A timeline on increasing AML compliance obligations for the crypto community

Why AML compliance is more important than ever in 2019

By Vanessa Malone

Money laundering has reached a new level of sophistication in today’s digital age, with criminals finding new ways to utilize the internet and conceal the origin of illegally obtained funds every day.

With the blockchain came a new anti-money laundering (AML) hurdle — the ability to make transactions to anyone in the world anonymously. And with growing popularity for trading cryptocurrencies such as Bitcoin, Ether, and other altcoins, it was really only a matter of time before the authorities stepped in to organize the chaos. What is becoming increasingly more transparent is that it’s time for the crypto community to begin taking steps to efficiently and effectively combat money laundering and terrorism financing.

Here is a timeline of some of the significant events in the past year that show the increasing AML compliance demands for the broader crypto community.

• July 18, 2018- President Trump signed an executive order establishing a new task force on Market Integrity and Consumer Fraud looking for financial crimes such as digital currency fraud, money laundering scams, and other digitally enabled financial crimes. It is led by the Justice Department and includes the SEC, the Federal Trade Commission, and the Consumer Financial Protection Bureau.
• September 18, 2019- The New York State Office of the Attorney General’s (the “OAG”) released the Virtual Markets Integrity Initiative Report. The report included the findings of a 6-month long investigation on several crypto exchanges and inquired about trading operations, fees, policies and procedures, and the use of risk controls. It found that cryptocurrency exchanges, as they stood, were vulnerable to market manipulation and lacked standards on consumer protections.
• December 20, 2018- Both FINRA and the SEC’s Office of Compliance Inspections and Examinations (OCIE) labeled AML compliance as a high priority for 2019, with the OCIE stringently examining AML compliance programs in place to see if they’re up to par, including entities that deal with blockchain technology or digital assets.
• June 21, 2019- Globally, recent additions were made by the Financial Action Task Force (FATF), an inter-governmental body established in 1989 to bring about international legislative and regulatory reform to combat money laundering and terrorism financing. Their amended AML Recommendations required all VASPS (Virtual Asset Service Providers) to be regulated for AML purposes and to monitor and report suspicious activities to relevant bodies.
• October 11th, 2019- the leaders of the US Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN), and the U.S. Securities and Exchange Commission (SEC) issued a joint statement reminding businesses and persons involved with digital assets of their anti-money laundering (AML) and Financing of Terrorism (CFT) obligations under the Bank Secrecy Act. To read our summary and solutions for the joint statement, read our last blog here.

What does this mean for companies and regulated entities moving forward? Compliance can no longer take the backseat, and it is up to the crypto community to be proactive in their enhancements to any existing AML compliance program or proactive in creating one. The use of AML software in your AML compliance program has reached the point of necessity more than a convenient “check the box” burden.

Horizon offers financial institutions its integrated KYC/AML solutions, KYCware and AMLCop, to both support and maintain these increasing compliance demands without sacrificing user experience. To learn more about our blockchain software solutions, visit https://www.horizon-globex.com.