On September 17, NYDFS announced it had extended its blockchain analytics guidance to all New York State chartered banks, credit unions, and branches and agencies of foreign banking organizations. As previously covered by InfoBytes, NYDFS issued guidance in April 2022 outlining best practices and expectations for its virtual currency licensees and New York limited purpose trust companies to implement “control measures that may leverage blockchain analytics,” augment due diligence, conduct transaction and sanctions monitoring of on-chain activity.

The new industry letter advised that banking organizations engaged in, or considering, virtual currency-related activity should reference the 2022 Analytics Guidance and consider leveraging blockchain analytics tools to enhance compliance and risk management. NYDFS highlighted use cases such as screening customer wallets, verifying the source of incoming funds from virtual asset service providers, and monitoring for money laundering and sanctions violations. NYDFS emphasized that controls should be “tailored to a Covered Institution’s business model, risk appetite, and operations.”

Superintendent Adrienne Harris stated that as “traditional banking institutions expand into virtual currency activities, their compliance functions must adapt, onboarding new tools and technologies to mitigate new and different risks.” The industry letter encouraged institutions to reassess risk-management frameworks regularly and emphasized that blockchain analytics tools can help safeguard the financial system by preventing illicit activities as virtual currency continues to proliferate across the broader financial system.