Dean

Bitcoin was created as a peer-to-peer monetary system that returns control of assets to its owners. But along with control, cryptocurrency holders faced a higher level of responsibility both for the safety of their funds and for checking the purity of their origin.

Money laundering is the process that allows illicitly earned funds to return to the mainstream of a society’s money. Typically, the process consists of three stages: placement, layering, and integration. The proceeds of crime are deposited in a bank account (placement), mixed with money from legitimate sources (layering), and gradually integrated back into the main cash flow. AML practices by banks and other financial institutions are designed to prevent money laundering at all levels of the process. But what about cryptocurrencies, which allow us to completely exclude intermediaries such as banks and other financial institutions from the process of transferring assets?

Conventional money laundering prevention measures, which usually include verifying the identity of a financial institution’s customer and monitoring account transactions, only work if transactions are conducted through a centralized service such as a cryptocurrency exchange or wallet.

AMLBot released an Anti Money Laundering (AML) Audit Checklist earlier this January, revealing what institutions and investors can do to meet regulatory requirements through AML Compliance. The AML compliance policy comprises all the steps a firm takes to reduce getting scammed and avoid personal data leaks. It includes functions like monitoring, reporting, regulations and user processing policies. AML Compliance is a set of standards designed to prove that a particular financial company is a reliable financial enterprise that is safe for other clients and investors.

Blockchain is an open public decentralized ledger, and this property of the blockchain can help identify financial crimes and related transactions. The automated service AMLbot was created specifically to check cryptocurrency transactions for possible links to financial crimes. AMLBot checks crypto wallets to identify the source of funds and categorize them into various categories. It facilitates the online scoring of crypto addresses created by a team of financial technology specialists in line with global anti money laundering (AML) requirements. Their algorithm analyzes more than 10,000 open sources and 2,500 plus scam addresses in real time to give results in just above 30 seconds.

The service is available to any crypto investor. Verification is carried out through the AMLBot website and does not require downloading and installing additional software. It is enough for an investor to specify the address of the wallet that requires verification, and the service will automatically collect information about transactions at this address and compare them with the databases of addresses linked to financial fraud.

Currently, as institutional money floods the crypto market and mass adoption of cryptocurrencies is growing all around the world, global regulators will definitely pay more attention to cryptocurrencies and their compliance with AML requirements. Methods of combating money laundering and the financing of terrorism using cryptocurrencies must change with the development of technology, said candidate for the post of US Treasury Secretary Janet Yellen at a Senate hearing.

“Cryptocurrencies are a particular concern. I think many are used, at least in a transactions sense, mainly for illicit financing and I think we really need to examine ways in which we can curtail their use and make sure that anti-money laundering doesn’t occur through those channels,” Yellen said.

The crypto industry is facing a tighter AML legislation, a process that has already begun in the European Union with the approval of amendments to the 5th AML Directive, obliging crypto services to identify users of cryptocurrencies. The absence of a regulated AML compliance policy can result in significant regulatory penalties imposed on firms, which can cost the firm dearly in financial resources and even more in terms of reputation and high risk of customer losses.

Creation of various AML services focused on cryptocurrencies and taking into account the nuances of blockchain functioning, will help reduce the risks of companies working in this area, and encourage the world regulators and financial system to embrace cryptocurrencies with greater confidence.