PrimeXBT’s user base is growing each day, as the trading platform attracts more and more traders from the worlds of both traditional and digital financial markets.
As any business scales, its needs also evolve over time. As PrimeXBT expands both its offering and the number of clients it serves, additional steps needed to be taken to improve upon internal AML and CFT compliance processes. PrimeXBT also has additional responsibilities as a trading platform, such as keeping user data safe, funds secure, and privacy maintained at all times.
Therefore, we have partnered with Bitfury Group’s Crystal – a blockchain analytics and cryptocurrency compliance company — in order to improve our trading platform’s anti-money laundering and counter-terrorism funding process and bolster compliance.
Crystal’s team of executives and developers are world-class blockchain analysts and award-winning mathematicians, who have developed a technology that can analyze blockchain data in real-time and assist PrimeXBT with quarantining funds that are related to international crime, such as ransomware, Ponzi schemes, terrorism and more.
In turn, this allows PrimeXBT to improve overall compliance and keep clients safe and their funds secure.
AML & CFT Compliance Through Real-Time Data Analysis
During 2018, over $865 million in cryptocurrencies were stolen from exchanges. At the same time, the incidence of ransomware cases has skyrocketed, targeting both everyday internet users as well as large government infrastructures. Crime is rife throughout the crypto industry.
However, by partnering with Crystal and leveraging their blockchain analysis tools, PrimeXBT will be alerted the moment any cryptocurrencies tied to bad actors are deposited onto the platform and can take action swiftly.
This also ensures that PrimeXBT is promoting a safer environment and positively contributing to the cryptocurrency sector, by eliminating any chance of money laundering through the trading platform.
Crypto Assets Assigned a Risk Score Without Compromising User Privacy
Crystal’s technology can trace the origin of any cryptocurrency in real-time and assign the assets a risk score based on Crystal’s proprietary algorithm. Crystal’s dashboard shows a breakdown of all associated high-risk coins and the category or risk they are associated with. These range from everything from trusted sources such as wallets and exchanges to known scams, darknet marketplaces and much more.
PrimeXBT does not require personal or private data and the risk score is assigned to the asset itself so that any information related to the account or account holder is kept private from Crystal. Risk increases depending on the origin and the amount of criminal activity tied to the source origin.
Crystal’s proprietary software will automate the data collection and analysis process. The additional information the partnership brings to the trading platform will also enhance safety and security for all clients.
The tools further break down each category of risk into known entities, as well as their balances, transactions, and more. The real-time analytics within moments learn detailed information regarding the source of funds, including even those that are mined and what pools they were mined from.
The user interface gives PrimeXBT a flowchart of transactions, tracing back from the original source address and all the addresses the funds hit along the way before they were deposited on PrimeXBT.
Exponential Growth in Crypto-Related Cybercrime Increases Need for Proper AML Compliance
Exchanges are often the target of advanced cybercriminals who are seeking to hack trading platforms through discovered vulnerabilities. In addition, hackers use stealthy techniques to attempt to hide the origin of funds and mix and launder cryptocurrencies through a number of other exchanges.
For example, in June 2018, cryptocurrency exchange Bithumb was hacked for a loss of $31 million in cryptocurrencies, and 2016 BTC stolen. Crystal analyzed the data from the hack and was able to discover that 2002 BTC of the stolen Bitcoin were distributed across 38 blockchain addresses. 1973 of that BTC ended up at Yobit exchange where they successfully mixed by the hackers. Due to how many addresses are involved and the large amount of BTC, the situation was extremely complicated for Bithumb to handle alone.
Later in September 2018, Zaif cryptocurrency exchange was also hacked. Much of the stolen Bitcoin remains in wallets owned by the hackers, waiting for the right opportunity to launder the funds. However, the rest of the Bitcoin was sent to blockchain addresses across Huobi, BTCBox, Bitstamp, and Livecoin. Considering how widely the stolen Bitcoin has been spread out, only advanced blockchain analytics tools such as the software Crystal offers are capable of spotting and sorting this information in real-time.
Crystal’s tools don’t just identify and quarantine crypto assets associated with hacks only, they also alert PrimeXBT to suspicious assets related to other types of crime, or funds that may have originated from any of the addresses associated with criminal activities.
In December 2018, Electrum wallet users became the victims of a widespread phishing attack. A hacker duped Electrum wallet users into downloading and installing malware disguised as a security software update. The malware version of the software prompted users to enter a two-factor authentication code that was then used to steal user’s funds directly from their own wallets.
In this case, the funds didn’t come from an exchange but were still moved to an exchange called MorphToken. The funds were changed into XMR, a privacy-centric crypto-asset designed to keep sender information private, then later sent to Bitfinex.
In all of these situations, Crystal’s blockchain analytical tools were able to trace the origin and destination of the funds, blacklist any related addresses, and shared the blockchain data with the rest of the crypto industry and related authorities or regulators.
Global financial market regulators such as OFAC and FinCEN often share information regarding suspected criminals and their associated cryptocurrency addresses, and demand trading platforms report any suspicious activity and are require them to comply with the guidelines set by regulators. Trading platforms that fail to comply are putting users at unnecessary risk, and aren’t taking their duties as a financial market participant to keep markets safe, fair, and free of any bad actors, seriously.
By providing PrimeXBT with the ability to monitor blockchain transactions and crypto deposits in real-time for any associated risks or ties to bad actors, it allows for faster and more accurate crypto compliance related to AML and CFT procedures, and helps to not only keep PimeXBT’s clients safer, but also contributes to creating a safer crypto and blockchain industry for all participants.