Safety Best Practices for Crypto Firms

On Apr 28, 2022, Adrienne A. Harris, Superintendent of the New York State Department of Financial Services (DFS), issued new guidance for cryptocurrency firms. Ms. Harris stated “Blockchain analytics tools provide companies with an efficient, data-driven way to conduct customer due diligence, transaction monitoring, and sanctions screening, among other things, which are all critical elements of our virtual currency regulation,”

She said blockchain analytics tools are an essential component of compliance with cryptocurrency regulations. She added that the utilization of these tools is one of the compliance and security best practices adopted by the industry and is expected of every regulated firm.

Cryptocurrency regulation is a controversial subject. Its measures are different from country to country, and state to state inside the United States. This gap brings confusion to crypto firms. Firms count on the guidance of the regulators to see through the fog and learn the best practices for securing customer assets and maintaining compliance.

What is blockchain analytics?

Blockchain analytics is the process of studying the data of a blockchain and transforming it into valuable insight. Blockchain analytics tools are multi-purpose applications of blockchain analytics technology. Crypto industry professionals in Virtual Asset Service Providers (VASPs), Financial Institutions (FIs), Law Enforcement (LE) and more, use this technology to monitor illicit activity, protect crypto assets from money laundering, maintain compliance and leverage the performance of the business altogether.

The growing popularity of blockchain analytics among crypto businesses and government agencies is eminent. Multiple studies reveal that security is the main cause behind the delay and uncertainty of governments and banks toward crypto adoption. QLUE, an investigative blockchain analytics tool, brings clarity to crypto transactions and the security governments and financial institutions need to step into crypto with confidence. 

QLUE benefits from the immutability of blockchain data to provide authentic and accurate analysis for any transaction. It identifies all the accounts (wallets) involved and qualifies the beneficiaries as per their history of transaction to assess any risk involved in the whole operation. 

How Blockchain Analytics help 

The establishment of cryptocurrency as an asset class has made it easier to invest in crypto. Nowadays, governments favor regulating crypto rather than banning it. Although this has helped cryptocurrency be more available to traditional investors, regulations bring those benefits bundled with a number of risks and challenges crypto firms ought to look out for, in order to thrive in the industry.

Below are some of the principal crypto industry best practices picked up from regulatory requirements, guidance and traditional finance procedures – and how blockchain analytics tools contain and solve them.

Perform Due Diligence

On Apr 21, 2022, Anchorage Digital Bank received a cease and desist order from The Office of the Comptroller of the Currency (OCC) due to violations of the Bank Secrecy Act (BSA)/Anti Money Laundering (AML) program elements. The OOC referred specifically to the bank’s commitment toward customer due diligence reports and the monitoring of suspicious activity.

The incident is not the first in the industry and it won’t be last as regulators ramp up oversight on crypto firms. On Mar 3, 2022, the U.S. The Securities and Exchange Commission declared nearly doubling the size of its Crypto Assets and Cyber Unit.

Notably, violations do not result only from not submitting the required reports to regulators, but also the missing of deadlines. Blockchain analytics facilitate the creation of due diligence reports and eliminate any delays.

Investigate Fraud

Using blockchain analytics tools, law enforcement, investigators, lawyers, financial institutions, and firms identify legitimate and illicit transactions and track and trace their movement until case resolution.

Avoid Sanctions

Crypto is global and the possibilities are endless. It is well-known that non-compliance with sanctions requirements can cost crypto firms billions in fines, if not intercept their continuity altogether. Running a cryptocurrency business without a reliable sanction screening program is like walking through a minefield. 

BitRank is a powerful compliance tool specifically designed by Blockchain intelligence Group to monitor transactions and identify the risks associated with them. Compliance officers in Banks and VASPs rely on BitRank to identify suspicious activity and make educated decisions. BitRank supersedes traditional screening tools in that it oversees the status of the counterparty and any other entity in its history of transactions. In addition, BitRank continues to perform health-checks on clients to keep risk profile scores up to date.

Freeze Illegal Currency Deposits

VASPs and authorities can use blockchain analytics tools as revolutionary anti-money laundering approaches and systems to screen crypto wallets and transactions for links to illegal activity. To mitigate the risks of illegal currency, they need the oversight that blockchain analytics tools provide over addresses associated with proceeds of hacks, scams, fraud and ransomware. This aids firms in preventing the laundering of illicit payments through their systems, as well as detecting and reporting such conduct to authorities.

DFS aims for New York to maintain a robust regulatory environment and remain a destination for crypto firms to operate and prosper. In its press release, DFS credited blockchain analytics’ role in achieving this target. 

Discover how your organization can leverage our crypto intelligence ecosystem for crypto asset safety and clarity.