Fighting money laundering in crypto, explained

Fighting money laundering in crypto, explained

Criminals often presume that blockchain transactions are anonymous, but it is possible to untangle and uncover fund flows using analytics tools.

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Given how many transactions are made on blockchains every day at high speed, automation is key.

Manual monitoring is impractical because of these dizzying volumes. Analytics services such as Crystal work to automate this monitoring process with 24/7 updates, so crypto businesses (as well as banks and financial institutions whose clients deal in crypto) can be alerted immediately when something is believed to be wrong.

Recent guidelines released by the Financial Action Task Force (FATF) show there are a combination of red flag indicators to be watched for when it comes to money laundering. The set of indicators to combat such illicit activity is in constant development, with information about the entity in question being one of the highest priorities, along with monitorization of transactions and transaction patterns being used, and the connections made.

The combination of factors is key to potential risk, and the FATF has highlighted that these factors should not be viewed in isolation, but as part of an overall contextualized picture.

With this overall picture in mind, Virtual Asset Service Providers (VASPs) must take anti-money laundering factors defined by the government, and with their compliance team decide what combination of factors need to be looked at for their unique compliance needs. The customizable nature of software like Crystal analytics allows VASP compliance teams to set up their own AML requirements.

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Criminals often presume that blockchain transactions are anonymous, but it is possible to untangle and uncover fund flows using analytics tools.

Unlicensed crypto exchange operator faces 25 years for laundering $13m

Unlicensed crypto exchange operator faces 25 years for laundering $13m

A California resident is expected to plead guilty to charges of operating an unlicensed exchange and laundering more than $13 million.

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49-year-old peer-to-peer crypto trader, Hugo Sergio Mejia, has agreed to plead guilty to charges of money laundering and operating an unlicensed money transmitting business.

The U.S. Attorney’s Office accuses Mejia of using a suite of limited liability corporations to conceal the true nature of his operations while exchanging cash for Bitcoins over a period spanning more than two years.

The complaint accuses Mejia of transferring funds between Bitcoin and U.S. dollars worth at least $13 million for clients from May 2018 and September 2020 using his companies Worldwide Secure Communications, World Secure Data, and The HODL Group.

According to the proposed plea agreement, Mejia negotiated with a client who was cooperating with law enforcement to exchange Bitcoin for tens of thousands of dollars in cash between May 2019 and March 2020.

Despite the client informing Mejia that his primary customer was an Australian methamphetamine buyer during a meeting in March 2020, Meija was willing to proceed with the transaction. The complaint states Mejia carried out transactions worth more than a quarter of a million dollars for the client:

“Mejia and the client who was working with law enforcement conducted five Bitcoin-cash transactions that cumulatively exceeded $250,000, the plea agreement states.”

The client conducted at least five transactions worth more than $250,000 in total.

As part of his plea deal, Mejia has agreed to forfeit almost $234,000 in cash and approximately $95,500 in cryptocurrency and metals that were found at his California residences.

The deal also mandates that from now on, Meija will „maintain, at most, one virtual currency wallet, and that one wallet shall be used for all personal transactions, limited to only using and possessing open public blockchain virtual currencies and restricted from using privacy-based blockchain virtual currencies.“

Mejia was charged on Friday, Jan. 29, and is expected to plead guilty to one count of money laundering and one count of operating an unlicensed money exchange which he failed to register with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

Mejia is expected to go before a U.S. district court in March and faces a maximum statutory sentence of 25 years behind bars in federal prison.