CipherTrace Q3 2019 Cryptocurrency Anti-Money Laundering Report Takeaways

November 29, 2019 | Digital Assets, Investments, News

Results show weakness in Know Your Customer policies

CipherTrace has released its Q3 2019 Cryptocurrency Anti-Money Laundering (AML) Report.

The leading cryptocurrency and blockchain intelligence firm discussed major trends in cryptocurrency regulation, nefarious actors, impending legislation, international trends, and prevailing sentiments.

Of particular note, CipherTrace conducted a first-ever comprehensive investigation of cryptocurrency exchange Know Your Customer (KYC) procedures. It found that two-thirds (roughly 65 percent) of the top 120 exchanges lack strong KYC policies.

The breakdown of the ratings shown in the figure below are as follows:

  • Weak – These exchanges allowed CipherTrace researchers to withdraw at least .25 BTC daily with very little to no KYC.
  • Porous – These exchanges require some sort of ID verification process.
  • Good – These exchanges require a very strenuous KYC process, which takes several steps to complete before the researchers were able to make a deposit or withdrawal. They not only require the ID process but also proof of address. Some require a phone call or video chat to complete the KYC process.

Other CipherTrace Trends

Other key takeaways of the CipherTrace cyber trends report include the following:

  • Q3 saw an increasing regulatory clampdown on virtual asset transactions as regulators, crypto exchanges, banks, and financial institutions prepare for the Financial Action Task Force (FATF) funds Travel Rule to take hold on cryptocurrency businesses.
  • In anticipation of the new FATF AML regulations, many cryptocurrency exchanges have preemptively jettisoned their privacy coins; yet, 32 percent of exchanges, including those determined to have weak KYC, still have privacy coins listed.
  • Although Q3 showed the lowest quarterly cryptocurrency thefts and scams in two years, the total number for 2019 still stands at a whopping $4.4 billion.
  • Terrorists, wise to blockchain forensics, are developing more sophisticated methods of obfuscating cryptocurrency funds flows for financing attacks and operations.

Finally, for more information, get the full report here.

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