Last month, Bitfinex, a cryptocurrency exchange owned and operated by iFinex Inc stole the spotlight of all newspapers after the United States Department of Justice made the biggest financial seizure in its history: $3.6 billion worth of Bitcoin. Bitfinex stated in August 2016 that it had a security compromise. Approximately 2,000 unauthorized transactions were routed from users’ separate wallets to a single wallet. 119,754 Bitcoins in total were siphoned into that wallet. The majority of the money in the wallet rested undisturbed for years. Investigators were able to trace the transactions to persons in the real world as the currency began to migrate out of the wallet in attempts to launder the proceeds through gift cards and various online services.
If crypto is at a crime scene, money laundering is likely. Criminals use the blockchain’s anonymity to launder proceeds from both off-chain and on-chain activities, obscuring the provenance of illicit payments and converting them to cash. Since crypto popularity has broken new records in recent years and Bitcoin and other coins emerged as distinguished features of the global financial system, the risk of money laundering and the attention of the authorities around the globe evolved.
Regulators within the US and alternative jurisdictions assert authority over cryptocurrency markets to underscore a backdrop of legal and regulatory uncertainty. From frequently tightening the regulatory grip on financial institutions and virtual asset service provider (VASPs) in the US to completely banning crypto in formerly very ‘crypto-friend nations like India and China, the world has been acknowledging this growth and the risks that may come with it in more perceptible approaches.
Laundering money through crypto isn’t the only provocation to which regulators are reacting, though. The danger of unproven business models, the possibility for misuse and fraud, the absence of a common knowledge of Distributed Ledger Technology (DLT) and how cryptocurrencies are sold and exchanged over it, and the concomitant uncertainty of an undefined legal environment are existing challenges for regulated financial institutions. Having said that, the implications of crypto have not discouraged over 15,000 businesses worldwide from accepting Bitcoin and around 2,300 in the US until the year 2020.
Cryptocurrencies are naturally volatile and the financial system loves stability. Leaders of banks, crypto exchanges, online marketplaces, payment processors and more, need tools to identify if a risky transaction is appropriate to accept or report when the transaction creates a connection that raises red flags. A dependable tool for meeting regulatory standards while reducing the risk exposure to money laundering and other illegal activities is key to fulfilling a critical business objective: compliance.
Financial institutions and crypto businesses use powerful compliance software, like BitRank Verified®, as the gold standard for evaluating and validating crypto transactions. We bundle peace of mind with the crypto services the enterprises offer to their clients, and create a safe and compliant environment to avoid regulators’ costly audits.
How does BitRank Verified® Work?
BitRank Verified® uses AI that processes billions of data points to assess crypto addresses and transactions in real-time. It generates risk scores and reports that are detailed and purpose-built for ease of use for internal and external financial professionals. Similar to credit scores, higher risk profiles are given a low score, while lower risk profiles receive a high score for easy monitoring. In addition, BitRank Verified®also generates insightful reports that assist decision-making and make the compliance and reporting process a smoother one altogether.
Learn how BitRank Verified® can help you at BlockchainGroup.io
Written By: Omar Marzouk
Writer, Content marketing at Blockchain Group
