January 27, 2020

CipherTrace

5th Anti-Money Laundering Directive (AMLD5) comes into force
NICE Actimize complements its crypto asset protection for banks with CipherTrace
New CipherTrace partnership with universities and blockchain organizations aims to nurture student crime-fighters
UK’s financial conduct authority (FCA) tasked with setting regulations for all crypto assets
Digital yuan finally ready for pilot testing

AMLD 5 Is Here: EU Crypto Businesses Faced with Tough New Regulation

As of January 10, the EU’s 5th Anti-Money Laundering Directive, variously referred to as 5AMLD or AMLD 5, went into effect in a bid to make fiat-to-crypto transactions more transparent. Partly prompted by the terror attacks in France, the new regulations are designed to fight terrorist financing and money laundering, while making information more accessible to European financial regulators. The directive also includes tough new regulations for virtual asset service providers (VASPs) such as virtual-to-fiat exchanges and custodian wallet providers. Noncompliant crypto service providers may be subject to fines up to €200,000.

Why It Matters: Many European crypto asset businesses have been unable to meet the new regulatory guidelines. Already, several companies have ceased operations, citing the extensive know-your-customer (KYC) and AML requirements as AMLD 5 becomes a reality. However, all the technology needed to quickly and cost effectively bring VASPs into compliance are readily available.

Not all European VASPs are making the investment in updating their compliance regimes to meet the new AMLD5 requirements. Dutch crypto derivative platform Deribit, for example, says it plans to move to Panama in early February to avoid these regulations. Despite some arguments that the costs of compliance will not be significantly higher, Deribit believes that the new regulations would create too many barriers for the majority of traders.

NICE Actimize Adds Cryptocurrency CipherTrace to X-Sight Marketplace to Help Banks Reduce AML Compliance Risk and Fight Fraud

NICE Actimize, the leader in autonomous financial crime management, announced the addition of CipherTrace to its X-Sight Marketplace. The industry’s first financial crime and compliance ecosystem,. The X-Sight Marketplace gateway connects financial services organizations with data, applications, tools and service providers. “The addition of a strong cryptocurrency innovator like CipherTrace to the X-Sight Marketplace not only complements our robust anti-money laundering portfolio but also supports FSOs as they strengthen their strategies against cryptocurrency-related fraud and money laundering activities,” said Craig Costigan, CEO, NICE Actimize.

Why It Matters: The decision by NICE Actimize is sign of banks’ growing awareness of the need to enhance protection against cryptocurrency risks. For example, a major research study by CipherTrace Labs discovered in 2019 that almost all the 10 top U.S. retail banks process cryptocurrency. The study further found that a typical U.S. bank may facilitate as much as $2 billion a year in illicit cryptocurrency-related transfers, much of it not readily visible to compliance officers. CipherTrace solutions will now help NICE Actimize’s finance industry customers eliminate this blind spot. They will have access to all the world’s best AML and crypto risk intelligence solutions all in one place.

Read the full announcement: https://ciphertrace.com/nice-actimize/

CipherTrace Defenders League Trains and Tools Budding Crypto Crime Fighters

As CipherTrace has reported in the most recent Cryptocurrency AML Report, theft and fraud targeting exchanges and investors can involve huge losses, and the problem is growing. Law enforcement agencies around the world have added resources to tackle the problem, but they typically have only enough trained investigators to pursue the largest crimes. On January 16, CipherTrace launched the CipherTrace Defenders League to address this shortage. The program will train university students to become crypto crime fighters and equip them with the world’s best blockchain investigation tools. Partners in the initiative currently include Middlebury Institute of International Studies at Monterey, Middlesex University London, and the Blockchain Acceleration Foundation (BAF). CipherTrace plans to offer a $4.3 million software grant to the participating universities and organizations.

Why It Matters: Whereas resource-constrained global law enforcement agencies may only tackle cryptocurrency crimes of US100 million or more, the Defenders League students can help victims recoup smaller losses.

Read the full announcement: https://www.businesswire.com/news/home/20200113005276/en/Student-Crime-Fighters-Virtual-Assets-Safer-Researching-Scammed

UK Regulator Ups Reporting Requirements on Crypto Firms

In line with the maturing cryptocurrency regulatory landscape, the UK’s Financial Conduct Authority (FCA) will begin setting regulations for all crypto assets, digital assets, and commodities. Effective this January, the FCA is now the AML/CTF supervisor for businesses carrying out certain crypto asset activities under the amended Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs). Any UK business conducting specific crypto asset activities falls within scope of the regulations and will need to comply with their requirements. Among other requirements, UK crypto asset businesses must now:

Identify and assess the risks of money laundering and terrorist financing which their business is subject to
Have policies, systems and controls to mitigate the risk of the business being used for the purposes of money laundering or terrorist financing
Where appropriate to the size and nature of its business, appoint an individual who is a member of the board or senior management to be responsible for compliance with the MLRs
Undertake customer due diligence when entering into a business relationship or occasional transactions
Apply more intrusive due diligence, known as enhanced due diligence, when dealing with customers who may present a higher money laundering / terrorist finance risk. This includes customers who meet the definition of a politically exposed person;
Undertake ongoing monitoring of all customers to ensure that transactions are consistent with the business’s knowledge of the customer and the customer’s business and risk profile.

In addition, any firms that carry out crypto asset related activity within the scope of the FCA’s regulations must register with the authority before conducting business.

Read the full story on the FCA’s news site: https://www.fca.org.uk/news/news-stories/fca-becomes-aml-and-ctf-supervisor-uk-cryptoasset-activities

China To Begin Testing National Digital Currency

After six years of development, China’s central bank is preparing to test its national digital currency: the digital yuan. China has been working to establish a digital currency for six years, and Facebook’s announcement of Libra further spurred those efforts. Now that China has completed the design work on the digital currency, it is prepared to launch its first pilot tests. The digital yuan’s value will be tied to the regular yuan, and the central bank will monitor every transaction, establishing what the Chinese banks have dubbed “controllable anonymity.”

Why It Matters: This news has led many observers to speculate about the beginning of an economic arms race, and, ultimately, a challenge to the U.S. dollar as the world’s reserve currency. Despite China’s momentum, the U.S. remains highly skeptical of digital currencies, and continues to intensely vet projects like Libra. Other central banks such as Russia’s are also experimenting with digital currency, which should pressure the U.S. to stay in the race for blockchain innovation.

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