New York Banks Advised to Leverage Blockchain Analytics: NYDFS

New York Superintendent of Financial Services Adrienne Harris issued a guidance letter on Wednesday advising all New York banking organizations to consider using blockchain analytics to strengthen compliance and manage risks tied to virtual currency activity.

NYDFS Links Prior VCRA, Analytics Guidance in New Notice to Banks

The Department of Financial Services (DFS or NYDFS) said the notice applies to “Covered Institutions,” including state-chartered banks and state-licensed branches or agencies of foreign banks, and directs them to DFS guidance on analytics and on seeking approval before new or different virtual currency activity.

DFS said rising customer exposure to crypto through banking relationships makes analytics tools useful for risk identification and mitigation across compliance and enterprise risk programs.

The letter lists use cases: screening customer wallets that show crypto transactions; verifying sources of funds from virtual asset service providers; monitoring crypto activity to assess exposure to money laundering, sanctions violations, or other crimes; and identifying risks tied to third parties such as VASP counterparties.

It also highlights using analytics to compare expected versus actual customer activity, fold insights from holistic monitoring into risk assessments and risk appetite, and evaluate the risks of any proposed virtual currency offering.

DFS emphasized that examples are not exhaustive and that controls should align to each institution’s business model, operations, and risk appetite, with regular reassessments as products, customer types, and market participants evolve. The DFS guidance lands in the middle of Trump’s sweeping economic shake-up, which happens to roll out the welcome mat for crypto assets and associated companies.

The department said emerging technologies bring threats that warrant blockchain analytics, and that banking organizations play “a critical role in safeguarding the integrity of the financial ecosystem” by helping prevent money laundering, terrorist financing and sanctions evasion. DFS noted the guidance does not limit any law or regulation and directed questions to relationship managers at the agency.