to identify and obtain relevant external intelligence and information to produce uniquely informed results for our clients. Investigations into instances of fraud have the potential to lead to loss, regulatory censure, and reputational damage. Financial by their nature, these improprieties may include the making of illicit payments, embezzlement, procurement fraud, financial statement fraud, misappropriations from either inside or outside the client’s organization, or the manipulation of market metrics. By working closely with the client’s counsel, our diverse team of forensic accountants, legal experts, corporate intelligence professionals, and former regulators can determine how the wrongdoing arose, the impact on the business, and the means to resolution.
- K2 Integrity’s financial crimes risk management team is working with a global stablecoin issuer to create a virtual asset service provider (VASP) compliance onboarding framework in line with US financial crimes regulatory obligations and help the company strengthen its financial intelligence unit.
- K2 Integrity helped clients Cameron and Tyler Winklevoss launch Gemini, a virtual assets exchange. The K2 Integrity team helped the client obtain BITLicense approval from the New York Department of Financial Services, which enabled the Gemini exchange to open for trading. K2 Integrity AML professionals crafted AML and KYC policies and also conducted AML/Combating Financing of Terrorism (AML/CFT) training for Gemini.
- K2 Integrity provided financial crimes compliance and regulatory gap analysis and risk assessment for a venture capital firm in connection with a potential investment opportunity in the African FinTech space that included virtual asset trading. This engagement involved reviewing the anti-money laundering policies, procedures, and controls of the target investment as they pertain to its current Africa-based market, as well as for the US and UK, where the target is looking to expand operations. Our resulting report provided the venture capital firm with a comprehensive risk profile that served as the basis for evaluating the proposed investment.
- K2 Integrity was retained by an Asia-based provider of virtual asset related offerings to build a full compliance framework that would allow them to meet regulatory standards and operate as a full-fledged European challenger banking institution.
- K2 Integrity was engaged by a US-based issuer of virtual assets, seeking to achieve licensure from the UK Financial Conduct Authority, and to serve as their interim UK anti-money laundering reporting officer to help manage the company’s growth.
- Our virtual assets team was engaged by a virtual assets exchange in the Midwest to create and update existing policies, procedures, and governance framework to comply with the new US regulatory requirements for VASPs, including the Travel Rule, as well as regulatory requirements and record-keeping for transactions involving unhosted wallets.