Ever since its inception, Bitcoin has faced major opposition from the traditional financial institutions. However, the flagship token has managed to open the doors for other cryptos to feature in the banking institutions without the banks even noticing that it is happening. According to CipherTrace Blockchain intelligence firm, large banks might be processing a staggering $2 billion in unnoticed crypto-related transfers annually.
According to a December 16 press release, CipherTrace alleges that its research unit has discovered that all the top 10 commercial banks in the United States have unregistered crypto businesses that use their payment networks to process funds. The unregistered cryptocurrency money service businesses (MSBs) comprise entities like crypto exchanges as documented by the research.
While both the Financial Action Task Force (FATF) and U.S. Bank Secrecy Act funds Travel Rules need banks to identify the MSBs using their networks by law, CipherTrace alleges that most are ill-equipped to adequately identify crypto exchanges together with other virtual asset service providers (IDPs) as MSBs.
According to the revised FATF and BSA guidance, it is expected to make identification and compliance more critical. The guidance will soon come into effect for the G20 nations. During the November 2019 San Francisco CipherTrace Cryptocurrency Travel Rule Information Sharing Architecture Conference, Carole House of the U.S. Treasury’s Financial Action Task Force (FinCEN) raised various concerns.
FinCEN raised concerns about whether banks are ready for the imminent statutory revisions. Carole said:
“It would be interesting to know how many financial institutions operating in this space can identify a [crypto-business] recipient as a financial institution based on its wallet reference number, or other information that it currently has available to it.”
CipherTrace has unleashed a new Crypto Risk Intelligence product aiming to resolve the Anti-Money Laundering (AML) compliance challenge this poses for financial institutions. The new product is designed to assist banks in minimizing crypto-related risks on their payment rails.
Currently, the company works to monitor more than 500 crypto businesses where it compiles risk and compliance scores. It also generates AML filtering data that can be used by banks together with other financial entities. The new intelligence tool allegedly also assists the banks to meet this hiccup with a focus on four key areas:
- Offering access to CipherTrace’s risk scores for crypto-related businesses.
- Avoiding dark web risks and discovering illegal financial products or even laundered funds supported through crypto transactions.
- Discovering any unknown risks between VASPs and bank payment ecosystems like ACH and SWIFT.
- Identifying all unregistered MSBS and peer-to-peer networks that rely on bank services.
Regulations for reshaping the financial industry
According to previous reports, FinCEN implemented its first enforcement action against an unregistered peer-to-peer crypto exchanger for knowingly violating money transmission laws in April 2019.
FinCEN’s director said this December that the crypto sector has started to fall in line with the agency’s regulations on money transmission services. He also noted that FinCEN’s May 2019 guidance is now having a recognizable and positive impact.
CipherTrace has recently stated that the new FATF regulations will reshape and determine how crypto businesses are needed to operate. The businesses must track their customers’ transactions and where these customers are sending their funds.