EXCLUSIVE: Leading crypto industry expert says drop in crypto scams in 2020 should be taken with a pinch of salt as dark market and sanctions breaches saw worrying rise - AML Intelligence
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EXCLUSIVE: Leading crypto industry expert says drop in crypto scams in 2020 should be taken with a pinch of salt as dark market and sanctions breaches saw worrying rise

By Vish Gain for AMLi

THE NUMBER OF cryptocurrency-related scams may have dropped in 2020, but that does not undercut the alarming rise in high-risk areas of crypto scams such as the dark market, a leading virtual assets industry expert told AML Intelligence Thursday.

Paweł Kuskowski, who is the CEO and co-founder of blockchain analytics company Coinfirm, said that the scale of crypto-related scams in 2020 was estimated at $10.5Bn, slightly lower than 2019 — which was the highest year on record. However, he warned that there was a simultaneous rise in sanctions breaches, hacks, ransomware and dark market-related activity.

Speaking at our #GlobalActionsAML conference, he warned that even though crypto crimes are significantly less in value than ‘traditional’ crimes, both are equally worrying. Citing data gathered by his firm, he noted that while crypto-related crimes amounted to $10.5 billion — a diminutive figure compared to ‘traditional’ crimes valued at $1.4 trillion — it is just as risky in percentage terms of total transactions value.

“Cryptocurrency growth has been spectacular, both in terms of market value and adoption by institutions. Apart from traditional crypto players, financial institutions have also moved into this space,” he said, noting that all major US banks today have retail clients using cryptocurrencies in some form.

And that has led to worrying, but not unexpected results. He noted that accompanying this meteoric sectoral growth is the difficulty in detection. “A typical large US bank sees around $2 billion in undetected crypto transactions annually,” he said. “This is adding complexity to compliance analysis.”

Regulators are paying attention to this rise. Kuskowski said that the big regulatory figures, such as the global Financial Action Task Force (FATF), the Financial Crimes Enforcement Network (FinCEN) in the US, and the Swiss-based Bank for International Settlements (BIC) are all paying close attention to this trend and trying to keep up.

“The FATF, in particular, has been putting in a lot of work to understand the risk and decide how to address it,” he said, citing the latest FATF guidance.

When asked about the big players in the private space, he noted US-based crypto AML companies such as Coinbase, Gemini and Bitstamp, among others, tend to have “more sophisticated tech” in terms of KYC and AML.

He added: “The risk in crypto is not larger than traditional finance because we can use sophisticated analytics on the entire network, giving us better results and better compliance than traditional finance offers.”

Consultancies, too, have been flocking to this rising space, where they see an opportunity to expand their market. JP Morgan and BNY Mellon are only some of the big investment names Kuskowski mentioned, noting that Europe is seen as an active market in the crypto space.

The European growth runs parallel to the many AML directives coming down from the EU Commission, the latest of which is the 6AMLD. In a poll at the end of Kuskowski’s presentation, AMLi chairman Stephen Rae asked the delegates whether they thought crypto transactions should be included in AML directives.

Unsurprisingly, 98% of respondents answered yes.

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