As financial technologies have evolved rapidly, so too have the ways used by fraudsters. The evolution of the whole cryptocurrency sphere and investment solutions have urged scammers and criminal groups to launder money using cryptocurrencies. They transfer large sums of virtual currencies quickly and anonymously. Meanwhile, financial authorities play an endless game: they solve one issue, and at the same time, another one appears.
For some financial authorities, virtual currencies are just another one of those loopholes that let criminals hide huge sums and legitimize them. As the segment gets more mature, the financial participants demand more control and more significant fines for criminal groups. Governments are actively seeking to conduct research and track transactions in order to show if altcoins, as well as BTC, can be used in fraudulent activities.
The latest research showed that approximately 270 blockchain addresses are involved in half of the cryptocurrency-related criminal cases. Despite the relatively low rates of illicit actions, including virtual currencies, noted during last week, governments around the world are planning to tighten regulatory hurdles.
We discussed blockchain security last week, and this time we will check out all the details and see how to avoid money laundering. What is AML, and why is it so important when using cryptocurrencies? Let’s find it out.
What is money laundering?
It can be determined as the way to make illegally gained funds look legitimate. Money laundering happens when the location, source, ownership, or control of money are fake.
How do companies prevent it?
A quick boost of the financial industry led to an increased demand for a regulatory framework, especially in fighting financial crimes. It means that even a program implemented in crypto exchanges should have the options to minimize the risk of scams.
Combating money laundering and terrorist financing contributes to global security, the integrity of the industry and sustainable growth. Rules to avoid money laundering and the funding of terrorism are utilized to keep the crypto segment away from being misused for these purposes.
The most popular thing is an anti-money laundering solution, also known as AML. It is a group of policies and procedures implemented by financial companies and authorities to identify and counter illegal actions carried out by fraudsters. These Illicit actions, including illicit money flows and terrorism financing, occur outside of the normal economic and financial spheres.
A complete AML compliance program includes a KYC system as a first step to determine a customer’s identity and watch their transactions. KYC is the most crucial level in an institution’s AML policy. Strong AML compliance policies allow firms to find problems quickly and remove them in a flash.
The Financial Action Task Force (FATF) brought global recognition to the issue when it formed to set international norms. The UK also established a precedent with a push to strengthen the protection using a new watchdog body.
AML and KYC solutions and their future
We should admit that scammers are a step ahead. They are aware of problems accessible in the regulatory framework and are exploiting its loopholes and inefficiency, causing as much as $2 trillion to be laundered all over the world every year.
Criminals may open bank accounts with deceiving information. This gives an opportunity to be onboarded as low risk – with the hope that their activity will not be controlled. Alternatively, they may recruit money mules, taking the chance that financial firms will not notice a change in transactions. Purchasing old or distressed businesses that have a verified banking history is another well-spread fraudulent method.
Some of the most reputable cryptocurrency websites suffered from criminals. It is crucial to note that impeccable personal accounts were involved.
The future of the whole industry can be shaped by tools such as automation, the modernization of payment solutions, the increasing growth and availability of data, and the need to empower investigators to make more accurate decisions in a flash. Organizations involved in digital assets have to ensure that they have the right system to keep pace and get ahead of evolving fraud and financial crime.
It is not a secret that a regulation framework requires significant administrative effort and the analysis of large amounts of transaction data. In order to avoid human error and potential compliance penalties, many businesses will automate AML systems with a set of smart technology options. Automation not only adds speed, accuracy, and efficiency to AML. It also helps firms adapt to new rules and continue to deliver the highest standards of compliance.
Rounding up all thoughts on anti-money laundering measures, we have covered the most critical questions about combating money fraud. This blog post aims to guide you through the fundamentals and show the use cases of AML.
We hope that our article will be helpful for you. By now, you know about illicit activities and popular solutions to eliminate them. So, you should keep in mind everything that we have mentioned above.
That is all for now. Stay tuned for more great content!