Q3 2019 Cryptocurrency Anti-Money Laundering Report Findings

FACTS

  • Only 32% of 120 Top exchanges trade privacy coins.

  • 63% of Top 120 that trade privacy coins (32%) have WEAK/POROUS KYC

  • 67% of the Top 120 exchanges that do not trade privacy coins also have WEAK/Porous KYC

  • Coinbase and OKEx have begun delisting privacy coins in 2019.

  • Total cryptocurrency-related frauds and thefts stands at US$4.4 billion for 2019.

  • The first five Google search results for “bitcoin QR generator” led to scam websites.

  • ZenGo’s researchers calculate that some $20,000 has recently been lost to QR code scams



After two years of large, high-profile hacks in exchange and exit scams, Q3 2019 saw a significant reduction in previous quarters ' total cryptocurrency crimes. In fact, in two years Q3 experienced the lowest quarterly thefts and scams.


Greater awareness of the traceability of public blockchain transactions and de-anonymization technologies has led to the development of privacy coins to satisfy the requirement of some users to protect anonymity.


According to the US Bank Secrecy ACT (BSA) rule [31 CFR 103.33(g)], for funds transfers above a USD 3,000 threshold financial institutions are required to share sender and receiver information. Nonetheless, most cryptocurrency exchanges, banks and financial institutions have not understood that the BSA funds Travel Rule even extend to digital assets


FATF guidance may have caused privacy coin valuations

risked towards a major hit


"Since the release of the FATF guidance in June 2019 and the accompanying loss of privacy coin support across several exchanges, Monero, Litecoin, Dash and Zcash have all lost between 50%-60% of their market value while the price of bitcoin has remained relatively stable in comparison."

While the privacy coins have many cases of use for people with legitimate anonymity and confidentiality concerns, they can also provide payment rails to facilitate fraud, tax evasion, money laundering, terrorist financing, and cyber extortion.


Terms to define descriptions


Weak – These exchanges allowed CipherTrace researchers to withdraw at least .25 BTC daily with very little to no KYC.

Porous – These exchanges require some sort of ID verification process.

■ Strong – These exchanges require a very strenuous KYC process, which required several steps to complete before the researchers were able to make a deposit or withdrawal. They not only require an ID verification process but also proof of address. Some require a phone call or video chat to complete the KYC process.



KEEP IN MIND:

  • New Malware "Masad Stealer" swaps out crypto wallet addresses once typed

  • Ryuk Ransomware globally targets computers and networks via cyberthreats

  • Recent reports of the death of privacy coins have been greatly exaggerated



Preventive Measures

UK’s National Cyber Security Centre (NCSC) suggests due diligence, outlined as follows:


  1. Keeping backups of important files

  2. Protecting devices and networks by keeping software up to date

  3. Whitelisting applications

  4. Installing antivirus software

  5. Using URI reputation services

  6. Employing multi-factor authentication to reduce the impact of password compromises



To what extent has legalities intervened?



SEC Halts Telegram’s $1.7 Billion Unregistered Digital Token Offering

Block.one to Pay $24M Penalty for Unregistered ICO

Kik Sold to Media Lab

Two Suspects in EtherDelta Hack Indicted by U.S. Authorities

SEC Sues Cryptocurrency Startup ICOBox for Selling $14.6M Worth of Unregistered Tokens



Mysterious Exit scams

QuadrigaCX (US$192 million)

PlusToken (US$2.9 billion)

Bitfinex misappropriation (US$851 million)


What are the effects globally?


  • Japan—Crypto Donations in Elections Are Legal

  • UK—FCA Provides Clarity on Current Crypto-assets Regulation

  • South Korea—Court Orders Exchange to Cover User’s Stolen Cryptocurrency

  • Venezuela Wants Central Bank to Hold BTC and ETH in Reserves, Considers Moving its Bitcoin and Ethereum Holdings

  • Maduro: Citizens Can Soon Use Cryptocurrencies as a “Method for Free National And  International Payments"

  • North Korea Hacked $2 Billion from Banks and Cryptocurrency Exchanges to Fund WMD Production

  • Iran Crypto Developers Launch Platform to Bypass Sanctions for Flood Victim Aid

  • Iran—Crypto Mining Now Legal, but trading is illegal


In closing, blockchain monitoring is vital for compliance when it comes to higher-risk transactions such as those involving privacy coins.

To have proper evaluation, it may be healthier to determine not just the customer,

but also the details of the customer's customer to appease KYC efforts.




Glossary:

  1. Travel Rule Information Sharing Architecture (TRISA)

  2. Financial Action Task Force (FATF)

  3. US Treasury Department’s Office of Foreign Asset Control (OFAC)

  4. Specially Designated Nationals and Blocked Persons (SDN)

  5. Financial Crimes Enforcement Network (FinCEN)



I appeal to your journalistic efforts to please cite your sources.








Sources:

https://ciphertrace.com/q3-2019-cryptocurrency-anti-money-laundering-report/

https://www.facebook.com/pg/CryptoCoinFemme/

https://ciphertrace.com/cryptocurrency-analysis-combats-the-opioid-crisis/

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