Tag: Aml

Crypto Exchange BKEX Halts Withdrawals Amid Money Laundering Investigation

by Blockchain News

In a surprise announcement on May 29, 2023, BKEX, one of the major cryptocurrency exchanges, has temporarily suspended user withdrawals due to alleged involvement in money laundering activities. The company is currently assisting police in their investigations, taking this step as a precautionary measure to support the law enforcement’s evidence-gathering process.

The exchange has reportedly been cooperative with regulatory agencies involved in the investigation, pledging to do everything within its power to return to normal operations as swiftly and smoothly as possible. BKEX has highlighted its commitment to protecting user rights throughout this ordeal.

In the official statement, the BKEX team emphasized their active cooperation with relevant authorities to resolve the issues at hand. They underscored that their primary concern is to ensure the maximum protection of user rights during this turbulent period.

While no details of the suspected money laundering activities have been provided at this point, this development sends ripples throughout the global crypto market. BKEX is renowned for its customer service and dedication to transparency, and it intends to maintain these standards during this investigation. The platform promises to keep its users updated on the situation and provide support to those who require assistance.

Users of the platform are urged to get in touch with BKEX’s customer service team should they encounter any issues or need help during this period. The team has expressed its gratitude for the users’ understanding and support during this trying time. It reiterated that the platform’s primary goal is to protect the interests of its users and that every effort is being made to restore normal operations.

This incident highlights the increasing need for stringent regulatory measures in the cryptocurrency industry. As digital currency transactions continue to proliferate, the necessity of implementing and enforcing robust anti-money laundering (AML) procedures becomes even more critical.

As the investigation unfolds, further updates from the BKEX team are expected, casting a spotlight on the ever-evolving landscape of cryptocurrency regulation and its implications for users and exchanges alike.

According to Coinranking, BKEX’s 24-hour trading volume averages around $430.27 million. This figure underscores the potential far-reaching implications of the withdrawal suspension on global crypto markets. As the situation develops, the focus will undoubtedly remain on how this investigation impacts both the exchange’s operations and the wider industry.

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Estonia Shuts Down Crypto Firms

by Blockchain News

In recent news, Estonia has strengthened its Anti-Money Laundering laws and almost 400 virtual asset service providers (VASPs) have shut down as a result. The amended laws expanded the defined scope of VASPs and increased licensing fees, capital requirements, and information reporting requirements. Additionally, the laws introduced the Financial Action Task Force Travel Rule. The Estonian Financial Intelligence Unit (FIU) announced that almost 200 domestic crypto service providers voluntarily shut down, and another 189 had their authorizations revoked due to non-compliance.

The FIU’s director, Matis Mäeker, noted that the response from the legislator and the supervision activities have been relevant, given the documents submitted by the service providers that lost their authorizations and their methods of operation and risks involved. The FIU also found several general issues within the companies it shut down, including misleading company information. For instance, some companies had registered board members and company contacts without their knowledge, while others had falsified professional backgrounds on their resumes. Additionally, many companies had copy-pasted identical business plans from each other, which were also found to be lacking any logic or connection with Estonia.

Estonia has made significant efforts to implement strong AML laws, primarily due to the discovery in 2018 that around $235 billion worth of illicit capital had been laundered through the Estonian branch of Denmark megabank Danske Bank. The ongoing war between Russia and Ukraine has also had an impact, as Estonia has pushed to cut off revenues supporting Russia’s war machine and protect international financial systems via strong AML regulation as part of its partnership with the U.S. Estonia is a member of the European Union and will soon have to implement the upcoming Markets in Crypto-Assets (MiCA) laws that are slated to come into effect in early 2025. Under MiCA, crypto firms will be subject to stringent AML and terrorism prevention requirements.

In conclusion, Estonia has taken significant steps to ensure the implementation of robust AML laws. The recent enhancement of AML laws has resulted in the closure of nearly 400 crypto firms in Estonia. The FIU found several issues with the companies it shut down, including misleading company information. As a member of the European Union, Estonia will soon have to implement MiCA laws, which will require crypto firms to comply with stringent AML and terrorism prevention requirements.

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Hong Kong Central Bank Urges Crypto-Friendly Banking

by Blockchain News

The Hong Kong Monetary Authority (HKMA) has issued a circular on April 27th instructing authorized institutions, also known as “AIs,” to provide banking services to cryptocurrency firms while adopting a risk-based approach to Anti-Money Laundering (AML) measures. This circular comes as a significant move towards legitimizing cryptocurrencies in the region and bridging the gap between traditional banking and the rapidly growing digital assets industry.

The HKMA’s directive is part of its broader efforts to regulate the cryptocurrency market in Hong Kong, a region that has been grappling with the lack of clarity surrounding cryptocurrencies and their legal status. This directive requires authorized institutions to assess the risks associated with each corporate customer, including cryptocurrency firms, and implement appropriate measures to mitigate those risks.

This move is a critical step towards the integration of cryptocurrencies into the mainstream financial system in Hong Kong, where digital assets have long struggled to gain legitimacy. Cryptocurrency firms in Hong Kong have often faced significant challenges in accessing banking services, leading to operational difficulties, stifling innovation, and impeding growth. With this new directive, the HKMA aims to ensure that cryptocurrency firms can access necessary banking services, enabling them to operate efficiently and safely within the existing regulatory framework.

The HKMA has been actively working towards regulating the cryptocurrency market in the region, with plans to launch its own central bank digital currency (CBDC) in the coming years. The HKMA’s efforts to regulate the cryptocurrency market, coupled with its CBDC initiative, highlight the region’s increasing interest in the digital assets industry and its potential to transform the traditional financial system.

In conclusion, the HKMA’s directive to authorized institutions to provide banking services to cryptocurrency firms is a significant move towards legitimizing cryptocurrencies in Hong Kong. This directive will not only help bridge the gap between traditional banking and the digital assets industry but will also enable cryptocurrency firms to access necessary banking services, leading to operational efficiencies and growth. With the HKMA’s increasing interest in the digital assets industry, we can expect to see further developments in the coming years, ultimately leading to the integration of cryptocurrencies into the mainstream financial system.

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DeFi Execs Argue KYC as Solution to Combat Money Laundering in the Industry

by Blockchain News

Decentralized finance (DeFi) has experienced tremendous growth in recent years, with its total value locked (TVL) surpassing $100 billion in August 2021. However, the lack of regulation and the prevalence of cyber attacks pose significant challenges for the industry. One of the most pressing issues in DeFi is the laundering of millions of dollars stolen from DeFi platforms into clean money. To combat this, DeFi executives at the World of Web3 (WOW) Summit in Hong Kong have argued that implementing Know Your Customer (KYC) measures can address the problem.

During a panel session titled “Blockchain Security to Smart Compliance: AML & KYC Solutions in DeFi,” industry leaders endorsed KYC as a solution to tackle Anti-Money Laundering (AML) issues. Dyma Budorin, the CEO of smart contract auditing firm Hacken, warned of the prevalence of tools readily available to hackers to “launder the money.” He described it as the “biggest issue” in the industry, where hackers can easily steal millions of dollars and launder the funds into various wallets, making it difficult to track the source of the funds. Therefore, he believes KYC is about transparency and accountability, and it should be part of the industry.

However, Victor Yim, the head of fintech at Hong Kong’s incubator for entrepreneurship, Cyberport, suggested that KYC alone would not solve all AML problems. He explained that even in traditional finance, where KYC measures are prominent, “there is still money laundering happening every day.” Despite this, Yim believes KYC measures can make a “better tomorrow” for the DeFi industry. He added that it would require a collective effort, including regulators, policy bureau, and other players, to execute successfully. He cited the concept of “anonymous traceable” as an example of a balance between anonymity and compliance, where individuals remain anonymous unless called upon by law enforcement, adding that it will “protect the good people while still getting the bad people.”

Alexander Scheer, the founder of zkMe, emphasized that different mechanisms should be used for different solutions. For example, crypto mixers need to be handled differently from DeFi front-ends and on- and off-ramps. Scheer also touched on regulations, stating that the DeFi industry should proactively take the lead and “front run” regulations before they are imposed by regulators. This proactive approach could help to ensure that regulations do not stifle innovation in the industry.

In conclusion, implementing KYC measures in DeFi could enhance transparency and accountability in the industry, making it more difficult for hackers to launder stolen funds. However, it is crucial to acknowledge that KYC alone is not a panacea for AML issues, and different mechanisms should be used for different solutions. The DeFi industry should collaborate with regulators and other stakeholders to develop effective solutions that balance compliance with innovation, safeguarding the interests of all stakeholders, and preventing bad actors from exploiting the system.

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India Implements AML Standards on Crypto

by Blockchain News

In a move that is not entirely surprising, the Indian government has implemented anti-money laundering (AML) standards on crypto. The Ministry of Finance published a notification in The Gazette of India on March 7, subjecting a range of crypto transactions to the Prevention of Money-Laundering Act (PLMA) 2002. This includes the exchange, transfers, safekeeping, and administration of virtual assets, as well as financial services related to an issuer’s offer and sale of virtual assets.

The PLMA obliges financial institutions to maintain a record of all transactions for the last ten years, provide these records to officials if demanded, and verify the identity of all clients. While the notification does not provide many details, it will complicate the life of crypto companies in India, as regulators worldwide are tightening AML standards for crypto.

This notification comes after the Indian government amended tax rules in March 2022, subjecting digital assets holdings and transfers to a 30% tax. This drove crypto traders to offshore exchanges and forced budding crypto projects to move outside India. Trading volume on major cryptocurrency exchanges across India dropped by 70% within 10 days of the new tax policy and almost 90% over the next three months.

In February 2023, Indian authorities again demonstrated their tough stance on cryptocurrencies with a preemptive ban on crypto advertising and sponsorships in the local women’s cricket league. This followed a previous ban for the men’s cricket Premier League, introduced back in 2022.

Despite the tough stance, India’s Finance Minister, Nirmala Sitharaman, urged international efforts to regulate crypto in 2023. While celebrating India’s first presidency of the G20, she called for a coordinated effort “for building and understanding the macro-financial implications,” which could be used to reform crypto regulation globally.

Overall, India’s implementation of AML standards on crypto will make it more challenging for crypto companies to operate in the country. However, the move is part of a wider global trend of regulators tightening AML standards for crypto, in an effort to curb illicit activities and promote greater transparency in the industry.

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FATF Releases Action Plan to Improve Implementation of Global Standards on Crypto

by Blockchain News

According to a study published by the Financial Action Task Force, often known as FATF, its delegates have reached a consensus on an action plan “to encourage prompt worldwide implementation” of global standards on cryptocurrencies.

According to a publication that was released on February 24 by the Financial Action Task Force (FATF), the plenary for the financial watchdog, which is comprised of delegates from more than 200 jurisdictions, recently met in Paris and reached a consensus on a roadmap that is intended to strengthen the “implementation of FATF Standards on virtual assets and virtual asset service providers.” The task force has said that it would provide a report on how FATF members have progressed in implementing the crypto standards in 2024. This study will include topics such as the regulation and monitoring of VASPs.

According to the findings of the research, “the absence of regulation of virtual assets in many nations presents possibilities that are used by criminals and terrorist financiers.” “Since the FATF strengthened its Recommendation 15 in October 2018 to address virtual assets and virtual asset service providers, many countries have failed to implement these revised requirements,” the Financial Action Task Force (FATF) writes. “This includes the ‘travel rule,’ which requires obtaining, holding, and transmitting originator and beneficiary information relating to virtual asset transactions.”

The “Travel Rule” established by the FATF contains a section that recommends virtual asset service providers (VASPs), financial institutions, and regulated organizations in member states gather information on the originators and beneficiaries of certain digital currency transactions. The financial watchdog said that as of April 2022, several nations were not in accordance with its requirements for combating the financing of terrorism and anti-money laundering.

The nations of Japan, South Korea, and Singapore have been among those that have shown the most willingness to put policies in place that are in line with the Travel Rule. According to reports, a number of countries, including Iran and North Korea, have been added to the “grey list” maintained by the FATF in order to monitor potentially illicit financial activities.

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WazirX Faces Sanction For Abating Illegal Loan App Companies

by Blockchain News

Asian crypto exchange WazirX which has been under the probe of the Indian enforcement agency, Directorate of Enforcement has finally had its bank assets seized. 

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Cumulatively, the frozen bank assets are worth about Rs. 64.67 crores which is approximately $8.13 million at current market value.

After several investigations, including probing the directors of Zanmai Labs Private Limited (WazirX) Nischal Shetty and Sameer Hanuman Mhatre the Enforcement Directorate (ED), has decided that WazirX is involved in a money laundering case.

 

The cryptocurrency exchange, WazirX is a subsidiary of Binance Holdings Limited the world’s largest crypto exchange by market capitalization. 

 

WazirX was accused of conniving with Loan App companies who were already under the radar for laundering customers’ funds. With assistance from WazirX, these fraudulent companies could divert the money from their laundering activities to crypto wallets. So far, the Indian crypto exchange offers this illegal service to about 16 financial technology companies.

 

WazirX Failed to Conduct KYC Procedures

 

WazirX complicated ownership structure is posing as an impediment to the case.  

 

Although, a show cause notice was issued under the provisions of the FEMA against the crypto platform to justify its actions. From all indications, The exchange failed to conduct an appropriate know-your-customer (KYC) procedure or any enhanced due diligence (EDD) on any of these companies. 

 

Also, no suspicious transaction report (STR) was submitted to inform the Financial Intelligence Unit (FIU) authorities of the skeptical activities of these Loan App companies. Interestingly, most of the transactions between WazirX and the companies were not recorded on the blockchain.

 

A statement from the probe reads, “While doing fund trail investigation, ED found that a large number of funds was diverted by the fintech companies to purchase crypto assets and then launder them abroad. These companies and the virtual assets are untraceable at the moment.”

 

Meanwhile, Wazirx has been on the radar of the Indian authorities for so many counts. It allegedly violated the Indian Foreign Exchange Management Act (FEMA). At another time, it was listed by the State Minister for Finance for the Indian government, Pankaj Chaudhary as one of the crypto firms which had successfully evaded tax.

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EU Partially Agrees to Establishes Anti-Money Laundering Authority

by Blockchain News

The European Union through the Council of the EU has agreed on partial terms to establish an Anti-Money Laundering (AML) body that will be named the Anti-Money Laundering Authority (AMLA).

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The establishment of this new body will be to boost the efficient functioning of the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CTF) framework of the Union. The challenge of money laundering is a prevalent menace in all countries today. Despite the proactive role being played by regulators across the board, cybercriminals are notably advancing in their approach by the way.

While it may be hard to curb the activities of these cybercriminals individually, safeguards can be put in place amongst financial services providers to block all possible loopholes being exploited by money launderers and terrorist financiers. The emergence of the AMLA will be targeting creating avenues by which institutions it oversees are AML-proof in all regards.

“Given the cross-border nature of crime, the new Authority is expected to make a strong and useful contribution in fighting anti-money laundering and the financing of terrorism. Among other tasks, it will contribute to the harmonisation and coordination of supervisory practices in the financial and non-financial sectors, the direct supervision of high-risk and cross-border financial entities and the coordination of financial intelligence units,” the press release from the Council reads.

AMLA will be given supervisory authority over a wide range of financial institutions and startups in the digital currency ecosystem, provided they are considered to be risky.

“It also entrusts the Authority to supervise up to 40 groups and entities – at least in the first selection process – and to ensure a complete coverage of the internal market under its supervision. More powers are also given to the general board in the governance of AMLA,” the Council detailed.

The initial definitions of the responsibilities of the AMLA is partial and the seat of governance has not been fully agreed upon. The AMLA will help in enforcing the AML aspects of Markets in crypto Assets (MiCA) when the bill is finally passed.

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Abu Dhabi Global Market to Permit Licensed Exchanges Trade NFTs

by Blockchain News

The Abu Dhabi Global Market (ADGM) is building out a regulatory framework that may make trading platforms or exchanges that have licenses to operate within the free trade zone to trade Non-Fungible Tokens (NFTs).

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The Emirati free trade zone published a consultation paper earlier this week titled “Proposals for enhancements to capital markets and virtual assets in ADGM,” which amongst other things covers NFTs.

“The FSRA recognizes the growing relevance of NFT markets within the wider markets for digital assets. NFTs, being akin to intellectual property rights over unique creations, may not themselves constitute Specified Investments or Financial Instruments. While the FSRA is not proposing to establish a formal regulatory framework for NFTs at this point in time, the FSRA is open to NFT activities,” the consultation paper reads.

According to the proposed guidelines, any trading firm that is licensed by the ADGM and wishes to conduct or facilitate NFT trading should do so with full compliance with Anti-Money Laundering (AML) rules. 

“ADGM firms, whether conducting Regulated Activities or not, should also be aware that transactions in NFTs may also trigger the requirement to comply with the ADGM’s Anti-Money Laundering and Sanctions Rules (AML) Rules, including, but not limited to the requirement to register with the FSRA as a Designated NonFinancial Business or Profession (DNFBP),” the ADGM wrote in the paper.

Abu Dhabi regulators have often maintained a positive stance toward the emerging digital currency ecosystem and the technology powering these asset classes. Back in October 2019, the capital city unveiled its intentions of putting its land registry system on the blockchain, pioneering the embrace of blockchain technology in the Middle East at the time.

The move to permit trading platforms to trade NFTs comes off as one of the forward-thinking moves of the ADGM that promised to “continue to monitor market developments and ensure that ADGM continues to play a thought leadership role, both regionally and globally.”

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Bank of Israel Issues Draft Regulations Regarding AML for Crypto Firms

by Blockchain News

The Bank of Israel has issued a new draft guideline to stakeholders in the cryptocurrency ecosystem concerning Anti-Money Laundering (AML) provisions.

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According to the press release published by the bank, the new guideline becomes necessitated with the growing number of funds flowing into the traditional banking system through the crypto ecosystem.

According to the new guideline, the Bank of Israel will mandate financial institutions operating in the country to “conduct a risk assessment and set out policy and procedures for the transfer of money that originates in or is destined for virtual currencies, taking a risk-based approach and identifying the virtual currency service provider.”

The apex bank will not give financial institutions the power to refuse any virtual asset service operator who has a license with a recognized regulator in the country, including the Supervisor of the Capital Market, Insurance and Savings Authority, and is subject to the Money Laundering Prohibition Order. The new guideline will give banks the leverage to analyze each crypto startup on case-by-case basis.

Crypto Funds Monitoring to be Activated

The digital currency ecosystem is replete with many bad actors, as digital currencies make it easy to shield transactions from authorities through their cryptographic nature. The new guideline will give banks the power to clarify the origin of any funds involved in a digital currency transaction and their purported destination until they finally enter the crypto ecosystem.

“The Banking Supervision Department is monitoring activity in virtual currencies as well as domestic and international regulation being developed in this field. In view of the increase in customers’ activity volumes in such currencies, and due to the potential for streamlining payments and international transfers, this draft regulation was formulated,” said Yair Avidan, Supervisor of Banks, adding that;

“Activity in virtual currencies comes with high risk in terms of the money laundering prohibition and the prohibition against the financing of terrorism. As such, this draft regulation sets out a number of principles for managing such risks, which will help banking corporation customers who wish to realize the money that originates in virtual currency activity while managing the risks inherent to the banking system as part of such activity.”

The bank said these new guidelines are up for public opinion comments and that it has been sent out to the Advisory Council on Banking Matters. This new guideline cements Israel’s engagement with digital assets, a push that has made the bank accelerate its Central Bank Digital Currency (CBDC) or Digital Shekel research strides.

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