Big Lessons for Crypto Companies From Even Bigger AML Fines

March 6, 2023 by Verafin

For crypto companies, the immense challenge of navigating the  multitude of regulators, escalating number of fines, and evolving landscape of compliance is overwhelming. Crypto companies are facing increased pressure to remain compliant, while avoiding penalties and reputational damage.

The Current Landscape of Compliance

As the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) regulations continue to evolve, FinCEN’s Advisory on Illicit Activity Convertible Virtual Currency from May 9, 2019, remains crystal clear on compliance — institutions must file a SAR/STR if they suspect funds derived from illegal activity, or any attempt to disguise funds.

In regard to sanctions screening, the Office for Foreign Assets and Control (OFAC) is also quite explicit. In their October 2021 release Sanctions Compliance Guidance for the Virtual Currency Industry, OFAC stated that, “as sanctioned persons and countries become more desperate for access to the U.S. financial system, it is vital that the virtual currency industry prioritize cybersecurity and implement effective sanctions compliance controls…”

In March of 2022, the U.S. government issued directives to further strengthen regulatory compliance requirements pertaining to virtual currencies. President Biden issued Executive Order (E.O.) 14067, Ensuring Responsible Development of Digital Assets, outlining the U.S. government’s approach to the threat posed by digital assets such as cryptocurrency to the US economy.

Subsequently, the U.S. Department of the Treasury issued Action Plan to Address Illicit Financing Risks of Digital Assets, addressing the significant illicit financial risks posed, while identifying seven priority actions to mitigate those risks to the U.S. economy. 

Seven Priorities of the U.S. Department of the Treasury Action Plan

This Action Plan was a solid start to the guidance that crypto companies are looking for in preparation for upcoming changes to their AML/CFT programs. However, more guidance is clearly needed.

Compliance is more important now than ever and crypto companies will need effective and efficient anti-financial crime management solutions to avoid financial losses and reputational damages.

The Cost of Non-Compliance

Failure to comply with current and future regulations, can cause considerable, potentially irreversible, harm to the integrity of your crypto company, resulting in substantial civil and regulatory penalties, reputational damage, or unsatisfactory regulatory examinations.

Here is an overview of crypto company fines handed down by regulators in 2022:

These fines show the real-world consequences of non-compliance for crypto companies. It is imperative that crypto companies abandon legacy manual solutions and adopt innovative solutions to maintain compliance while keeping pace with future regulatory change.

Prepare your Company for Future Changes, Today

To keep pace with a constantly changing regulatory landscape, crypto companies need automated solutions that give them the full picture of crypto-related crime. Many crypto companies use disparate systems to handle AML/CFT requirements — with many employing several different systems to handle reporting and compliance tasks. For more effective AML programs, crypto companies should consider AML/CFT solutions that includes suspicious activity monitoring both on and off the blockchain, streamlined case management, and behavior-based risk management.

Maintaining compliance with sanctions is an essential requirement for crypto companies. Traditional AML and sanctions compliance solutions often fail to incorporate necessary geolocation tools, including automated IP address blocking systems. Without these essential elements, crypto companies are at risk of unknowingly processing transactions from countries located on OFAC’s sanctioned country list, often resulting in penalties and reputational damage.

Verafin’s All-in-One Anti-Financial Crime Solution for Crypto Companies

Verafin’s Anti-Financial Crime Platform for Crypto Companies offers an all-in-one solution including transaction monitoring, case management and regulatory reporting. With 20 years of experience, Verafin has in-depth experience assisting financial entities to adapt and evolve to meet new or changing compliance obligations.

Our complete solution encompassing blockchain and fiat transaction monitoring, targeted sanctions screening analytics, automated watchlist updates, and behavior-based analytics, can protect your crypto company and your customers from potentially suspicious activity, as well as reputational and compliance risks. Verafin offers integrated case management to facilitate complex investigations that cross fiat and crypto transactions and streamlines reporting with automated SAR/STR completion and e-filing.

Evolving regulatory expectations are placing growing demands on crypto compliance. To learn more about Verafin’s Anti-Financial Crime Platform for Crypto Companies, download our Fact Sheet.

Fact Sheet: Verafin’s All-In-One Anti-Financial Crime Platform for Crypto Companies

Learn more about how Verafin streamlines AML compliance and fraud detection for crypto companies.

Crypto Site: Verafin’s All-In-One Anti-Financial Crime Platform for Crypto Companies

With the world’s only all-in-one Anti-Financial Crime platform for Crypto Companies, Verafin provides a full fiat-to-blockchain view of cryptocurrency activity to monitor and investigate both on-chain and off-chain risk. Verafin's holistic solution offers the investigation tools, case management and regulatory reporting capabilities critical to increasing the efficiency and effectiveness of crypto compliance programs.

Verafin, a Nasdaq company, is the industry leader in Financial Crime Management providing a cloud-based platform for AML, Fraud Detection and investigative Case Management. An all-in-one crypto compliance offering, Verafin supports complex investigations, enables robust transaction monitoring and improves efficiency of compliance processes. Its multi-chain visual investigation tools help streamline case investigations and trace the flow of funds across both cryptocurrency and fiat networks.

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