Strong Cryptocurrency Compliance: Five Best Practices
The growth of cryptocurrencies, fueled by developments in blockchain technology, has opened up new financial opportunities in many countries throughout the globe. However, when criminals take advantage of regulatory blind spots to support terrorist operations, launder money, and commit other financial crimes, the advantages and opportunities presented by cryptocurrencies have also brought with them new hazards.
Criminal activities using cryptocurrencies reached a record high in 2021, totaling almost $14 billion, nearly twice as much as they did in 2020 ($7.8 billion).Because of the legislative ambiguity surrounding cryptocurrencies, it’s critical that businesses in this sector are aware of their responsibilities with regard to crypto compliance and are equipped to identify and manage any risks.
A thorough strategy for complying with cryptocurrency laws should comprise:
- Thorough onboarding: Crypto companies should focus on the Know Your Customer (KYC) procedure and appropriate identification verification while learning as much as they can about new clients.
- Transaction tracking: Organizations need to have mechanisms in place to follow the movement of bitcoin assets.
- Regulatory awareness: By reviewing draft advice, cryptocurrency companies might be able to predict changes in regulations and know what is expected of them by authorities.
- Virtual analysis: Companies should aim to be able to carry out virtual asset risk assessments, taking the time to comprehend the specifics and complexities of each asset that they accept or manage, given the online nature of cryptocurrency transactions.
5 BEST PRACTICES FOR GOOD CRYPTO COMPLIANCE
Conduct a thorough risk assessment.
The Financial Action Task Force (FATF) advises financial institutions to handle AML/CFT compliance using a risk-based methodology; bitcoin service providers should also abide by these recommendations. According to risk-based compliance, businesses must implement compliance measures in line with the compliance risk that their clients pose. Crypto companies must conduct individual risk assessments, gather and validate client data, and create risk profiles to guide future compliance choices in order to determine that risk.
Recognize Criminal Typologies.
For KYC crypto controls to be successful, a company must have a thorough awareness of criminal typologies and red flags. Numerous crypto money laundering typologies are similar to traditional money laundering typologies, but they are made worse by the hazards that come with using blockchain technology, such faster transaction times and greater anonymity.
Assemble Your Compliance Group.
The quality of your cryptocurrency compliance program depends on the personnel in charge of it. In light of this, it’s critical to make sure that compliance personnel are chosen who possess the knowledge and skills necessary to identify AML/CFT risks as well as an awareness of the crypto risk environment.
Include compliance technology in your process for complying with cryptocurrency regulations.
Businesses must put in place an appropriate software solution to fulfill the data collecting requirements associated with cryptocurrency compliance. With the use of software automation, bitcoin service providers may improve the precision and speed of certain critical KYC procedures, including as transaction monitoring and client due diligence (also known as CDD).
Control the Stakeholders
Similar to traditional financial establishments, bitcoin service providers need to make certain that all parties involved in their compliance solution are aware of their respective roles and duties. In actuality, this means that cryptocurrency companies should designate a money laundering reporting officer (MLRO) to supervise the operation of the AML/CFT program and establish clear channels of communication between senior management and compliance teams.
In a similar vein, cryptocurrency companies should work to maintain a positive rapport with the appropriate financial authorities and regulators in order to speed up the resolution of compliance warnings. Crypto companies should also try to put in place an internal training program to make sure that the compliance staff members are up to date on the most recent AML/CFT best practices, criminal techniques, and legislation.
