Crypto money laundering is under attack

All eyes may have been on Ukraine this week, but across major economies around the world, the use of crypto as a tool for money laundering has come under renewed attack this week as prosecutors and politicians have stepped up the use of criminal charges to combat the flow of filth. money via blockchains – as well as any unregulated and unidentified use of cryptocurrencies.

Starting West, the US Department of Justice announced two guilty pleas in its groundbreaking lawsuit against the leaders of cryptocurrency derivatives exchange BitMEX for ignoring anti-money laundering (AML) regulations. ). Meanwhile, the European Union reportedly intends to entrust its new block-wide agency AML with oversight of the crypto, and Canadian authorities have forwarded a complaint about the CEOs of two major exchanges tweeting about the seizure of crypto donations from Freedom Convoy protesters to law enforcement.

Chinese authorities, meanwhile, have added prison terms to penalties for illegal fundraising by selling cryptocurrency to the public, Russia plans to criminalize peer-to-peer trading, and a key Brazilian Senate committee has approved a legislation including new AML oversight and criminal penalties for virtual asset violations.

Add to that India’s recent determination to ban the use of crypto for payments and you have the largest and wealthiest countries in the world sinking their teeth into crypto surveillance.

Read more: RBI supports a complete cryptocurrency ban in India

BitMEX CEO pleads guilty

By issuing arrest warrants against the four main executives of BitMex, the Seychelles-based crypto derivatives exchange, the Department of Justice (DOJ) has announced the first major AML prosecution of a consumer cryptocurrency firm. at the end of 2020.

On Thursday, Damian Williams, the United States Attorney for the Southern District of New York, announced that BitMEX CEO Arthur Hayes and COO Ben Delo each pleaded guilty to one count of charge of violation of the Bank Secrecy Act. The two agreed to a $10 million fine, the DOJ said in a statement. The charges carry a maximum sentence of five years in prison. And while final sentencing is up to the judge, the couple will likely avoid jail time.

In October, the Justice Department accused Hayes and Delo, along with BitMEX co-founder Samuel Reed and business development manager Gregory Dwyer, of “willfully failing to establish, implement and maintain an anti-money laundering program at BitMEX”.

As Hayes was by far the biggest name in crypto and the face of BitMEX, and Delo quickly turned himself in while the others negotiated with authorities, the DOJ’s past tactics suggest they could face sanctions. lighter.

Following the charges, all four executives resigned and BitMEX brought in new management that implemented strong AML procedures and, in August 2021, made peace with the authorities via a $100 million fine. .

Calling cryptocurrency firms “essential gatekeepers in efforts to ensure U.S. markets are fair, efficient and secure,” Williams said Hayes and Delo have built a business “designed to flout” their obligation to “contribute drive out crime and corruption”.

The US Attorney added, “They deliberately failed to implement and maintain basic anti-money laundering policies. They allowed BitMEX to operate as a platform in the shadows of the financial markets. Today’s guilty pleas reflect this Office’s continued commitment to investigating and prosecuting money laundering in the cryptocurrency industry.

Read also: Crypto Exchange BitMEX Buys 268-Year-Old German Bank to Offer ‘Banking 2.0’

EU supervision

Half a dozen EU governments have proposed giving the bloc’s new watchdog agency AML oversight of cryptocurrency exchanges and other virtual asset service providers, or VASPs, Bloomberg reported on Monday. February 22.

Concerned about the use of crypto to hide illicit funds, the German-led group wants to ensure that the agency – which should be operational in 2024 and fully operational by 2026 – oversees crypto businesses. currency as well as banks and other financial institutions. Virtual assets are only mentioned “obliquely” in the agency’s founding proposal, he noted.

“It is essential that the scope of the new EU authority explicitly includes crypto-assets, given that this is one of the areas most prone to money laundering activity” , said Spanish member of the European Parliament Luis Garicano, one of the leaders of the group proposing the change. .

The new body is being created following a series of money laundering scandals aided by the “patchwork of regulations” of EU members, according to the article.

Emergency orders

Meanwhile, north of the border, the Ontario Securities Commission “shared” tweets from Coinbase CEO Brian Armstrong and Kraken CEO Jesse Powell with the Royal Canadian Mounted Police, or RCMP, as well as with “appropriate federal authorities,” Canadian media reported. The CEOs of the two major US exchanges – which have a long history of cooperating with regulators – have advised cryptocurrency investors to keep their assets in private wallets rather than on exchanges which may be forced to freeze accounts after the Canada’s first-ever invocation of its emergency law to cut off funds from Freedom Convoy protesters on February 14.

To see: PYMNTS Crypto Basics Series: What is a Crypto Wallet and How to Avoid Losing a Quarter Billion Dollars?

“Concerned to see things like this happen in any country, especially in a place as economically free as Canada,” Armstrong said. noted, referring to a report on government action. “Self-custodial wallets matter!”

Noting that “crowdfunding platforms are now regulated by the Canadian Terrorist Financing Act,” Powell tweeted“Do you see where this leads? Please do not fund causes directly from custodial wallets. I’m sure freeze orders are coming. Withdraw to non-custodial before sending.

The comments followed Canadian orders that required financial institutions, including cryptocurrency exchanges, to actively monitor and report any transactions involving “designated persons” named in the emergency law order.

Russian surveillance

The Russian government’s upcoming cryptocurrency regulatory legislation includes a provision that “effectively makes peer-to-peer trading illegal,” said a lawyer who saw the yet-to-be-published proposal at CoinDesk on Feb. 24.

This legislation comes despite the objections of the Bank of Russia. The central bank wants an outright ban on cryptocurrency trading and ownership.

The bill would require all cryptocurrency transactions to go through licensed exchanges or other operators. These exchanges, payment processors, and other businesses acting as on- and off-ramps for crypto transactions to be licensed, adhere to AML reporting requirements, including customer identification, and only authorize the purchase of digital assets only with funds from Russian bank accounts. Russian crypto miners would be subject to similar reporting requirements.

Additionally, all private cryptocurrency wallets should be certified, identifying their owners. In effect, this means that all crypto transactions must include participant identification or be illegal.

China Crypto Fundraising Ban

China’s top court, meanwhile, announced a ruling on Feb. 23 that would effectively add criminal penalties for initial coin offerings, or ICOs, and any other use of virtual assets to raise money from the public. . While such fundraising has been banned for five years, lower courts can now jail offenders for up to 10 years under the new ruling. All crypto transactions were banned in September.

Read more: China declares all cryptocurrencies and related transactions illegal

New Brazilian Crypto Regulator

Brazil’s Senate Economic Affairs Committee has approved legislation that would require the government to create a crypto regulator overseeing all transactions — except initial coin offerings, which remain the responsibility of its Securities and Exchange Commission. — and the licensing of crypto businesses, CoinDesk reported on Feb. 22. It will also make AML reporting mandatory and establish criminal penalties of up to eight years in prison for financial crimes committed with digital assets.



On: Forty-two percent of US consumers are more likely to open accounts with financial institutions that facilitate automatic sharing of their bank details upon sign-up. The PYMNTS study Account opening and loan management in the digital environmentsurveyed 2,300 consumers to explore how FIs can leverage open banking to engage customers and create a better account opening experience.