September 2025

2025 Canada AML and Terrorist Financing Risks: New Tech Drives Challenges, Government Strengthens Oversight

Canada’s 2025 assessment of money laundering (ML) and terrorist financing (TF) risks highlights threats from organized crime groups and third-party enablers, with illegal drug trafficking, fraud, and tax crimes as top ML risks. While TF activity remains low, foreign-based actors, cryptocurrencies, and misuse of non-profits pose concerns. Vulnerable sectors include major banks, corporations, trusts, crypto assets, and certain money services businesses. Since 2018, Canada has invested nearly $470 million in intelligence, compliance, and enforcement. Emerging risks such as AI-enabled fraud, foreign interference, and links between organized crime and terrorism are shaping Canada’s financial crime landscape.

LYODS INSIGHTS: This report reveals that combating financial crime is increasingly challenging due to rapid developments in digital assets and new technologies, particularly the compliance risks posed by stablecoins. To overcome this, we stress the importance of building robust governance and dynamic compliance monitoring systems. By integrating crypto risk evaluation tools and facilitating data sharing with regulators, we help financial institutions achieve real-time risk detection and reporting that meets regulatory demands. We are optimistic about the role of cross-agency data collaboration and AI in AML governance, and we aim to optimize scalable compliance solutions to help clients navigate evolving regulatory landscapes and protect financial system integrity.

Could Taiwan Issue Stablecoins? FSC’s Attitude Opens, Banks Reveal Their Views

Following international trends, Taiwan’s Financial Supervisory Commission (FSC) is exploring a regulated approach to stablecoins, incorporating a legal framework into the draft Virtual Asset Service Act. The legislation, which is under review, would allow qualified banks to become issuers. While one domestic bank has shown interest, most financial institutions are patiently observing how the new legal framework develops. The path forward hinges on the law’s enactment and close alignment with the Central Bank to ensure both innovation and monetary sovereignty.

LYODS INSIGHTS: The Financial Supervisory Commission’s flexible stance marks Taiwan’s ambition to align with the global stablecoin trend. While this direction is clear, actual implementation requires formal legislative procedures, central bank review, and industry cooperation.

For the banking sector, stablecoins present both new opportunities and significant challenges, including regulatory compliance and AML. Consequently, banks are understandably adopting a “prepare first, act later” approach, focusing on building robust internal frameworks before fully engaging with this evolving market. This cautious strategy ensures financial integrity.

Hong Kong’s Stablecoin Licensing Framework

Hong Kong’s stablecoin regulatory framework took effect on August 1, 2025, marking a significant milestone in its ambition to become a global digital finance hub. Despite receiving 77 expressions of interest from major financial institutions and fintech firms—including HSBC, ICBC, Standard Chartered, and Bank of China—the HKMA plans to approve only three to four licenses initially, with expectations that the first approvals will be granted in early 2026. This cautious approach aims to ensure stability, robust compliance, and rigorous oversight while positioning Hong Kong as a first mover in Asia’s regulated stablecoin market.

LYODS INSIGHTS: LYODS is poised to play a critical role in supporting stablecoin issuers and other digital asset service providers in navigating Hong Kong’s regulatory landscape:

• Identity Verification and KYC Onboarding: Comply with HKMA’s stringent customer due diligence requirements.
• Regulatory Reporting and Compliance Automation: Our platforms automate AML/CFT reporting requirements including audit-ready record and risk based AML approach.
• Transaction Monitoring and Risk Management: Real-time transaction monitoring systems tailored to stablecoin flows, enabling issuers to:
  • Detect and report suspicious activities
  • Implement blockchain analytics to trace transactions across wallets and protocols.

FinCEN Heightens AML Scrutiny on Cryptocurrency Kiosks Amid Rising Fraud

On August 4, 2025, FinCEN issued Notice FIN-2025-NTC1 highlighting rising financial crime risks tied to cryptocurrency kiosks (CVC kiosks/ATMs). These machines, popular for exchanging cash into crypto, have been increasingly exploited for scams, money laundering, and organized crime. In 2024 alone, CVC kiosk fraud losses reached nearly $247 million, with seniors disproportionately victimized. FinCEN stresses that operators must register as MSBs, comply with Bank Secrecy Act obligations, and maintain strong AML/KYC protocols. The Notice also provides red flags, including structured deposits, high-value rapid transfers, and no-ID promotions. This move underscores heightened regulatory scrutiny and urges institutions to strengthen compliance while protecting consumers.

LYODS INSIGHTS: FinCEN’s latest notice on cryptocurrency kiosks highlights both the regulatory risks and opportunities facing the digital asset ecosystem. With fraud and launderingincidents rising, kiosk operators and financial institutions must adopt stronger transaction monitoring, customer verification, and behavioral analytics. Lyods’ AML solutions are built to meet these challenges, combining proprietary risk indicators, automated SAR filing, and real-time blockchain analytics that correlate on-chain data with customer profiles. Our platforms are scalable and flexible, enabling compliance not only for kiosks but also for stablecoin governance. By safeguarding vulnerable populations and reinforcing controls, Lyods helps financial entities navigate regulatory gaps while strengthening trust in the fintech sector.

Sending ¥1 Worldwide in Seconds? The Impact of Japan’s First Stablecoin and Its Critical Risks

In a groundbreaking move, JPYC, a Japanese fintech firm, is poised to issue Japan’s first yen-pegged stablecoin, “JPYC,” as early as September 2025, following its registration as a funds transfer operator on August 18. The coin—backed 1:1 by reserves such as deposits and government bonds—promises ultra-low transaction costs and near-instant transfers, enabling global remittances of as little as ¥1 to settle within seconds. By leveraging blockchain technology, JPYC aims to improve economic efficiency and even allow seamless transfers between electronic money platforms like Suica and PayPay. While experts anticipate the global stablecoin market could swell to US $3.7 trillion by 2030, the emergence of such digital currency also brings risks: potential for misuse in financial crime, consumer protection gaps, and the systemic threat of “stablecoin runs” if trust or liquidity falters. As JPYC prepares rollout, robust AML safeguards are critical for a secure digital finance future.

LYODS INSIGHTS: Stablecoins demand regulatory foresight as much as technological innovation. Instant global transfers create undeniable benefits, yet without strong oversight they risk becoming channels for laundering, fraud, and systemic shocks. Regulators must establish clear standards on reserve transparency, cross-border transaction monitoring, and mandatory adoption of advanced AML tools. Institutions alone cannot shoulder the burden—policy alignment and supervisory enforcement are essential to safeguard trust. At Lyods, we believe regulators should view AML not as a compliance checkbox but as infrastructure. Only with rigorous, real-time safeguards can stablecoins evolve into a secure and sustainable pillar of digital finance.

Sources:

• 2025 Canada AML and Terrorist Financing Risks: New Tech Drives Challenges, Government Strengthens Oversight – Source from Canada Government | 2025 Assessment of Money Laundering and Terrorist Financing Risks in Canada: Report”
• Could Taiwan Issue Stablecoins? FSC’s Attitude Opens, Banks Reveal Their Views: – Source from Yahoo! Taiwan 2025-09-07 | 台灣發穩定幣？金管會態度開放 銀行看法曝
• Transaction Monitoring and Risk Management: Real-time transaction monitoring systems tailored to stablecoin flows, enabling issuers to:
• FinCEN Heightens AML Scrutiny on Cryptocurrency Kiosks Amid Rising Fraud – Source from FinCEN News archive 4 Aug 2025 | FinCEN Issues Notice on the Use of Convertible Virtual Currency Kiosks for Scam Payments and Other Illicit Activity
• Hong Kong’s Stablecoin Licensing Framework – Source from SCMP | First-mover advantage key to Hong Kong’s success as multicurrency stablecoin hub, says PwC
• Sending ¥1 Worldwide in Seconds? The Impact of Japan’s First Stablecoin and Its Critical Risks – Source from Yahoo! Japan | https://news.yahoo.co.jp/articles/71e44bf0306a0b944d910ed68f644b0040520248?page=1

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