Crypto Markets Cool but Money Laundering Risk Persists
Although the hype and volatility of the digital asset market appears to be cooling off (at least for now), the push to regulate and control bitcoin continues with a sense of urgency. The leveling of cryptocurrency markets indicates less speculative investing, but certainly does not indicate a decrease in money laundering activities. Despite the widespread perception that popular cryptocurrencies like Bitcoin and Ethereum are anonymous, they are better described as pseudonymous.
This pseudonymity provides an excellent opportunity for effective AML regulation as complete transaction data is available. When combined with identification information from exchanges, wallet providers, or other sources, this data can come together to form a rather complete and useful picture for money laundering detection.
Different countries are taking very different approaches to the task of monitoring the crypto ecosystem. Japan and Russia, for example, are focusing on cooperation from exchanges to receive reports on flagged suspicious activity. In a similar structure to SAR filing in the US, exchanges in Japan send intelligence to the National Police Agency on suspicious activity. The US is also working with exchanges to establish suspicious activity detection and reporting standards. However, the US government is rumored to have gone a step further and has developed a system to identify bitcoin users by harvesting and analyzing global internet traffic. There is not a lot of information on the scope of this program and it is dependent on users unknowingly downloading a VPN designed to extract their data for monitoring.
While regulations for cryptocurrencies are still being developed by many governments, the need to monitor and control this money
laundering vector is critical. Beam is actively researching advanced methods to attach identities to addresses, thereby allowing Beam’s sophisticated detection engine to flag suspicious activity and create detailed reports for regulators. Beam reduces compliance risk and improves the efficacy of compliance teams.