Even as the risks associated with the use of cryptocurrencies like money laundering, terror financing continue to increase as the sector evolves, the anonymity of crypto is fast becoming a myth with on-chain analysis tools that aid in tracking payments from different people and their wallets.
In an interview with CNBC TV18
, Jonathan Camilleri Bowman, CEO of Sekuritance, a RegTech platform from where governments can use blockchain as a regulatory solution to identify, verify and transact safely online, said increasing regulatory enforcement has pushed for all organizations no matter the size to have an effective compliance program within their business structure.
The new compliance mandates necessitated by governments across the world means customers provide data multiple times, especially for rules governing KYC, anti-money laundering, and combatting terror finance, holding back the rapid development of highly secure blockchain and cryptocurrencies market.
While these challenges have given rise to several regulatory technology (RegTech) companies, they tend to operate in silos, adding an extra layer to difficulty to an already fractured system, with customers having to double up the data they provide and pay extra fees for compliance.
“Taking into consideration how the world is evolving, increasing regulatory enforcement has pushed for all organizations no matter the size to have an effective compliance program within their business structure. Keeping things in check is an effective way of keeping away from hefty fines and reputational damage which could be detrimental to a business. More than that, no business would like to be at a gateway for laundering dirty money,” Bowman said.
He added that through the use of different services like KYC, KYB, on-chain analytic checks, and transaction monitoring, an organization would be ensuring that its activities are not associated with or facilitating illicit activity.
He further said the cost of traditional methods of compliance have continued to rise throughout the years and have proven to be a time-consuming matter, however, the introduction of RegTech solutions have made compliance services more accessible to all kinds of organizations, with most companies spending a large portion of their budget on compliance and legal costs, allocating resources to build a team of compliance experts, and spending tons of capital for over-the-top KYC products which many start-ups simply cannot afford.
When asked to comment on RegTech companies usually operating in silos, thereby increasing difficulties of merchants and customers having to pay extra fees and double up on the data they provide, Bowman said the solution is being able to provide a full suite of services, which means saving our customers' time and resources that they would otherwise spend searching for different providers, negotiating with each of the solution providers (some of which have really lengthy processes of defining success metrics), building different API integrations, etc.
Asked if the advancement of deanonymization technologies burn down the edifice of DeFi that is based on the premise of anonymity, Bowman said blockchain transactions are typically pseudonymous in nature and leave tracks, which can be analyzed with the help of technology in an attempt to infer someone’s identity, or at least their affiliation to certain groups of people or types of activities, while on the other hand, technology has certain limitations and network analysis alone might not always suffice.
“It is worth noting that this presumed anonymity in DeFi projects has been on the regulators’ radar for a while – last year there was a guidance by the global anti-money laundering watchdog (FATF) stating that owners and operators of DeFi arrangements need to implement procedures to identify their users, which basically means that DeFi users should no longer be able to stay anonymous,” he said.
Asked to explain how 'Sekur.Trace' – one of the six products in the Sekuritance RegTech suite helps government agencies, banks, financial institutions, cyber-crime, and financial-crime authorities track scams and darknet activities, Bowman said the anonymity of crypto is fast becoming a myth yet it is still difficult to track what people actually spend their crypto assets on.
“Sekur.Trace is our on-chain analysis tool that aids in tracking payments from different people and their wallets. Sekur.Trace lets you know whether a wallet or user has been involved in illicit activities like fraud, ransomware attacks, money laundering events, or darknet activities, as well as if someone has tried to obfuscate their identity through the use of tumblers, mixers, or similar technologies,” he said.
He added that the tool has different use cases depending on the user, for example, a bank could implement on-chain screening as part of their enhanced due diligence procedures, especially when the customers' funds and overall wealth are coming from alleged trading in crypto assets.
-The author, Murtuza Merchant, is a senior journalist and tracks stories in the blockchain and cryptocurrency space.
(Edited by : Pradeep Suresh V)