In a press release introducing new software that helps banks detect cryptocurrency risk threats, cryptoforensics firm CipherTrace claims, “every one of the top 10 U.S. retail banks currently have unregistered cryptocurrency MSBs—including crypto exchanges—transmitting funds on their payment networks.”
The claim is remarkable because banks are known to have denied service to cryptocurrency firms due to possible money-laundering and terrorist finance risks.
Cryptocurrencies can be sent across borders via the Internet and sometimes have features that allow users to obscure their identities.
Cryptocurrencies have been used by intelligence agencies to fund subversion. They are also widely used in Dark Net criminal marketplaces.
CipherTrace and other cryptoforensics firms make it their business to help crypto companies and corresponding firms bring operations up to snuff when it comes to the KYC-AML standards mainstream finance is already beholden to.
The amounts of crypto-related funds being processed by banks are substantial, CipherTrace claims:
“Analysis revealed that a typical large bank is processing as much as $2 billion a year in undetected cryptocurrency-related transfers, posing a challenge to Anti-Money Laundering compliance.”
These volumes are, “especially significant since compliance with both the U.S. Bank Secrecy Act (BSA) and Financial Action Task Force (FATF) funds Travel Rules requires financial institutions to clearly identify the MSBs they facilitate.”
Banks are using, “a number of advanced tools and methods for risk management, Anti-Money Laundering and Counter-Terrorist Financing of conventional payments, but they are left exposed when it comes to virtual currencies that use traditional payment systems such as SWIFT and the ACH networks.”
All told:
“Most banks are ill-equipped to identify and monitor cryptocurrency exchanges and other virtual asset service providers (VASPs) as MSBs, which is required under the BSA and new FATF guidance that will soon become law in G20 nations.”
CipherTrace says it, “monitors over 500 cryptocurrency companies and provides risk scores, compliance scores and AML filtering data for financial institutions.”
The company also says it can help banks, “Identify unregistered MSBs & P2P schemes using bank accounts.”