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Coinbase Landed Patent for a New Compliance System to Root Out Non-Compliant Accounts

US cryptocurrency exchange Coinbase has been awarded a new patent from the US Patent and Trademark Office for an automated system to flag and remove non-compliant user accounts.

The filing was published on Nov. 19, detailing a new system with a model that “determines a compliance score for each one of the accounts based on the respective factors associated with the respective account.”

According to the patent, the automated system will be accompanied by a scoring mechanism that would be ruling out non-compliant user accounts, ones that are suspected of trafficking in illegal activity in particular. The scoring system consists of user-inputted or executed data points, including the user’s age, account balance, transaction volume, location, verification history and the number of devices with access.

The accounts that are suspected of illegal activities would be suspended and referred to law enforcement authorities if the transaction involves more than $2,000. On the other hand, good accounts are allowed to pass through the system untouched.

The filing read: “An investigator may be able to determine whether an account is being used for illicit activities by doing research on the parties of the transaction who receive or send payment and determining whether such parties are regularly involved in illicit activities. It may, for example, be relatively easy to determine that a party sending or receiving payment is in the business of conducting online services that may be illegal.”

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How Does MakerDAO Stay Compliant on over 400 Global Partnerships?

Exclusive Interview with Gustav Arentoft of MakerDAO (Link: Part 1 and Part 2)

MakerDao is the protocol behind Dai, the world’s first decentralized stablecoin and the contemporary success story for decentralized finance (DeFi). The project went live in December 2017, with Dai as the USD stablecoin and Maker functioning as the governance token. In the world of decentralized finance, MakerDao is by far the most popular DeFi protocol running on the Ethereum network and has been steadily increasing traction since its launch. After only a year and a half into production, MakerDao reached its all-time high market cap of $97M on July 9, 2019.

In part three of our interview with Gustave Arentoft, Business Development, Dai Speaker, MakerDAO: he talks to Blockchain.News regarding the necessity for decentralized banking for the institutionally unbanked and regulatory requirements for operating across multiple jurisdictions.

Regulating on the Edges

Maker has users in over 120 separate and specifically financially regulated jurisdictions across the globe. To regulate a truly decentralized entity, such as Bitcoin or Ethereum, at its core to satisfy every local financial compliance protocol is basically “not possible” according to Arentoft. “We regulate where the lending protocols meet the jurisdiction. So with a decentralized product you don’t regulate the core but you regulate on the edges, the edges which meet the specific local jurisdiction.”

Maker has more than 400 different partnerships globally. These partners are already using DAI and collateralized debt positions (CDP), Arentoft stated that every single time a project is tied to any legal jurisdiction, compliance with local regulation must be made but he explained this process is often simplified by their active partners’ foothold in that particular jurisdiction. He said, “For example, one of our partners is Wirex, which is a debit card company, and they have an e-money license in the UK to operate—so that’s one way Maker becomes regulated in regards to the UK’s jurisdiction as that company uses our product within the local regulatory guidelines. Regulation is something that we’re really on the forefront with and we try to ensure that we won’t get ourselves or any of our partners in trouble with regulators.”

Education is the Key

In regards to regulators, Arentoft believes that they have been labeled as having fairly negative approaches to crypto and token regulation, whereas he feels it is more a matter of education at this point and that it is a necessity for developers to be a part of the growing conversation. On meeting the regulators at the Singapore FinTech Festival, he said, “I felt that they really wanted to learn and explore this space not just reject it.”

Maker were invited to present on the future of sustainable finance by the Asian Development Bank a week prior to the Singapore FinTech Festival. Arentoft again highlighted that there is an outsider perception that DeFi organizations are met with nothing but vitriol from the central banks who are perceived as only viewing the technology as a threat to their traditional institutions. He stated, “41 central banks were present and what they actually are focused on is that we have the ability to serve people that banks had previously deemed too unprofitable to service. For banks to set up an affiliate abroad is a very expensive process compared to downloading an app on your smartphone.” He added, “If you look at the predicted increasing smartphone adoption rate for the next few years, it will allow us to work together with these banks in areas that require our operations to bank the unbanked—our mission is to help these people after all.”

FATF Assessment Finds Majority of US Exchanges are Compliant with Virtual Asset Guidance

The Financial Action Task Force (FATF) has published an assessment of the US’s compliance with its revised criteria for anti-money laundering (AML) and terrorist financing (CTF) through virtual assets and found that most virtual asset providers are compliant.

Recommendation 15 – Travel Rule

It began in June of 2019, one of the most authoritative regulatory organizations worldwide, the Financial Action Task Force (FATF), issued new guidelines on how digital assets should be regulated.

A point that caused great concern and confusion for exchanges was the “travel rule,”: which refers to section 7(b) in the Interpretative Note to Recommendation 15 in the FATF Guideline, which requires Virtual Asset Service Providers (VASPs) to collect and transfer customer information during transactions.

While the recent FATF assessment concludes that, “the US remains rated as Largely Compliant with R.15,” it still cited minor deficiencies such as the requirement for US-registered money services to only be obligated to keep records of transactions of $3,000 or more, a limit three times that recommended by FATF, which the regulatory watchdog believes could be manipulated by bad actors. From the assessment, FATF wrote,“This higher threshold is not clearly supported by low ML/TF risks.”

The FATF also concluded that US Regulators, such as FinCEN and the SEC, are also behind in their investigations of convertible virtual currency (CVC) business. The watchdog was critical of the US Regulating bodies’ strategy which “does not specifically identify higher risk virtual asset service providers (VASP),” making their “various” examinations of high-volume exchanges and peer-to-peer networks insufficient.

Advantages of the Travel Rule

In a previous interview with RegTech expert and CEO of IComply, Matthew Unger told Blockchain.News about the advantages of implementing Recommendation 15 despite the concerns of many VASP and exchange operators.

Unger said, “First and foremost, there’s the mainstream adoption—because this is the last piece of compliance needed for crypto assets to be held to the same standard as the rest of the financial industry.”

“Secondly, without the FATF travel rule or something similar to the travel rule, the security token industry will never survive because every platform is creating its own protocol, which is causing massive fragmentation.” He concluded, “Finally, the use of the travel rule enables more institutional investors to trade cryptocurrencies for their clients while lowering the cost and manual compliance work required for each trade.”

CipherTrace Unveils New Compliance Software For Banks Against Illicit Crypto Transactions

Blockchain security and analytics provider CipherTrace has unveiled a new cryptocurrency compliance product recognized as “Armada”, which is designed to eradicate risky crypto blind spots for financial institutions and banks. The new product targets financial institutions and banks dealing with cryptocurrencies.

CipherTrace Dedicated to Help Banks

Armada targets a large number of financial institutions, which have not adopted the proper AML (anti-money laundering) and KYC (know your customer) guidelines that could assist in detecting unregistered digital asset transactions. With the use of the new tool, financial institutions would be able to meet their anti-money laundering obligations and gain visibility into risky crypto blind spots. This assists in keeping the KYC procedures secure and also conducting due diligence on all VASPs (virtual asset service providers).

Dave Jevans, CipherTrace CEO, said that: “If Kunal Kalra’s banks had been using Armada to monitor their accounts, we could have identified Kalra much earlier.”

CipherTrace works with financial institutions and banks and their existing monitoring tools to assist in enhancing their AML procedures. It also assists in tracing the source of on-chain funds, matching user IDs, and finding problematic wallet addresses. The firm is backed by Galaxy Digital owned and operated by Mike Novogratz, one of the most vocal cryptocurrency supporters within the industry.

With Armada, banks and financial institutions can learn more about counterparty risks linked with unregistered virtual asset service providers and money service businesses. Jevans further described that if M.Y. Safra Bank deployed Armada, it would easily detect illegal crypto transactions. He revealed that although the bank has not been fined by the OCC (Office of The Comptroller of The Currency), it must focus on reporting and monitoring suspicious activities and carrying out independent AML/BSA audits.

He stated that the bank also must allow an independent party to reviews its previous activities and not only hire a BSA officer, but also adequate support staff in the next 180 days.

CipherTrace is a California-based company that provides a suite of blockchain forensic services and tools, which allow its clients to analyze crypto transactions flow like identifying laundered or hacked funds and also provides theft asset recovery service.

Cryptocurrency Theft Alarming At $4.4 Billion In 2019

According to a report released by CipherTrace, the crypto sector lost about 4.4 billion in thefts and scams in 2019, up by more than 150% from $1.7 billion in 2018. The report shows that crypto theft has increased at an alarming rate because malpractices have been taking place through crypto exchanges. The trend has been triggered by an increased number of criminals who are keen to undertake bigger heists. Criminals endeavor to use every means to chase money, which is there and ripe for taking. However, regulatory scrutiny within the crypto sector is being beefed up across the world as the market developers and participants are seeking to penetrate the crypto space. CipherTrace assists law enforcement and financial regulators in their investigations on cryptocurrency-related AML and compliance issues.

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The Algorand Foundation to Integrate Chainalysis KYT for Transaction Monitoring and Compliance

The Algorand Foundation will be leveraging Chainalysis’ Know Your Transaction (KYT) for transaction monitoring and compliance processes after its integration.

Investigations and due diligence will be enhanced by using Chainalysis KYT for Algorand’s native token, ALGO. The Algorand Foundation is led by Turing award-winner Silvio Micali and a renowned team of cryptographers to build an open-source, public blockchain for an inclusive ecosystem.

“Algorand is committed to providing an inclusive, transparent, and secure system for its global users,” said Algorand Foundation’s Chief Operating Officer (COO), Fangfang Chen, in a release shared with Blockchain.News.

“We needed a compliance partner that could not only help us adhere to regulations in Singapore where we are based but also global regulatory best practices. This will enable us to build the best transaction monitoring solution for the Algo token so that we can realize our mission of providing the world’s first open, permissionless, pure proof-of-stake blockchain protocol securely and scalably.”

With the integration of the Chainalysis KYT, Algorand is able to monitor large volumes of activity and identify high-risk transactions on an ongoing basis.

Chainalysis adds compliance support to track privacy coins Dash and Zcash

Chainalysis has recently launched support for two of the most popular privacy coins, Dash and Zcash. Privacy coins are cryptocurrencies with privacy-enhancing features that allow users to gain total anonymity when making blockchain transactions.

Although privacy coins are known to be used for illicit purposes, research by the RAND corporation mentioned that 0.2 percent of all the cryptocurrency addresses mentioned on the dark web was either for Dash or Zcash.

Although Dash is known for its privacy features, only 9 percent of all Dash transactions make use of mixing transactions related to PrivateSend. This portion of Dash transactions takes up a relatively small and declining percentage of Dash transactions, according to Chainalysis.

Libra Appoints New Chief Compliance Officer, Third C-Suite Executive Appointed with a Strong Compliance Track Record

The Libra Association appointed Sterling Daines as its new Chief Compliance Officer (CCO), who is currently the Managing Director and Global Head of Financial Crime Compliance at Credit Suisse.

He is expected to leave his position at Credit Suisse and join the Libra Association later this year. Prior to Credit Suisse, he was the Managing Director and Deputy Head of Financial Crime Compliance at Goldman Sachs and has worked as a consultant to the US Department of Justice and the Financial Crimes Enforcement Network (FinCEN).

“I am pleased to join the Libra Association as it works to transform the digital payment space to empower billions of people,” said Daines in a press release shared with Blockchain.News. “A critical element of achieving this mission is to ensure we are building a safe, compliant, and reliable platform for all users, which I look forward to significantly contributing to.”

Libra gets appointed first CEO, Stuart Levey

The Libra Association appointed its first CEO, Stuart Levey, the Chief Legal Officer at HSBC Holdings. Levey will be overseeing the Libra digital currency and payments system and holds a strong compliance track record and is expected to join Libra in the coming months. However, HSBC has not shown the same upright compliance record.

Levey is also expected to “combine technology innovation with robust compliance and regulatory framework.” The Facebook-led project has invited scrutiny from global regulators, with concerns over its threat to national sovereignty with its potential launch. Many of Libra’s original members, including Vodafone, PayPal, and Visa have also chosen to leave the association.

Three C-suite level executives have worked or consulted in the Department of Justice, coincidence?

Robert Werner, the General Counsel at the Libra Association was also appointed a month earlier. Regarding the addition of Sterling Daines to the team, he said, “I am thrilled that Mr.Daines will be joining the Libra Association as our Chief Compliance Officer. Mr. Daines is a world-class compliance leader and will bring critical expertise to the project.”

Werner has previously worked in the Justice Department’s Office as the Legal Counsel where he advised the Attorney General and White House Counsel.

Prior to joining HSBC, Libra’s appointed CEO Stuart Levey has served as the Principal Associate Deputy Attorney General at the US Department of Justice and has served as the Associate Deputy Attorney General.

Although Sterling Daines has not worked directly at the US Department of Justice, he has served as a consultant to institutions including the Justice Department and FinCEN.

Renault Deploys Blockchain for Vehicle Compliance Certification from Design to Production

Groupe Renault, a leading French multinational automobile manufacturer, has established the XCEED (eXtended Compliance End-to-End Distributed) blockchain system to certify the compliance of all car parts from design to production.

Adhering to stringent regulations

The blockchain-based tool is expected to boost Renault’s efficiency and responsiveness in meeting regulatory stringency in the automotive industry.

For instance, new market surveillance requirements were enforced from September 1, necessitating more enhanced regulatory controls for cars already on the market. As a result, Renault sees blockchain as one of the best alternatives to adhere to these stipulations within shorter timeframes.

XCEED was launched in 2019 as a collaborative project between automotive industry players like Saint-Gobain, Plastic Omnium, Faurecia, and Continental. Recently, this blockchain tool was tested at Renault’s Douai plant, and it archived at least one million documents at a speed of 500 transactions per second.

As per the announcement:

“With XCEED, blockchain is used to create a trusted network for sharing compliance information between parts manufacturers and vehicle manufacturers. The decentralized nature of blockchain technology means each party maintains data control and confidentiality, without compromising its integrity, while simultaneously increasing security and confidentiality.”

Underpinning competitiveness

Renault views the blockchain system as a stepping stone to operational excellence and underpinning competitiveness in the automotive sector. This is because it enables the timely sharing and tracking of information by various players. As a result, data is availed in real-time, making efficiency inevitable.

Odile Panciatici, Groupe Renault’s blockchain vice president, noted:

“We are convinced that blockchain is a vector for transforming the automotive industry. Blockchain technology really comes into its own in a vast ecosystem involving a number of different companies, providing a link between the partners’ various processes, computer systems and databases.”

Automotive players leaning towards blockchain

In April, BMW Group combined blockchain and cloud technologies using Microsoft Azure and Amazon Web Services to enable the tracking down of vehicle components’ origin without permitting any manipulation. This project was expected to be instrumental in propelling the traceability and transparency of crucial raw materials and parts in its international supply chains muddled in complexity.

Later on, in July, Volvo Cars invested in Circulor, a London-based blockchain company majoring in industrial supply chains. The objective was to use Circulor’s blockchain technology to track and reduce carbon dioxide (CO2) footprints.

Blockpass Supports Permissionless DeFi Protocol UniLend Fundraiser with KYC & AML Screening

Blockpass today announced a successful working partnership with UniLend, the decentralised finance (DeFi) platform. UniLend recently conducted a successful fundraiser, with Blockpass providing the requisite KYC and AML provision in order to meet regulatory compliance. By handling the compliance measures, the UniLend team were able to focus their efforts on the actual fundraising process.

UniLend is a permissionless decentralized protocol that combines spot trading services and money markets with lending and services through smart contracts. The integrated smart contract for both features of the protocol allows both trading & DeFi capabilities to co-exist within the same protocol, solving the liquidity and liquidation issue which has been limiting the growth of DeFi adoption to a broader market.

Blockpass is a digital identity verification provider which provides a one-click compliance gateway to financial services and other regulated industries. From the Blockpass Mobile App, users can create, store, and manage a data-secure digital identity that can be used for an entire ecosystem of services, token purchases and access to regulated industry. For businesses and merchants, Blockpass is a comprehensive KYC & AML SaaS that requires no integration and no setup cost. You can set up a service in minutes, test the service for free and start verifying and on-boarding users.

“We are seeing a huge rise in DeFi applications as more and more people begin to realise the amazing potential it holds,” said Adam Vaziri, Blockpass CEO. “It is a real pleasure to be working with UniLend as they facilitate the growth and development of DeFi and support its move towards mainstream markets. It has been a great test of our KYC and AML provision and we look forward to continuing working closely with them in the future.”

“Working with Blockpass we KYC verified 1,000 people in a 48 hour period. They took care of everything so we could concentrate on our fundraise. Their team were fully committed to our success and it was a pleasure to work with them,” said UniLend Co-Founder and CEO, Chandresh Aharwar. “They covered everything we needed with instant KYC/AML checks and a dashboard where we could review the data. What is best is the no set up time we needed to add Blockpass – just create an account and get going. Can’t recommend their service enough.”

Blockpass has grown significantly in size and use since its inception, both in the number and range of companies it has partnered with, and the scope of its work. Blockpass continues to develop its digital identity protocol with updates and additions to improve the compliance experience. Blockpass has seen rapidly increasing numbers of users in the past year as its identity verification solution is used for ICOs, STOs and IEOs, including supporting a number of successful fundraisers in the past few months.

With a current 90%+ discount on its services, a fact made possible due to the unique reusable nature of its verification method and put in place to help as many people as possible access KYC in the current pandemic, there has never been a better time to explore the potential of Blockpass. The Blockpass App is available from the App Store and Google Play.

About Blockpass

Blockpass is a fast, fully comprehensive KYC & AML screening software-as-a-service for Crypto, Defi and other regulated industries. With Blockpass, you get an unmatched set of benefits for any compliance service that includes pay-as-you-go, no setup cost, no integration necessary, free testing, immediate launch and at the lowest cost. Blockpass’ KYC Connect(TM) platform enables businesses to select requirements for customer onboarding that can include ID authentication, face-matching, address checking, AML ongoing monitoring and/or screening of sanctions lists, politically exposed persons (PEP), and adverse media. Through Blockpass, end-users easily create a verified portable identity that they can control and re-use to onboard with any service instantly.

For more information and updates, please visit and sign up to the following:

Promotional video: https://youtu.be/SvO2cw3e-SI

Website: http://www.blockpass.org

Email: sales@blockpass.org

About UniLend

UniLend is a permission-less DeFi protocol that combines spot trading services and lending/borrowing functionality within the same platform. While current DeFi protocols support only ~30 assets, anyone can list any ERC20 asset on UniLend for decentralized trading and lending/borrowing.

This leads to a huge demand for a protocol that supports a wide number of assets in a decentralized and permission-less way. UniLend is designed to address this untapped market and fuel the blockchain ecosystem by opening up the DeFi Space for all tokens.

Image source: Blockpass IDN

Bitcoin ATM Operators Joins Forces to Float New Compliance Cooperative

A group of crypto industry’s Bitcoin ATM (BTM) operators, including DigitalMint and Coinsource, as well as blockchain analysis platform Chainalysis amongst others, have launched the Cryptocurrency Compliance Cooperative (CCC), an associated with the underlying aim to promote regulatory compliance amongst players in cash to crypto industry for risk diversification to the consumers.

The majority of regulators worldwide are naturally sceptical about using digital currencies per their underlying pseudo-anonymous transactions. Along with the proliferation of self-service Bitcoin ATMs worldwide, the CCC believes there will be a need to promote a common culture amongst its members and the entire industry in seeking stipulated information that will help bolster laid down KYC and AML provisions from BTM users.

“The nefarious use cases plaguing this industry are well documented by several law enforcement agencies and include fraud, elder abuse, and drug and human trafficking,” said Seth Sattler, Director of Compliance for DigitalMint and leading contributor of the Cryptocurrency Compliance Cooperative.

“While a small number of Bitcoin ATM operators go above and beyond with know your customer (KYC) and anti-money laundering (AML) protocols, others in the cash-to-crypto industry simply turn a blind eye and are complacent to these bad actors by simply applying the bare minimum customer protections, which in many cases allow for completely anonymous transactions.”

The need for regulatory compliance has put many industry players at loggerheads with market watchdogs around the world. Seychelles-based BitMEX exchange has had to pay a $100 million settlement to the US Commodity Futures Trading Commission to settle various charges, including lack of implementing adequate KYC.

The CCC seeks to bring in major players in the crypto ecosystem, including cash-based cryptocurrency MSBs, regulatory bodies, financial institutions, suppliers, non-governmental and law enforcement agencies. The body will organise meetings quarterly. It will always work to bring its members up to speed about regulatory demands, challenges and ways to meet compliance, amongst others.

Binance Hires Former IRS Special Agents to Ramp Up Its Compliance Team

Binance cryptocurrency exchange has announced hiring two IRS special agents to ramp up its compliance efforts as it navigates complex regulatory issues in a still-evolving industry.

Last Thursday, September 30, Binance announced that it has named former IRS special agent Tigran Gambaryan as the vice president of Global intelligence and investigations.

Besides that, Binance also disclosed that it has appointed another IRS special agent, Matthew Price, to serve as its senior director of investigations.

Russian-born Gambaryan spent more than ten years at the Internal Revenue Service – criminal investigation cyber-crimes unit. He started his IRS career at the Oakland expert, a well-known blockchain expert in crypto law enforcement circles. Gambaryan’s most career achievements involved leading several successful multi-billion-dollar cyber investigations, including those concerned with the notorious Silk Road drug marketplace and the Mt. Gox hack.

Price also has a profound experience in the crypto industry, having led the IRS’s investigations into Bitcoin mixing services Helix whose founder and CEO – Larry Dean Harmon – recently pled guilty to charges related to money laundering.

The hiring of the two agents from the IRS and prominent individuals who helped run sophisticated law enforcement operations is likely to assist Binance in uncovering illicit activity on its platform – an activity that critics stated the exchange turned a blind eye to until recently.

The two new officers will help Binance to improve its compliance as part of a broader push to reform the firm’s reputation as recent violations of regulations brought the firm into the limelight from regulators around the globe.

Binance’s audit and investigations team will focus on external and internal investigations to prevent threats and financial losses while continuing working with law enforcement and regulators around the globe, the firm stated.

Investing in Compliance Roles

Currently, Binance has been on a hiring spree to add compliance teams as the firm faces regulatory scrutiny over tax evasion and money laundering issues.

Last month, Changpeng Zhao, the CEO of Binance exchange, announced that his top priority is to hire people with compliance and regulatory experience.

Regulators across the globe have been taking a more complex look at the freewheeling cryptocurrency industry, which boomed as the prices of Bitcoin surged to record highs this year.

Regulators have been concerned that criminals use cryptocurrency exchanges to conceal transactions linked to everything from ransomware attacks, drug tracking, fraud to money laundering.

In May, the US Justice Department opened an investigation into the Binance operations. US officials expressed concerns that crypto assets are being used to conceal illegal transactions, including drug deals and theft.

Several nations recently announced probes and demanded that Binance affiliates cease operations within their jurisdictions.

In early July, the CEO of Binance admitted that the crypto exchange did not get everything right in the past and stated that the firm has plenty of room to grow, following a crackdown from regulators around the world.

One of the key measures that Binance recently took is investing in its compliance roles.