Banks Exposed to Compliance Issues Due to Crypto Fraud; CipherTrace

Banks Exposed to Compliance Issues Due to Crypto Fraud; CipherTrace

CipherTrace, a cryptocurrency intelligence firm, report revealed 533 percent increase in the value of cryptocurrency fraud, which include Ponzi style pyramid schemes, and exit scams. Such increase means that the traditional banking system is potentially exposed to danger under the new Financial Action Task Force (FATF) regulations as misappropriated funds are laundered.

In order to identify and report suspicious transactions, track the availability of information, take freezing measures and prohibit transactions with designated individuals and entities, the Travel Rule requires virtual currency businesses to obtain, keep and transmit appropriate originator and beneficiary information.

The law would apply to the FATF’s 37 members, including the US, China, Japan, South Korea and many European countries. It is scheduled to be introduced in June 2020.

Banks Exposed to Compliance Issues

Following a massive 160 percent year-on-year rise in losses suffered by cryptocurrency consumers, exchanges, and investors — from $1.74 billion in 2018 to over $4.5 billion in 2019 — it’s not just the crypto-industry that stands to lose as a direct result of increased crime.

According to the report, top 10 U.S. bank unknowingly facilitates around $2 billion in illegal cryptocurrency transactions every year. While banks paid a total of more than $6.2 billion in Anti Money Laundering (AML) fines in 2019, that number could increase with the introduction of the travel rule.

 “As crypto-assets become increasingly entangled in traditional financial services, AML and CTF [Counter-Terror Financing] compliance risks are on the rise,” said Stephen Ryan, COO of CipherTrace. “Virtual assets are now pervasive in bank accounts and payment networks, and banks must find ways to deal with the risks. Effectively mitigating cryptocurrency risks requires equipping compliance officers with the best tools and intelligence to gain visibility into this new asset class.”

CipherTrace CEO David Jevans continued:

“Like them or not, banks have a lot more virtual assets lurking in their accounts and payment networks than most in the industry had previously thought. Banks need new capabilities to ferret out illicit MSBs [Money Service Businesses], terrorist financing, and other major sources of risk.”

In a related context, President Donald Trump’s 2021 budget proposal amounts of $4.8 trillion hopes to solidify the Secret Service with the Treasury Department to enhance the investigations into cyber and financial crime.

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Abdulhay Mahmoud 414 Articles
Abdulhay Mahmoud is a creative writer with over 15 years of experience in journalism, translation, and investor relations. He has B.A in English and Literature from a reputable University. He recently became a contributor at to fulfill his thirst in reporting digital coins and blockchain-related news, an interest was built over the years.