Sanction Scanner: Regulated Banks VS Bitcoin and Crypto

Understanding the Risks of Cryptocurrencies

Bitcoin was born with the principle of eliminating the need to trust third party payment systems, banks, and brokerage houses. Today, financial intermediaries’ role is to provide trust has emerged from the necessity of the direct connection between the two parties, thanks to Bitcoin’s underlying technology.

One of the easiest ways to buy Bitcoins is through crypto trading platforms. Today, almost all platforms comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) principles. In line with these principles, users have to declare their identity information while registering for crypto trading platforms. Some platforms allow users to make Bitcoin transactions by not exceeding certain limits without revealing their identity information to their users.

The security of bitcoin working with blockchain technology has been among the most questioned and speculated issues since the birth of cryptocurrencies. In the first years of its emergence, Bitcoin, which was frequently introduced for use in terrorist financing, money laundering, and illegal payments due to its semi-anonymity, often made headlines with hacking incidents fear at that time. However, today it is possible to say that it appeals to a vast audience and can be used as an investment tool.

The Bitcoin network has a high level of security. Blockchain technology allows transactions to be carried out within a high-security framework thanks to its distributed and cryptography infrastructure. No hack or theft has ever happened directly over the Bitcoin network. Infrastructure problems of low-security platforms, traps are known as Ponzi Schema; security weaknesses caused by people or intermediaries through fishing and similar means can cause such events to occur.

The UK Treasury said that bitcoin is preferred for cybercrime, not money laundering. In the monetary policies report prepared by the United Kingdom Undersecretariat of Treasury, statements were made about cryptocurrencies, especially bitcoin. Using a quote from the National Crime Agency report, the use of bitcoin in the criminal world was examined. The report pointed out that bitcoin is not a suitable tool for money laundering.


Most highlight results;

  • Cryptocurrencies can be an effective tool to secure financial inclusion.  — Agree %50 ,  Neither Agree or Disagree %22,  Disagree %26.
  • When thinking about the global use of cryptocurrency, do you think of it mainly as a risk or opportunity?  — Risk %55, opportunity %26, neutral %14.
  • When thinking about cryptocurrency risk, are you mainly worried about criminal activity or consumer protection?  — Criminal Activity %61, neutral %20, Consumer Protection %17.
  • How prepared do you feel cryptocurrency exchanges are in dealing with and protecting against the above cybercrime activities?  — Unprepared %51, Neutral %21, Prepared %15.
  • Cryptocurrency transactions are compatible with sanction screening and transaction monitoring.  — Disagree %49, Neither Agree nor Disagree %19, Agree %29.
  • Cryptocurrency transactions offer more transparency than traditional financial transactions.  — Disagree %54, Neither Agree nor Disagree %17, Agree %27.
  • Cryptocurrency service providers have a firm grasp on AML/CTF compliance. — Disagree %50, Neither Agree nor Disagree %23, Agree %20.
  • In five years, cryptocurrencies will be an effective tool for financial inclusion. — Agree %46,  Neither Agree nor Disagree %23, Disagree %24.

The survey shows that respondents are divided over whether they see the cryptocurrency as a risk or an opportunity. There is a significant difference between government and financial industry perceptions and the votes of those directly involved in the crypto industry. The cryptocurrency industry mainly believes that cryptocurrency transactions offer more transparency than traditional financial transactions. Rick Mcdonell, the co-author of the survey, said, “The results of this survey give a unique global insight into how respondents and the crypto industry itself think about cryptocurrency: it’s potential and risky.”


Understanding the Risks of Regulated Banks

Leaked official FinCen documents revealed that five major banks – Deutsche Bank, HSBC, JP Morgan, Bank of New York Mellon, and Standard Chartered Bank – were laundering money. The leak of The official Financial Crimes Enforcement Network (FinCEN) documents revealed that more than $ two trillion US dollars were laundered. As a result of this incident, financial institutions became skeptical about implementing AML laws. Dirty money, on the other hand, still flows freely in famous global banks.

Today, financial institutions should be able to handle transactional risk in real-time to protect their customers without reducing the customer experience or transaction process. This requires a compound of broad insights and specific tactics, including machine learning, artificial intelligence, real-time transactional data analysis, and greater collaboration across the industry to uncover potential criminal activity. Investing in technology and performing the necessary processes is essential in preventing financial crimes as well as other illegal activities with which it is often associated, such as human trafficking and terrorist financing.

Regulation plays an essential role in preventing financial crime, but regulatory compliance is not a magic wand, especially in a fast-moving industry. Financial institutions should take into account the risks they face and take the necessary measures to reduce these risks and protect their customers.



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