For criminals, cryptocurrency was the best invention since the dark web! ‘Finally,’ cried the crooks of the world, ‘we have an untraceable money-laundering medium. Let’s have fun!’ And ever since, regulators have waged a losing battle…
The dark web, floods of unregistered exchanges, and the anonymity of end-users have turned cryptocurrency into the proverbial hydra: cut off one head (or avenue of transaction) and another three spring up in its place. Add to that the number of cryptocurrency users (roughly 7% of consumers in the US, and a much higher percentage across many countries in Asia, South America and Africa) and you’ve got an almost unwinnable war.
But finally, change is on the horizon. As regulators are set to pass a host of stringent regulations to make crypto-assets more traceable, victory is shifting from the criminals to the law…
A SHIFT IN BATTLE
Overseen by a new EU-wide anti-money laundering authority (AMLA), these proposals are set to come into force in 2023 and will, according to the EU Commission, “oblige all service providers to conduct due diligence on their customers, with the aim of improving the detection of suspicious transactions and activities, and closing loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system.”
In short, when the laws come to pass, crypto-asset transfers will become subject to the same anti-money-laundering rules as wire transfers. Institutions involved in the transfer of customers’ crypto-assets will be forced to include details of name, address, date of birth, account number, and name of the recipient. And companies which don’t or can’t provide these vast amounts of data will, themselves, run the risk of being heavily penalised.
While some crypto-asset service providers already enjoy comprehensive AML programs that stipulate the gathering of Know Your Customer and Customer Due Diligence information, and others possess limited AML risk-based controls, more than a few lack any form of customer identification whatsoever. And it’s these institutions which will inevitably fall foul of the new regulations, incurring incredible risk with every transaction.
So, with stringent new regulations just around the corner, and ever-stricter penalties on the books, what’s the answer? Because manually processing the sheer volume of data (in multiple transactions from countless customers) is utterly impossible. For a human, anyway…
HOW THE WAR WILL BE WON
RegTech is our ultimate weapon in the fight against illegal crypto activities: machine-learning AI systems that can not only process vast amounts of data, but also learn on the job. Such solutions are becoming the only way for institutions to function within these new laws, and iSPIRAL’s market-leading RegTek+ Solution is an excellent example.
Comprising various, tailor-made solutions (including AML Transaction Monitoring, Client Lifecycle Management, and Digital Identify Verification and Screening), RegTek+ provides any institution dealing with crypto transactions with complete protection.
Over the last two years, we’ve already seen huge fines handed out to companies who have failed to install the appropriate RegTech solutions: the crooked clients they onboarded, and the illegal transactions they allowed have cost them dearly. So don’t waste the next two years hoping your company – no matter its size – will be overlooked by the law. It won’t.