Beyond Bitcoin: The Evolution of Blockchain Assets and What This Means for AML and CTF
From 16 to 18 January, 2017 our CEO Aurélien Menant presented at the Global Conference on Money Laundering and Digital Currencies in Doha, Qatar, jointly organized by Europol, Interpol and the Basel Institute on Governance with the collaboration of the Qatar National Anti-Money Laundering and Terrorism Financing Committee.
The event was attended by more than 400 financial investigators from money laundering, cybercrime and financial intelligence units, together with experts in asset recovery and relevant private sector representatives. One of the main focuses of the conference was the misuse of digital currencies by criminals and terrorist financiers to launder money and support other criminal activities.
The title of Aurélien’s presentation was: Beyond bitcoin: The evolution of blockchain assets and what this means for AML and CTF, which highlighted why exchanges, law enforcers and regulators need to work together to ensure the safe and legitimate development of cryptocurrencies and blockchain assets.
Aurélien began by providing an overview of blockchain technology, cryptocurrencies and the evolving types of blockchain assets, especially with regards to ICOs and ethereum tokens. He then took a deeper look at the blockchain assets ecosystem, highlighting the major players and the increase in trading volumes over the years.
He then described the regulatory landscape in APAC with a focus on the situation in China and Hong Kong and gave an in-depth explanation of Gatecoin’s experience with AML and CTF.
Specifically, this included a discussion about our pre-emptive compliance procedures thanks to our Money Service Operator (MSO) license, as blockchain assets exchanges are not yet regulated by the HKMA.
Aurélien explained how our MSO has been useful for establishing and maintaining banking and law enforcement relationships over the years and ensures that we can easily adapt to future regulatory requirements imposed by the HKMA or other regulators in jurisdictions where we might have a physical presence in the future.
The second half of the presentation focused on the challenges for AML and CTF enforcement due to the following trends:
- Criminally run exchanges with a business model that relies on money laundering with no KYC, AML, CTF or data privacy policies and based in countries with loopholes and very little oversight on digital crime activities.
- Bitcoin ATMs and LocalBitcoins.com which have no KYC/AML process.
- Hacking and cyber-heists because of ransomware, social hacking or inside jobs.
- Prepaid bitcoin debit cards that involve a high number of intermediaries and thus a lack of AML and CTF supervision.
- The Dark Net as a popular destination for many sites selling illegal goods and services for cryptocurrencies.
- Mixing services as they hamper the ability to trace and audit blockchain based transactions.
- Smart contract enabled automated transactions without any manual AML/CTF controls such as those included in decentralized applications (dapps) and ICOs.
- The use of ICOs as an alternative ‘mixer’.
- Anonymous cryptocurrencies with untraceable transactions.
- Undefined legal status of blockchain assets and lack of regulation for exchanges and wallet services.
Despite highlighting these challenges for law enforcers, Aurélien concluded the presentation by suggesting that a combination of collaboration, education and progressive regulation can lead to greater opportunities as a result of blockchain asset and cryptocurrency based innovations, which will ultimately outweigh the risks.
The Gatecoin team looks forward to future discussions with law enforcement agencies and regulators from jurisdictions around the world to encourage greater legitimacy and adoption of cryptocurrencies and blockchain assets.
You can read our latest perspective on the ongoing investigation of bitcoin exchanges in China here.
To know more about the conclusions of the conference by the organizing law enforcement agencies, you can check out their official post-event press release.
