Banks Have Been Unknowingly Enabling Crypto Transactions, CipherTrace Reveals

While cryptocurrencies and blockchain technology have been able to penetrate just about every part of daily human life, their integration with the traditional financial space has been a bit of a challenge. However, CipherTrace is reporting that it’s possible major banks have been doing some business with crypto while being blissfully ignorant. 

Major Banks Unknowingly Process Billions in Crypto Business, Says CipherTrace

— Airgeadais (@Airgeadais) December 17, 2019

In a press release, the blockchain analysis and intelligence firm confirmed that its research unit had gotten proof that each of the top 10 commercial banks in the country has been unknowingly acting as payment portals for several unregistered crypto businesses, who use the banks’ payment networks as fund-processing channels. 

Anonymity Principle Puts Banks at a Disadvantage 

Currently, the Financial Action Task Force (FATF) and the Bank Secrecy Act have rules which require commercial banks to identify any of the money service businesses which use their networks to process funds. However, given that the crypto businesses which fit this description, (such as wallet providers, exchanges, and custody providers, to name a few) are bound by the tenet of anonymity, the ability of banks to ensure compliance when serving these companies, albeit unknowingly, will be significantly hampered.  

"The death of privacy coins has been greatly exaggerated. FATF and FinCEN are not advocating an outright ban on privacy coins as long as controls are in place," says @ciphertrace in their recent report on anti-money laundering. https://t.co/vLs6VfQvfV#Zcash $ZEC #privacy

— Electric Coin Co. (@ElectricCoinCo) December 6, 2019

However, a lot of this could change beginning from next year. As stated earlier, cryptocurrencies have been able to insert themselves into more facets of daily life, and the government has gradually begun to identify them as a part of the financial system. However, for them to get complete approval, they will need to provide some degree of transparency. This will include money service businesses that operate in the crypto space as well. 

The FATF understands this, and it has put out requirements for the regulation of the cryptocurrency space. Back in July, a draft from the Anti-Money Laundering (AML) regulator proposed requirements that crypto exchanges and other asset custodians should be made to share information about their customers. 

Per the document, countries should ensure that when crypto businesses send money, they “… obtain and hold required and accurate originator [sender] information and required beneficiary [recipient] information and submit the information to beneficiary institutions … if any.”

Also, countries are tasked with ensuring that beneficiary institutions can get all required information about the originator of funds transferred, and the beneficiaries of those funds. 

CipherTrace to the Rescue 

CipherTrace is also stepping into the ring, as the company has launched a new Crypto Risk Intelligence product that will help banks reduce the level of crypto-associated risks on their payment channels. The company is one of the most recognized authorities on AML and security enforcement in the crypto space, and with the new tool, banks will be able to take advantage of its infrastructure to generate AML filtering data.

Amongst many other things, the tool will provide banks with insights into the unregistered money service businesses that use their payment networks, while also countering Dark Web-associated risks and detecting the transfer of illicit funds through their channels.