CipherTrace Hints at Financial Institutions Incompetence to Trace Digital Currency Transactions

CipherTrace has taken the crypto world in a blow by stating that nearly $2 billion digital currency transactions, processed by the top 10 highly reputed U.S banking entities, go traceless on a yearly basis. CipherTrace takes pride in being the world’s first blockchain forensics team created by the entrepreneurs from Silicon Valley.

The leading blockchain analysis platform has highlighted a suite of financial organizations that have failed to adopt a law-abiding framework for the fulfillment of KYC/AML norms. The firm stated that the unaccounted pool of funds is directed via money service business’ (MSBs) transactions that involve virtual currency exchanges and brokerage services.

As per the statement given by the CipherTrace team, the chief cause for the processing of the transactions, unknowingly, by the banking institutions is the lack of adoption of the latest technological excellence required for the tracing of such trading activities. The report mentioned nearly two-third of the top crypto exchanges as institutions following a “weak KYC” mechanism. It revealed that one of the exchanges allowed the CipherTrace team to withdraw 0.25 BTC per day without any substantial scrutiny, which exposed the weak ecosystem.

In a general rule, the financial institutions need to detect the MSB transactions and report it to the financial watchdog FATF or the Financial Action Task Force. CipherTrace strongly affirmed that the banking institutions would have to comply with the given regulatory guidelines released by FATF, in the future.

“Financial institutions are exposed to cryptocurrency-related risks because they have no way to detect underlying threats,” stated Dave Jevans, the honorable CEO of CipherTrace.

The report highlighted that though the current year witnessed a downfall in crypto-related crimes, there were cases of multiple crypto exchange frauds and hacks, which amounted to $4.4 billion. CipherTrace gave a special mention to the exchanges that halted the operations of privacy coins in accordance with the FATF guidelines.

“In anticipation of the new FATF AML regulations, many cryptocurrency exchanges have preemptively jettisoned their privacy coins; yet, 32 percent of exchanges, including those determined to have weak KYC, still have privacy coins listed,” read the report.

The firm affirmed that stringent regulatory actions have played an important role in reducing malicious and fraudulent activities in the crypto niche. The report stated that “Ciphertrace had previously speculated that the shift from outright thefts to exit scams and other frauds perpetrated by insiders indicated that crypto exchanges had begun to adequately invest in hardening their IT infrastructures.”

David Cox

David is a finance graduate and crypto enthusiast. He projects his expertise in subjects like crypto and Blockchain while writing for CryptoNewsZ. Being from Finance background, he efficiently writes Price Analysis. Apart from writing, he actively nurtures hobbies like sports and movies.

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