Skip to main content

Coronavirus-exploiting scams demonstrate the urgent need for regulatory compliance

With coronavirus infections exceeding 1.3 million, and its terrible impact continuing to occupy the forefront of our minds, talk of the ongoing implementation of FATF-recommended INR15, originally scheduled for review just months from now in June 2020, has faded into the background. Yet in the midst of this turmoil, the urgent need for regulatory compliance has only become all the more clear.

Interacting with the virtual asset economy has always, to this point, carried with it an unspoken element of risk. By their very pseudonymous nature, cryptocurrency transactions are difficult to monitor, reverse, and police. However amidst growing chaos over the coronavirus, and at a time when many expected cryptocurrency to show its value, the virtual asset economy has fallen flat in more ways than one, not only struggling to deliver on its promise as a legitimate store of value, but reminding us as well of its alarming capabilities as a pseudonymous vehicle for criminal ambitions

Over the past month we have assisted an international law enforcement agency in tracking down over $2 million in illicitly-acquired cryptocurrency as part of an ongoing investigation. These ill-gotten gains are the result of a scam operation that used fake sales-listings for facemasks and other health essentials to swindle desperate, unsuspecting buyers out of their money. If this were not bad enough, however, this is far from the only cryptocurrency-based scam that has surfaced in the midst of this outbreak. Scammers impersonating the WHO and other well-reputed organizations have plagued the innocent with donation-seeking calls for weeks, and even these are merely a subgenre of one of a whole litany of exploitative scams ranging from fraudulent treatments to phishing emails to fake charities.

FATF’s recommendations represent the first step of many towards a more intelligently-regulated and, by extension, more legitimate cryptocurrency space. As designated and licensed VASPs under the FATF recommendations, businesses seeking to operate in the virtual asset economy risk audit, investigation, sanction, and even complete license revocation for failing to comply with the new AML/CFT standards set to emerge in the coming months. The technology has long existed to close the liquidation loophole and crack down on crypto-based money laundering, but now such regulations as the much-discussed Travel Rule, which necessitates strict, universal record-keeping of sender and recipient KYC information as well as transaction details for any transactions over a certain threshold, have finally introduced legitimate financial incentive to comply, though only to a fraction of the extent expected of traditional financial institutions.

The fact of the matter is that the current FATF recommendations relating to crypto industry represent only the foundations of a far more robust system. VASPs are held to a far more lenient and flexible set of standards than their traditional counterparts, as financial institutions in accordance with FATF’s overarching recommendations are required not only to submit to inquiries and audits, but to actively report suspicious transactions and accounts to their associated FIU/regulating body at risk of severe sanction. Cryptocurrency at large represents only a small fraction of FATF’s overarching concerns, representing perhaps $8 billion USD of the possible $1.6 trillion in funds impacted annually by all forms of money laundering

The AnChain.AI team is committed to bringing trust to trustless systems, and our products are built to facilitate the level of AML/CFT compliance necessary to the emerging regulatory landscape, ensuring that anyone, regardless of their level of experience, can confidently interact with decentralized technologies. FATF’s latest recommendations, however uncomfortable they may be upon initial adoption, represent a genuine effort towards broad adoption and legitimizing recognition through internationally-collaborative compliance. If recent history is any indication, the businesses operating in the virtual asset economy may very well find themselves without a future if they fail to heed them.