Banks may be processing up to $2 billion per year in undetected crypto transfers

on Dec 17, 2019
Updated: Mar 11, 2020
  • Recent reports indicate that the US banks are processing billions for crypto-related businesses without being aware of it.
  • The banks are allegedly underequipped to identify unregistered crypto businesses.
  • A company called CipherTrace is currently developing a product based on patterns noticed in registered crypto businesses, in order to help the bank recognize the same patterns in transactions made by unregistered ones.

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According to a blockchain intelligence company known as CipherTrace, it might be possible that billions of dollars related to crypto transfers are unknowingly being processed by banks each year. CipherTrace claims that this includes all top 10 largest commercial banks in the US, which have processed payments for unregistered cryptocurrency businesses.

As some may be aware, the United States’ Financial Action Task Force (FATF) and the Bank Secrecy Act require banks to identify any unregistered money service business that is using their networks. However, the problem lies in the fact that banks may be too badly equipped to identify crypto businesses such as exchanges.

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CipherTrace also noted that the FATF and BSA guidance will soon be revised and that the move will make identification of unregistered crypto business significantly more important. However, not everyone believes that the banks are ready for the forthcoming statutory revisions.

CipherTrace creating a product for identifying crypto businesses

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Recently, during the Cryptocurrency Travel Rule Information Sharing Architecture Conference, based in San Francisco, the US Treasury’s Financial Action Task Force’s Carole House voiced concerns about this very issue. According to her, it would be interesting to see how many financial institutions are even capable of identifying crypto business recipients.

However, the issue is more serious than it might seem, as the inability to identify crypto businesses poses a challenge for AML compliance for financial institutions.  This is why CipherTrace came up with a new Crypto Risk Intelligence product, which should help banks deal with the problem,

The company is supposedly already working on monitoring more than 500 cryptocurrency-related businesses, such as exchanges. Meanwhile, it is compiling risk scores, as well as compliance scores. In addition, it is using the data to create AML filters that the banks could use to identify similar businesses.

In addition, it was reported recently that FinCEN took its first enforcement action against a crypto exchange that failed to register. FinCEN charged the exchange for violating money transfer laws earlier this year, in April.


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