On Aug. 10, 2021, the Financial Crimes Enforcement Network (FinCEN) – a bureau of the U.S. Department of the Treasury – announced its first enforcement action against an unregistered futures commission merchant (FCM). FinCEN assessed a civil money penalty of $100 million against cryptocurrency exchange and derivatives trading website BitMEX for violations of the Bank Secrecy Act (BSA) and FinCEN’s implementing regulations.
“BitMEX’s rapid growth into one of the largest futures commission merchants offering convertible virtual currency derivatives without a commensurate anti-money laundering program put the U.S. financial system at meaningful risk,” FinCEN’s Deputy Director AnnaLou Tirol said. “It is critical that platforms build in financial integrity from the start, so that financial innovation and opportunity are protected from vulnerabilities and exploitation.”
Regulations contained within the U.S. Bank Secrecy Act (BSA) and FinCEN require FCMs and other institutions to undertake customer due diligence and to report suspicious activities. Specifically, FinCEN said that more than $209 million was transacted by known darknet actors on BitMex, while 588 specific transactions went unreported by a Suspicious Activity Report, as required by regulations.
The BitMex case shows that the U.S. regulatory agencies are determined that FCMs – especially those operating in the crypto markets – must comply with regulations. The case has ushered in a new age of regulatory action. FinCEN is likely to continue challenging and investigating other platforms to tackle money laundering, terrorist financing, ransomware attackers and darknet marketeers.
Those cryptoverse actors who want their reputations (and legal status) to remain untarnished need to partner with a compliance provider that knows and understands the growing list of compliance requirements from FinCEN and other regulatory agencies.
Meeting regulatory expectations
Compliance has been a growth sector within the financial service industry for well over a decade. The re-regulation of financial services since the global financial crisis has vastly expanded the compliance obligations of companies, financial institutions and individuals alike. It has now come to the crypto markets.
This new compliance environment means that organizations and their customers must provide the same data multiple times, especially for rules governing know your customer (KYC), anti-money laundering (AML) and combatting the financing of terrorism (CFT). Ensuring and proving that financial transactions are compliant and fraud-resistant has never been more costly or time-consuming. It is also holding back the more rapid development of the emerging highly secure blockchain tech and crypto markets.
Multiple regulatory technology (RegTech) companies have sprung up in response, but these only operate in particular silos. This puts an extra layer of difficulty onto an already fractured and overlapping system. This affects merchants and customers alike, who not only have to double up on the data they provide, but also the fees they need to pay. As the crypto world goes mainstream it is vital that ways are found to improve this situation.
Dublin, Ireland-based Sekuritance is working to break through this tangled web of regulations, obligations and repeat data. It is a unique RegTech platform that is advancing the blockchain ecosystem. Its platform acts as a single place from where anyone can run regulatory and compliance screening programs and queries. These include secure data tokenization, transaction monitoring, personal and business identification and verification, fraud monitoring and other programs. This is available for institutions and businesses of all sizes regardless of what their needs might be.
With one integration, customers can maintain all their RegTech providers in the same interface and can easily add new providers. The platform’s unique rules engine and intelligent routing capabilities increase acceptance rates and help to detect fraud.
Despite DeFi’s rise in popularity, it will not be able to reach commercial and legal sustainability without the use of robust KYC and AML/CFT protocols. At the same time cryptocurrency’s anonymity is a myth. Very few mixing services can outwit modern deanonymization technologies for tracking bitcoin and other cryptocurrency alternatives.
Sekur.Trace by Sekuritance is built for government agencies, banks, financial institutions, cyber-crime and financial-crime authorities, by receiving insights into how people spend their crypto holdings. It helps establish whether a particular crypto transaction or crypto wallet was involved in any scams or darknet activity.
In total, there are currently six products in the Sekuritance RegTech suite. These include Sekur.Vault, Sekur.MFA, Sekur.Alert, Sekur.Transact, Sekur.Trace and Sekur.Certify. These products help financial institutions to obtain industry certifications, to validate and process 3D checks, to tackle financial crime and certify controlling power, among others.
A compliance ecosystem
Furthermore, not only does Sekuritance provide its own solutions, but it also welcomes developers to connect to its platform and develop new ones. It also has over one hundred different APIs with which developers can integrate.
Completing the ecosystem is Sekuritance’s native cryptocurrency called the SKRT token. This is a new cryptocurrency for enterprise-class regulatory technology compliance, security and more. It is a utility token that leverages the consensus-driven blockchain’s permanent immutable nature for the purpose of underpinning a new independent digital economy.