On September 17, the New York State Department of Financial Services (NYDFS) announced an extension of its blockchain analytics guidance, now applicable to all chartered banks, credit unions, and branches and agencies of foreign banking organizations within New York State. This move follows earlier guidance issued in April 2022, which outlined best practices for virtual currency licensees and New York limited purpose trust companies. The initial guidance emphasized the implementation of control measures that could utilize blockchain analytics to enhance due diligence, as well as transaction and sanctions monitoring for on-chain activities.
The updated industry letter advises banking organizations currently engaged in or considering activities related to virtual currency to refer to the 2022 Analytics Guidance. It encourages these institutions to incorporate blockchain analytics tools to bolster their compliance protocols and risk management strategies. Among the specific use cases highlighted by the NYDFS are the screening of customer wallets, verification of the source of incoming funds from virtual asset service providers, and ongoing monitoring aimed at identifying money laundering and sanctions violations.
Superintendent Adrienne Harris emphasized the necessity for traditional banking institutions to adapt their compliance functions as they venture into virtual currency activities. She noted that this adaptation requires the integration of new tools and technologies to effectively mitigate emerging risks. The letter also urged institutions to regularly reassess their risk management frameworks, underscoring the potential of blockchain analytics tools in safeguarding the financial system from illicit activities, especially in light of the increasing prevalence of virtual currency in the broader financial landscape.
