As banks explore stablecoins, they must keep in mind that Bank Secrecy Act and sanctions rules still apply, and that should guide their relationships with third parties that provide stablecoin services, according to American Bankers Association SVP and Counsel Heather Trew.
Trew and ABA SVP for Innovation and Strategy Brooke Ybarra discussed the implications of the recently enacted Genius Act for anti-money laundering compliance during the Financial Crimes Enforcement Conference, which is taking place this week in Arlington, Virginia. The Genius Act created a regulatory framework for payment stablecoins, allowing banks to issue the digital currency and provide services to other stablecoin issuers.
In terms of compliance, it does not matter whether banks are dealing with stablecoins or another form of payment, Trew said. “It means that if you’re going to contract with a third party, if you’re going to get into some kind of a relationship with a digital asset service provider, you need to understand how they operate, how they are responsible and what they are doing to meet these obligations.”
Banks cannot “contract away” their BSA and sanctions obligations, but there are steps they can take to protect themselves, Trew said. A good contract should establish roles and responsibilities so that banks know who to contact as they seek to achieve certain objectives. It should also allow banks to access materials they need to ensure legal compliance. And it should spell out the consequences if that access isn’t allowed, or the third-party provider fails to meet the objectives.
“If you don’t have the ability to terminate a contract, you’re kind of stuck,” she said.
