Financial Crime World

Financial Crime on the Rise in Saint Pierre and Miquelon Amid Digital Age Boom

The tiny archipelago of Saint Pierre and Miquelon, nestled off the coast of Canada, is finding itself at the forefront of a growing financial crime crisis sparked by the rapid growth of digital assets.

The Rise of Digital Assets

As highlighted in the Treasury’s publication, Crypto-Assets: Implications for Consumers, Investors, and Businesses, the aggregate market capitalization of all crypto-assets has hovered just below $1 trillion since June 2022. A recent national consumer research study conducted by Raddon Research Insights revealed that 28 percent of consumers are extremely interested in having digital assets services as part of their banking relationship.

Regulatory Uncertainty and Challenges

The surge in demand is forcing traditional financial institutions to re-evaluate their stance on digital assets, with some opting to launch their own digital assets business or partner with existing players. However, regulatory uncertainty aside, financial institutions must prioritize identifying and mitigating the key threats, vulnerabilities, and illicit financing risks associated with virtual assets.

Key Risks and Vulnerabilities

  • Partnering with VASPs (Virtual Asset Service Providers) that offer both custody and exchange services can indirectly expose financial institutions to facilitating suspicious transactions.
  • Payment service providers using conventional operating bank accounts to facilitate digital asset payment services pose indirect ML/TF (Money Laundering/Terrorist Financing) risks to traditional financial institutions.

Implementing AML/CFT Measures

The Financial Action Task Force’s (FATF) updated guidance on virtual assets provides a roadmap for implementing AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) measures when partnering with VASPs. The traditional risk-based approach recommendations put financial institutions in a good position to adopt these practices by leveraging existing frameworks used for customer due diligence and risk assessments within functioning AML/CFT programs.

Best Practices

  • Conduct counterparty VASP due diligence prior to partnering with VASPs.
  • Perform ongoing CDD (Customer Due Diligence) and monitoring on a periodic basis thereafter.
  • Confirm whether a VASP or payments service provider has performed a thorough risk assessment of its AML/CFT program, while also performing a risk assessment of their own.

Conclusion

By performing the appropriate levels of customer due diligence regarding strategic alliances with VASPs and payments service providers, financial institutions increase their likelihood of creating long-lasting business relationships while addressing compliance with evolving regulatory expectations. As the digital assets market continues to grow, financial institutions must remain vigilant in their efforts to meet customer demand without compromising the integrity of their AML/CFT programs.

The Importance of Combating Financial Crime

Saint Pierre and Miquelon’s financial sector is being forced to adapt to a rapidly changing landscape, and it is crucial that they prioritize the fight against financial crime. Failure to do so could have devastating consequences for the local economy and reputation.