FATF Releases Red Flag indicators To Identify Money Laundering Using Crypto

  • The Financial Action Task Force (FATF) releases report on how to identify possible red flags in crypto money laundering rings across virtual asset service providers, or VASPs in short.
  • The regulator highlights a number of ways that crypto exchanges can stop and curb illegal and illicit activity.

The report titled, Virtual Assets – Red Flag Indicators of Money Laundering and Terrorist Financing, outlines several red flags including those arising from irregular transaction patterns, anonymous transactions, arising from senders and receivers and sources of wealth profiles of the crypto users.

One of the red flags arises from the size and frequency of transactions whereby a money launderer could make multiple high frequency transactions over a period of 24 hours or staggered and regular transactions which stop shortly after they are made. Moreover, transferring virtual assets to exchanges with low or non-existent AML/CFT rules is also considered a red flag.

User profiling is also an excellent way of noticing possible money laundering and terrorist financing. Here, exchanges are tasked with checking on the transactions made and comparing it with the user’s profile.

This arises when a user deposits an unusual amount to their wallet which does not match the traders profile or recent transactions. This could signal the deposit is subject to checks of money laundering, scamming or a money mule. The report reads on transaction patterns as a red flags stating,

“Conducting a large initial deposit to open a new relationship with a VASP and funding the entire deposit the first day it is opened, and that the customer starts to trade the total amount or a large portion of the amount on that same day or the day after, or if the customer withdraws the whole amount the day after.”

Also quick deposits and withdrawals of full balance of virtual assets in a short period of time raises eyebrows.

Virtual asset accounts with no logical business explanation making frequent deposits and transfers off the exchange to less KYC friendly exchanges poses a red flag. Accumulation of funds from several unrelated exchanges or wallets sending small amounts to one virtual asset account before fully withdrawing the funds may be a money laundering scheme.

Regulators should also follow users who use anonymity enabled public cryptocurrencies and privacy coins such as Monero, Zcash and Dash closely, the report states. Also the exchange of public and transparent crypto coins such as Bitcoin for the anonymity enhanced cryptocurrencies also raises questions on the actions of the trader.

FAFT has pushed through KYC/ AML regulations and compliance rules for VASPs across the globe in a bid to curb money laundering and terrorist financing using crypto. The “Travel Rule” recommends that the 200 countries that follow it, say to mandate VASPs such as custodians and crypto exchanges to retain and share any information on possible illicit and illegal trades happening on their platforms.

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Author: Lujan Odera

Aave Dominates after DeFi Loses One Unicorn, FTX Launches LEND Perpetual Contracts

Aave is now the dominating force in the DeFi world.

With a dominance of 20.72%, this lending protocol currently has $1.54 billion of total value locked in it, out of the total DeFi TVL of $7.45 billion.

Aave is actually now one of the three unicorns of the DeFi world after Uniswap lost its status following SushiSwap’s migration.

Uniswap’s clone, SushiSwap, was responsible for more than 75% of the liquidity on the former DEX, which resulted in its TVL to be more than halved to $450 million, volume to slash down to around $350 million, and liquidity to take the biggest hit to $600 million.

Still, the numbers are improving and are better than the pre-SushiSwap launch. As such, currently, Aave, Maker, and Curve Finance are the only ones with more than $1 billion TVL.

DeFi darling Yearn.Finance is close behind with $806 million, followed by Synthetix $715 million, Compound $612 million, and Balancer with $564 million.

Aave Perpetual Contracts

The derivatives platform FTX meanwhile launched LEND perpetual contracts today.

One of the hottest DeFi tokens in the market, LEND, has seen an uptrend of 7,460% YTD. Today, this 26th largest crypto with a market cap of $866 million jumped 21% on the back of FTX listing, trading at $0.665.

FTX is recording a volume of 2.9 million LEND and open interest of nearly 635k LEND on its perpetual futures.

FTX CEO Sam Bankman-Fried, who was recently handed over the control of SushiSwap, also announced that its migration has also been successful and the DEX is now live with staking SUSHI enabled to earn fees from Sushiswap.

Also, FTX’s partner Solana blockchain’s on which the DEX Serum is built will now have Tether running on it. The idea is to “facilitate the building of ultra-high-speed, low-cost decentralized finance (DeFi) applications.”

The most popular stablecoin Tether (USDT), which is the third-largest cryptocurrency by market cap of $14.7 billion, already runs on several blockchains including Ethereum, which accounts for more than 60% of all USDT issuance, followed by Tron, Omni, EOS, Liquid, Algorand, and Bitcoin Cash’s Standard Ledger Protocol (SLP).

Solana’s native token responded with a 30% spike in its price to $3.34.

“Tether is expanding every day/week/month/year since 2014. Never stops, never sleeps, just works,” said Paolo Ardoino, CTO at Tether and its sister company, crypto exchange Bitfinex.

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Author: AnTy

Stablecoins Yet Again Under Regulatory Scrutiny In Revised FATF Report

In a Tuesday report, the Financial Action Task Force, with members from about 200 countries, said stablecoins need to comply with standards to guard against money laundering and terrorism financing.

FATF is an inter-government body that sets international standards to prevent illegal activities related to money laundering and terrorist financing watchdog. It was after a 12-month review completion that the report was prepared for the G-20 finance minister and central bank governors.

Lately, regulators are taking a strong stance against fiat-begged stablecoins like Tether (USDT). With the latest step by the FATF, the exchanges and other entities supporting stablecoins will likely have to verify the identities and comply with different policies.

“My assumption would be that FATF will update guidance in relations to stablecoins in the near future,” said Jesse Spiro, global head of policy and regulatory affairs for compliance technology provider Chainalysis.

Potential to be mass-adopted on a global scale

The total supply of stablecoins has doubled this year and is now quickly approaching the 12 billion mark.

Interestingly, USDT issued on Ethereum accounts for more than half of the total stablecoins supply. Also, the market cap of Tether has surpassed $10 billion.

Amidst this surge of stablecoins, the new rules would impose anti-money laundering (AML) and know-your-customer (KYC) requirements on stablecoins like Tether and also the new endeavors like Facebook’s upcoming Libra.

Stablecoin providers and exchanges that support coins would have to set up processes for monitoring transactions, investigations, and regulatory filings, Spiro said. Also, they would have to make sure that OTC trading desks are compliant. Tether uses Chainalysis for a part of its compliance process; Spiro told Bloomberg.

“OTC desks, there’s been a lot of illicit activity that we’ve been able to follow through,” said Spiro. “It’s something that regulators are going to be taking a long hard look at.”

The fiat-pegged digital currencies were an attempt to mitigate the extreme volatility in the cryptocurrency market. Tether, a popular stablecoin is especially used in China for fiat on- and off-ramp, since the country banned direct fiat channels in 2017. It is also used by export-import businesses in Asia.

According to FATF, “stablecoins appear better placed to achieve mass-adoption than many virtual assets.” For instance, Facebook wants its Libra to be used by 1.7 billion of the world’s unbanked.

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Author: AnTy

Massive Lawsuit Brought Against Consumer Financial Protection Bureau by PayPal

  • PayPal says that the regulations implemented by the CFPB force them to make “misleading and confusing” disclosures to customers.
  • The payment processing firm is asking to be compensated for the attorney fees and cost of taking this case to court.

PayPal is one of the biggest payment processors in the world, and they’ve served millions of customers on various merchant websites. However, they have recently gotten involved in a lawsuit against the Consumer Financial Protection Bureau. According to PayPal, the CFPB has required them to make disclosures about its fees with “misleading and confusing” statements.

The lawsuit, which was filed on December 11th by PayPal, states that the agency seems to be unclear on the substantial ways that digital wallets and prepaid products (like their prepaid debit cards) differ. A court filing revealed to CoinTelegraph shows that the CFPB requires both digital wallets and prepaid products to be regulated under the same rules. However, this type of regulation for the digital wallets that PayPal offers is “fundamentally ill-suited,” as PayPal states.

Within this lawsuit, there’s a specific CFPB rule in question – “Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) Rule.” The rule was originally implemented in April this year, and it states that PayPal must provide users with a disclosure on the fees that are not charged by the company. PayPal claims that the rule also doesn’t properly demonstrate what most customers actually pay for their fees.

Essentially, the rule states that the descriptions of these fees on PayPal that “undermine PayPal’s own clear disclosures” need to be simplified. Furthermore, the rule bans them from offering information to consumers that would otherwise allow them to make “an informed decision,” and instructed the firm to tell their customers the worst possible fee that they may come up against, “even if the fee would rarely be incurred.”

In the filling, PayPal added, “The Rule mandates that customers be given — and actually view — ‘short form’ fee disclosures. The requirements for this short form disclosure are extremely prescriptive and rigid. Certain fee categories must be placed in specified positions and presented in certain font sizes […] The Rule further prohibits PayPal from including explanatory phrases within the disclosure box to describe the nature of these fee categories.”

Along with the petition for the ruling by CFPB to be deemed unconstitutional, the push to relieve them of it also asks that PayPal be awarded the costs and attorney fees by the court, as they deem appropriate.

Andrew Rossow, an internet attorney from Ohio, said that the lawsuit from PayPal makes it clear that there are many regulators – CFPB included – don’t actually understand the new technologies being launched in the industry today, like blockchain, artificial intelligence, and others.

Rossow added, “I think the CFPB’s recent expansion of Regulation E (Prepaid Accounts Under the Electronic Fund Transfer Act) and Regulation Z (Truth in Lending Act) was premature because it still doesn’t understand, in my opinion, how these digital wallets (which includes cryptocurrency wallets—hot and cold) operate and the parties that involved in even the most ‘basic’ of digital money transactions.”

If the court sides with PayPal, the progress could be huge for the cryptocurrency industry. After all, PayPal isn’t just standing up for itself – it is “defending the business operation of each of its competitors, protecting themselves from unwarranted and almost endless liability at any given point in time,” says Rossow.

PayPal has recently revealed their substantial quarterly profits and has been recording new users and more transactions. However, the platform recently cut some of their partnerships, including their ties to Pornhub and their models.

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Author: Krystle M

Global Monetary Enforcer FATF Shares Concerns About Libra And Stablecoins

The Financial Action Task Force (FATF), one of the most important financial regulators in the world, has recently voiced some concerns about Facebook’s Libra project. According to the institution, Libra and other stablecoins could pose several risks if they were to achieve mass adoption, especially when considering money laundering and terrorist financing.

Xiamgmin Liu, the president of the organization, has talked about the future and the dangers that stablecoin projects such as the Libra could pose to society. He affirmed that if stablecoins were very widespread, they could bring in new risks to the table.

According to the president, it is the responsibility of the FATF to prevent any kind of money laundering, especially when it involves new technologies and regulations. Because of this, they would have to take a very close look at these projects to prevent them from creating unnecessary risks.

Ever since the announcement of Libra, the regulators from all over the world seem to have woken up to the “dangers” of cryptocurrencies and stablecoins. While Bitcoin was often seen by many as a speculative asset or a coin used by criminals, corporate projects such as Facebook are seen as real threats to the sovereignty of countries and are receiving scrutiny.

Many authorities from all over the world seem to be concerned with the Libra and its possible uses for money laundering as well as its ability to threat national fiat currencies in countries that are not very stable. Facebook also does not have a good track record when it comes to keeping the data of its clients private, so the situation only gets worse.

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Author: Silvia A

U.S Air Force (USAF) Partners with SIMBA Chain and Constellation Network Inc.

The United States Air Force (USAF) is dwelling into blockchain to secure its supply chain data and to streamline its Small Business Innovation Research (SBIR) plans. The partnership is between USAF and SIMBA Chain (supply chain project) and Constellation Network Inc. (SBIR plan).

The U.S Air Force, USAF, welcomes blockchain technologies to streamline its supply chain management on the battlefield and in their country. The USAF Blockchain Approach for Supply Chain Additive Manufacturing Parts (BASECAMP) will leverage SIMBA Chain’s blockchain to ensure the complex supply chain is secure and available across the platform.

The platform is on Microsoft Azure and offers the military a secure, distributed and surveillance free channel to build supply chain dApps. SIMBA Chain provides “a simplification layer for blockchain developers to implement complex, security-focused solutions” hence the selection by USAF.

With entities wanting to intercept the manufacturing data in military bases, SIMBA Chain offers the Air Force a secure platform against anyone wanting to obtain or modify the data. According to a PR release on Newswire, SIMBA Chain will start off its partnership with the Air Force creating a

“prototype demonstrating a blockchain approach for the registration and tracking of Additive Manufacturing (AM) components during their entire lifecycle.”

Constellation Network Inc. signs contract with USAF

The Air Force is heavily investing in the industry 4.0 as seen by its latest partnership with Constellation Inc. The contract signed between the two parties is expected to enhance the overall experience and the pool of potential applicants to the SBIR I project.

The VP of Business Development at Constellation, Benjamin Diggles looks forward to an excellent partnership with the “right match” to accomplish their goals. He said,

“The USAF has a multitude of data sources like drones, planes, and satellites that need to be secured. Clean and consolidated data that can be queried instantly is a big need within the defense apparatus.”

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Author: Lujan Odera

New Jersey Will Soon Have a Blockchain Initiative Task Force of its Own

  • The resolution to create such a task force was passed by NJ Governor Phil Murphy.
  • The task force will have to submit its findings/recommendations to the state government every 180 days.

In what is being considered a welcome move by crypto enthusiasts all over the world, the Governor of New Jersey (NJ) — Phil Murphy — has just signed a bill that will allow for the creation of a NJ-centric blockchain task force (BTF).

Additionally, as per an announcement made by the NJ state department a few days back, the task force will be responsible for dealing with things related to:

It should also be pointed out that the new BTF will comprise of 14 people — all of whom will be selected by state government officials of varying ranks.

The task force will have to submit a report on its findings to the NJ government every six months. Not only that, they will also have to conduct CBAs (cost benefit analyses) so as to help filter out the best projects that are currently available within this burgeoning domain.

The task force is going to be helmed by New Jersey’s current Chief Technology Officer Chris Rein (who is quite well known for his pro-crypto stance).

In regards to this entire development, Senator James Beach — who was one of the main sponsors of this bill — recently commented that through the use of blockchain solutions, different state governments can bolster their native security protocols in a big way. He also added:

“Blockchain is a technological innovation that will protect us from hackers and those seeking to steal our information […] I believe that whatever the taskforce decides, there is a place for blockchain to be used in local governments to protect them from the ever increasing dangers of the Internet.”

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Author: Shiraz J