Earlier this year, the team at Elliptic, which works to assist with categorizing financial crime typologies while protecting legitimate crypto-asset users from illicit activities, had explained how proper and effective compliance can prevent (potential) money laundering activities using Bitcoin (BTC) or other digital currencies.
Elliptic had pointed out that crypto-asset transactions and related business processes are now being regulated in many jurisdictions. But the company explained that there are “always methods for criminal or terrorist organizations to launder money.” Non-compliant virtual currency exchanges, crypto ATMs, so-called “privacy” coins, and gaming currency are a few examples of how illicit funds may be converted into “clean” cash, Elliptic had noted in a blog post.
The company also mentioned that the “accessibility” and “universality” of Bitcoin, or any other virtual currency, is what “lends itself to criminal use.” Illicit fiat currency may easily be transferred to cryptocurrencies and then “bounced around” several different digital wallets. This makes it increasingly difficult for its source to be determined, Elliptic explained. That’s why legitimate crypto investors or traders must be careful when conducting transactions, because they could come in contact with funds obtained from illegal sources, Elliptic noted.
The Elliptic team added:
“The threats that come from interacting with criminal entities or illicit funds on the blockchain are varied. There’s the potential of being the target of fraud or finding yourself incidentally providing funds to criminal organizations that help to further hide their dirty money and its origin. Similarly, if an issue like this is made public, there’s a greater risk of reputational damage.”
Regulators across the globe have now become more aware and better equipped to deal with bad actors who may be orchestrating (or planning to) sophisticated financial crimes via the Internet.
As reported recently, South Korean authorities are planning to impose heavy fines on businesses violating crypto regulations.
As mentioned in an update shared with CI, about a year after passing one of the world’s first comprehensive crypto laws, South Korea has reaffirmed its commitment to stamping out financial terrorism and money laundering.
The update also noted that Korean regulators would impose “harsh fines of up to 100 million won ($88 million) for failing to retain details on suspicious transactions.” Because of all these new requirements, cryptocurrency-focused firms are finding themselves inundated with the substantial costs related to implementing compliance measures or protocols.
Jeff Kang, Korea Country Manager at CoolBitX, an international blockchain security company, and creators of Sygna Bridge, the “market-ready” FATF-Travel Rule solution, has noted:
“With increased oversight of South Korea’s FSC on data collection and identity verification for cryptocurrency transactions, it is increasingly necessary for Virtual Asset Service Providers (VASPs) in Korea to build on their compliance efforts in order to prove their legitimacy and ability to meet local regulatory requirements.”
“While the implementation time and cost of compliance solutions might bog down smaller to medium-sized VASPs, the heavy fines imposed by the FSC for failing to report suspicious transactions and flag suspect accounts will be an even heavier cost to bear, essentially narrowing their operating margins. The reputational costs incurred for non-compliance could also result in the loss of trust from consumers and regulators, as we have seen across the global industry.”
“As the South Korea authorities step up their regulatory efforts this year, while the FATF approaches its second 12-month review on the global crypto industry, the industry can look forward to continuing on its growth trajectory, as institutional and mainstream adoption of cryptocurrencies ramp up in the year ahead.”
As explained in the note shared with CI, Sygna Bridge assists internatonal VASPs—including those in South Korea— with adhering to the FATF Recommendation 16’s “Travel Rule” guidance.
Sygna has released its Wallet Address Filter API—a service that “distinguishes between custodial and private wallet addresses, with the developing need from regulators to identify and flag suspicious transactions to private wallets.”