19/04/2023 admin

The state of AML and CFT in crypto

Pawel Kuskowski talks to Amanda Wick, founder and CEO of The Association of Women in Crypto, former Chief of Legal Affairs at Chainalysis and Senior Policy Advisor at the Financial Crimes Enforcement Network (FinCEN) who has been in crypto since 2013. They discuss the size of money laundering in crypto and how there are caveats to the estimate of this figure but think that it is realistically similar to the amount of money laundering happening in traditional finance. However, the more important question to ask is “How do you detect money laundering?” which with the tools available in blockchain analytics are so much better in crypto than in traditional finance.

They also discuss how to track exchanges notorious for money laundering via external tracking tools providing honest vetted data but that there could be a structural problem in the incentive structure. There is also a problem if regulatory bodies do not have a designated authority to deal with enforcement in certain jurisdictions. The nature of the US government being reactive to the changes in regulation is causing the US to lose the innovation war in digital assets as crypto exchanges leave the jurisdiction.They also discuss the risk of DeFi being built without building in any AML and CFT measures due to negligence. Digital identity and zero knowledge proofs are pieces that can be part of the future of digital assets because we are now at the point where it is too expensive for DeFi services to move fast and break things without paying attention to any regulatory considerations as a money transmitter.