Can AML (anti-money laundering) and cryptocurrencies coexist?

Recently, a bank refused to work with a Bits of Golds cryptocurrency marketplace. Reason invoked by the bank: risk of money laundering (AML: Anti Money-Laundering) due to the nature of crypto-currencies (and not the platform Bits of Gold)

Roy Keidar, Law Firm Yigal Arnon & Co., was interviewed by David Grana, and explains the situation with hindsight.

summary

• The Israeli court has ruled that a bank account opened by a cryptocurrency exchange can not be adequately monitored in accordance with AML rules.
• Crypto-currencies are appreciated on the black market.
• The KYC system (Know your Customer) still has shortcomings.
• Cryptocurrency holders benefit from the advantages of anonymisation.
• The blockchain platform is used to eliminate intermediaries within financial transactions.

David Grana: According to the recent decision of the Israeli court, what are the key elements related to the use of cryptocurrencies?

Roy Keidar: It took about a year and a half to make that decision. This is not something major in the whole, however in this particular area, it explains how regulators value their cryptocurrencies. This involved identifying whether a bank's decision to exclude the opening of a bank account on the Bits of Gold Cryptocurrency Exchange, was considered legal. Banks argued that because of the imminent risk of money laundering, they feared that it would be impossible to effectively monitor the bank account in accordance with anti-money laundering rules. Banks were worried about possible repercussions from Israeli and foreign regulators. It therefore deemed it necessary and more secure to prohibit cryptocurrency transactions and informed the account holder to seek another bank to manage its business. Bits of Gold was one of the first platforms of Bitcoin, which insisted that it did not violate any law.

David: In this perspective, have the courts entrusted this flaw to regulators?

Roy: Yes, the courts have entrusted the resolution of this problem to the regulators, while allowing the banking institutions to refuse the opening of a particular account.

David: Since cryptocurrencies use the Blockchain platform, should the investor, in this case, be forced to reconcile with the AML and KYC laws?

Roy: Suppose the AML applies to all investors in cryptocurrencies. It would be necessary to know whether the anti-money-laundering struggles apply in the exchanges between the fiduciary currencies (EUR) and the cryptocurrencies. Knowing that the Blockchain is a public ledger that records all transactions, we can go back and see exactly what happened. The innovation brought by the Blockchain technology gives us this opportunity. However, although it records all transactions, cryptocurrency users benefit from anonymization. The wallet contributes greatly because buyers and sellers operate almost anonymously. Obviously, we can not ignore the fact that crypto-currencies are favored on the black market. But this is only a perception. The process is anonymous when exchanging one cryptocurrency with another. The codes act as identification. Rest assured, the security measures act so that we can go back to the original wallet, if the fiat money is used in an illegal activity. I see that in some countries you can open wallets and deposit cash without going through the KYC process. The fiduciary money system has significant flaws in addition to the inherent costs. It should then be addressed.

What about the traceability of the initial purchase of cryptocurrency?

Roy: The passage through the KYC process to exchange cryptocurrencies is mandatory in some countries, while in other countries this procedure is optional. So, yes, it can be traceable, but again, I stress that the system itself has flaws.

David: Is there a lack of global cooperation in KYC and AML?

Roy: Indeed, although cryptocurrencies are only a tiny part of the problem with AML and KYC. For example, there is international collaboration in the fight against money laundering and terrorist financing of the FATF Financial Action Task Force. If the standards imposed on all jurisdictions are respected, collaboration is best facilitated.

David: Is it possible to keep cryptocurrencies for use in a jurisdiction, while complying with KYC and AML?

Roy: Entry points for cryptocurrencies can be regulated. I am referring to purses that require a complete KYC process when it opens. The disadvantage lies in decentralization. These purses can exchange currencies worldwide. To regulate these transactions, you would need the cooperation of regulators around the world.

David: How is the Blockchain applied in the big financial ecosystem?

Roy: I studied blockchains for two years. Crypto-currencies are in fact only an application of the blockchain, to study its multiple uses is fascinating I am one of those who think blockchain is the biggest innovation since the Internet. The internet is about data and information, while the blockchain does away with intermediaries. Which solves one of the biggest problems in the world today. It provides a network where you can practice your business, transfer value, use smart contracts,record activities and more, while saving a lot of money, time, energy and allowing appropriate and congruent governance. Its application tends to diversify, so that in the future, we will see the blockchain in contexts still unsuspected. That's why this technology is so captivating. We already see public blockchains like Bitcoin. We will also see big companies using private blockchains, like the R3 Consortium,which includes more than 40 different companies. Its application will extend to royalties, real estate, intellectual property and governance . It is already used to identify refugees thanks to its decentralized nature. You can use it to provide a temporary identity. However, many changes are still to be expected because the system is optimizable. I am not even sure that the technology in its current form is the one we will see later. I think there will be major progress in the multiple uses and applications of the blockchain.

What do you think of Roy's explanations regarding the evolution of the blockchain? Do you think that AML and cryptocurrencies can coexist? Tell us your opinions in the comments section below.

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Posted from my blog with SteemPress : https://infos.link/can-aml-anti-money-laundering-and-cryptocurrencies-coexist/

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