Cryptocurrencies have revolutionized money in just a short amount of time. Just as cryptocurrencies have changed the way we view money, they have also changed laundry and crimes. Where there is money, there are also fraud and laundering schemes.
As you likely know, there have been dozens, if not hundreds, of major cryptocurrency-based crimes. Crypto assets are actually some of the riskiest assets for financial institutions as a result.
Law enforcement and different financial institutions have begun trying to regulate cryptocurrency-based crimes with anti-money laundering policies. The goal of these policies is to make crypto laundering riskier and less profitable to help mitigate crypto fraud and laundering.
If you have an interest in cryptocurrency, understanding anti-money laundering is an important part of the industry. In this article, we define anti-money laundering, how it works, and why it matters for companies like Mining City.
What is Mining City?
Mining City is a platform that provides mining plans, giving users access to hash power and mining rewards. Hashpower is the computing power needed to generate cryptocurrencies.
Mining City users can buy crypto mining plans that give them access to hash power and mining rewards. Hashpower provided by Mining City is used to mine Bitcoin (BTC) and other cryptocurrencies.
How Does Mining City Protect Against Money Laundering?
Mining City has taken proactive steps to be an industry leader in providing its community a legal and compliant environment to engage with blockchain and cryptocurrency. Mining City leaves banned markets and takes a compliant approach to new laws and regulations, adjusting to global markets. A great example of Mining City’s commitment to compliance is its recent implementation of KYC, AML, and other compliance check processes.
Cryptocurrency and crypto mining industry are new and gradually become more and more regulated markets – the laws, rules and regulations change frequently and vary by location. As new regulations go into effect, market players must adjust. By enacting strict KYC requirements, Mining City has taken steps toward reducing the potential for fraud and help prevent against money laundering. While there is no magic bullet to prevent bad actors from exploiting a company or business, Mining City is committed to responsible behavior and has a talented team of legal and compliance professionals who are equally committed to ensuring adherence to the law.
What Is Anti-Money Laundering For Crypto?
Anti-money laundering for crypto is simply the laws, practices, and regulations used to stop criminals from using illegally obtained cryptocurrency and turning it into money. Many different policies and regulations fall under anti-money laundering using this definition.
How Does Crypto Anti-Money Laundering Work?
The Financial Action Task Force was founded in 1989 to help combat money laundering. Through the years, this task force has changed some of its approaches and regulations based on popular forms of illegal money trends at that time. In 2001, for example, its mandate expanded so that it included terrorism financing.
Now, the financial task force also sets global laws for anti-money laundering relating to cryptocurrency. It was only a few short years ago that the Financial Action Task Force started publishing guides on crypto anti-money laundering. In 2014, members quickly took action in order to set policies and publish guidance relating to the issue.
Today, the Financial Action Task Force still defines anti-money laundering global laws, but there are many other regulatory bodies that transition the Financial Action Task Force’s crypto and anti-money laundering recommendations into law.
Once these recommendations are turned into law, virtual asset service providers regulate exchanges, issuers, protocols, and marketplaces to help stop laundering head-on. They do this by monetary transactions, employing compliance officers, and other regulatory actions.
Why Is Crypto Anti-Money Laundering Important?
In 2020, laundered cryptocurrency exchanges reached $2.3 billion. Many of these illegal activities made major news headlines. Needless to say, many criminals flock to cryptocurrency to transition illegal cryptocurrency into money.
As such, crypto assets tend to be the riskiest for any financial institution. This fact has caused global governments to be cautious of the industry. Countries like China and South Korea are incredibly strict on crypto exchanges and mining.
The goal of crypto anti-money laundering is to make cryptocurrency less risky. It does this by making cryptocurrency fraud more difficult to commit and less profitable for the criminal. Ideally, this makes crypto less risky for financial institutions.
Crypto Anti-Money Laundering Regulations
So far, we have covered what crypto anti-money laundering is in general. Let’s learn some specifics about these anti-money laundering regulations and techniques. Here are the most recent crypto anti-money laundering regulations and enforcement actions in the United States:
National Cryptocurrency Enforcement Team
In 2021, the National Cryptocurrency Enforcement Team was created to help investigate and prosecute illegal uses of cryptocurrency. It specifically focuses on targeting virtual currency exchanges, mixing, and tumbling service crimes.
This National Cryptocurrency Enforcement Team was overseen by the Assistant Attorney, but it also worked with the Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section, as well as the Computer Crime and Intellectual Property Section.
Anti-Money Laundering Act
Also in 2021, Congress voted on the Anti-Money Laundering Act. This act was partially to override President Trump’s veto of a spending bill. The act also amended the Bank Secrecy Act, which had not been amended since 2001.
The Anti-Money Laundering Act has roots in past legislative attempts to reform the Bank Secrecy Act, though. For example, the Corporate Transparency Act of 2019, the STIFLE Act of 2020, and the Illicit Cash Act of 2020 are older versions of the Anti-Money Laundering Act.
Ultimately, the goal of the Anti-Money Laundering Act is to share information and help different governmental agencies coordinate with one another to fight anti-money laundering together.
Bank Secrecy Act
The Anti-Money Laundering Act reformed the Bank Secrecy Act so that it includes cryptocurrency and similar digital assets. Although this is an improvement, there are still some serious downsides to the Bank Secrecy Act. For example, critical terms like Bitcoin and digital currency are missing, though some are pushing for further reform.
Boards of Directors, Compliance Officers
A board of directors is responsible for a bank’s anti-money laundering compliance. These compliance officers ensure that senior management and the entire bank are on board with the approved compliance program. It may be helpful to think of these compliance officers as enforcing the acts and policies above.
Some things that compliance officers do to regulate anti-money laundering include conducting anti-money laundering risk assessments, improving customer due diligence, building better resources and technology, and updating policies and procedures.
Anti-money laundering has been a real issue for cryptocurrency. Of course, most money launderers still want real cash, not cryptocurrencies, but money laundering has changed dramatically with the rise of cryptocurrencies. Anti-money laundering is specifically set up so that it helps counteract money laundering, including laundered cryptocurrencies.
To keep up with changing criminal tactics, governments and organizations have worked together to help set up anti-money laundering policies so that financial institutions have less risk when dealing with cryptocurrency assets.
We still have a long way to go in terms of crypto anti-money laundering. Introducing key terms into top legal documents is just one step we need to take to improve anti-money laundering tactics, but that’s far from being the only thing that needs to be improved.
In the future, we hope to see better anti-money laundering techniques to help minimize cryptocurrency fraud and asset risk as much as possible.