Three times more cryptocurrency was stolen from exchanges in the first half of 2018 than in the whole of 2017, according to new research, which finds that Bitcoin is the cryptocurrency of choice for cyber extortionists.
The CipherTrace 2018 Q2 Cryptocurrency Anti-Money Laundering Report, released last week, outlined the scale of the multi-billion dollar cryptocurrency money laundering problem that is attracting the attention of regulators globally.
In terms of criminal activity taking place, the report stated that USD 761 million of theft took place from cryptocurrency exchanges in the first half of 2018, compared with 2017’s total for the year of USD 266 million. The pace of the increase does not look to be slowing either. CipherTrace suggests that losses could reach USD 1.5 billion by the end of the year.
The inter-governmental Financial Action Task Force (FATF) is cracking down on cryptocurrency money laundering, with rules which seem strict on the surface, including a call for exchanges to be registered or licensed, verification of customers’ identities and reporting suspicious trading and transactions. Currently, these rules are voluntary but the FATF is considering making crypto exchange rules binding and additional global enforcement action is also expected from the US Financial Crimes Enforcement Network (FinCEN). This is likely to target money laundering services, crypto-to-crypto exchanges and privacy coins.
“Until now, the lack of regulatory guidance has hindered the broader adoption of cryptocurrencies. Now we are seeing the big guys coming together asking for cryptocurrency anti-money laundering regulation — it is inevitable, it will be unified, and it will be global,” said Dave Jevans, CEO of CipherTrace and co-chair of the Cryptocurrency Working Group at APWG.org.
“There will be little room for privacy coins without AML [Anti-Money Laundering] in these Know Your Customer and Anti-Money Laundering regulated regimes. This will also be a wake-up call for virtual currency exchanges and financial institutions, exposing them to the risk of stiff penalties.”
The company is launching a Cryptocurrency AML Compliance Solution, aimed at exchanges, hedge funds, initial coin offerings (ICOs), money transfer agents and banks, to help them safely participate in crypto asset markets, while minimizing compliance efforts and costs. According to CipherTrace, this tool can handle massive numbers of transactions and value and traces the flow of funds through the crypto ecosystem.
The product uses machine learning algorithms and a “Crypto Intelligence Sharing Network” to calculate risk scores for transactions based on whether the funds have traveled through dark markets, money mixers, gambling sites or are associated with known criminals.