Crypto & AML:
What you need to know to stay ahead of the ever-changing ecosystem.
As the world of finance evolves, AcuityTec is proud to be at the forefront of welcoming cryptocurrency into the business landscape. However, we understand that one of the biggest challenges for our clients is ensuring that they're dealing with validated customers when using these new exchanges.
That's why we want to share some vital information with you. At AcuityTec, our Know Your Customer (KYC), Compliance, and Risk Management processes are designed to help you step confidently into the world of cryptocurrency.
In recent years, cryptocurrency has gained increasing popularity, with more people using digital assets for various transactions across borders. However, with this surge in popularity comes an increase in regulatory scrutiny. As authorities put more regulations in place, cryptocurrency assets will continue to be a viable option for those seeking to invest or make transactions without the need for a centralized authority.
To mitigate the risks associated with cryptocurrency, organizations need to adopt effective Anti-Money Laundering (AML) practices. By implementing AML processes, businesses can ensure that they're meeting regulatory requirements and protecting themselves from potential vulnerabilities in the crypto space.
According to a recent report by Chainalysis, total transaction volume grew to $15.8 trillion in 2021, up 567% from 2020's totals, highlighting the significant role that digital assets are playing in global finance. As more businesses and individuals turn to cryptocurrency, it's vital to ensure that proper compliance and risk management measures are in place to safeguard against financial crimes like money laundering and fraud.
At AcuityTec, we're committed to helping businesses navigate the complexities of the cryptocurrency landscape with confidence. Contact us today to learn more about our KYC, Compliance, and Risk Management solutions and how we can help you stay ahead of the curve in this rapidly evolving industry.
Why is Anti-money Laundering Important for Crypto Exchanges?
As countries worldwide continue to adopt cryptocurrencies, firms need to keep up with anti-money laundering compliance. For years authorities have been fighting against AML risks associated with crypto, but now several approaches are being taken in different areas such as Switzerland and Japan.
There’s a global call for regulations as governments begin to regulate cryptocurrencies. The Financial Action Task Force (FATF) announced they’d release international Anti-Money Laundering standards in 2019.
FATF issued a revised set of guidelines that brought cryptocurrencies into its purview. This was an international agreement, and many other countries across Europe have since adopted these regulations for Anti-Money Laundering purposes – including Great Britain!
These developments show positive momentum in regulating the new industry; however, we can expect more progressions moving forward where certain aspects related to AML will become clearer over time, such as VASPs registration, etc.
In the United States, FinCEN has had a regulatory framework for cryptocurrencies in place since 2018. In 2019 they issued new guidance to bring these virtual currencies under their remit as well.
The fact is most financial institutions can no longer claim ignorance or hide even if they are not involved directly. By banking digital assets, chances are they will be significantly impacted directly or indirectly by customers who adopt cryptocurrencies. For these reasons, AcuityTec is committed to move and grow with these changes offering products and services that will support the merchant’s fight against Anti-Money Laundering.
Changing Regulation for VASP and FIs
Regulators around the world are grappling with cryptocurrencies. In America, FinCEN – a bureau regulating cryptocurrency since 2017 – released amended guidance that brought crypto under their remit as endorsed by FATF (Financial Action Task Force).
Europe is another jurisdiction where AML regulations include KYC/AMLA requirements for VASPs who wish to provide services related to these new technologies. As more and more regulators are including cryptocurrencies within their AML financial services regulation, it will become harder for criminals who want to hide in anonymity to find ways around these rules.
Tracing Cryptocurrency
Cryptocurrency has offered the world a more decentralized, secure, and reliable way to move money. It has been a popular way to make income anonymously. However, every cryptocurrency coin on the blockchain ledger can be tracked without any room for anonymity or concealment. Today, there are software vendors that have designed tools used for tracking and investigating cryptocurrencies.
Because of its anonymity, holders must convert their currency into fiat currencies or vice versa for use; this leaves them vulnerable and traceable by law enforcement agencies while trying to withdraw from exchanges that do KYC/CDD on customers.
Many regulated platforms offer AML programs; this requires gathering customer identification data through established procedures so appropriate action can be taken when necessary.
As a cryptocurrency exchange or wallet provider, you want to ensure that your customers are who they say they are. But what happens when law enforcement needs more than just their name and address?
The answer: KYC information for all customer transactions in compliance with anti-money laundering (AML) laws was passed by governments worldwide, including those in North America. This was designed to provide access to authorities any time through established procedures!
There is increasing use of this software by government agencies, law enforcement, and financial institutions with a common goal to track, trace and assess cryptocurrencies. The software traces cryptocurrency and allows VASPS or FI’s to understand which other specialists they are dealing with due to AML compliance.
Most of these software vendors have teamed up with screening vendors and traditional monitoring to create more room for existing AML processes and systems.
Conclusion
Let's face it: Cryptocurrencies are not perfect. One of the most significant drawbacks is that they're traceable, with public information available to everyone on how much money was sent where and when it happened in real-time, even if the end-user isn't necessarily identifiable by name or picture right away.
This can make it challenging for financial institutions (FIs) to navigate the cryptocurrency market, as it operates outside the traditional framework of Anti-Money Laundering (AML). Several risks, including cybercrime, can't be ignored, even though some countries have improved over time.
But that doesn't mean that FIs should ignore cryptocurrencies altogether. Instead, they need to learn more about them, so they know how best to approach regulating or not regulating digital assets within a financial system.
At AcuityTec, we understand the importance of compliance and risk management in the cryptocurrency landscape. That's why we offer comprehensive coverage of global AML risk data sources, including sanction lists from around the world, law enforcement lists, and governing regulatory bodies. Our AML Watchlist Services help merchants comply with domestic and international Anti-Money Laundering (AML), Counter Terrorist Finance (CTF), and sanctions enforcement regulations.
With our AML Package and advanced crypto analysis solution, you'll have instant access to all the necessary lists to facilitate business decision-making processes and regulatory compliance efforts. By partnering with AcuityTec, you can be confident that your business is protected from financial crimes like money laundering and fraud, even in the complex world of cryptocurrency.
Get started and contact us to book a demo today.