Illicit crypto transactions are getting more attention from the government

The COVID-19 pandemic has forced governments worldwide to focus on bringing blockchain technology to their financial services, along with the needed regulatory upgrades to keep the burgeoning fintech industry clean.

For example, on Sep. 10, Switzerland — a global center for the wealth management industry, housing around $2 trillion or 27% of global offshore wealth — passed a reformed Blockchain Act that includes a new set of laws and regulations to support the growth of blockchain and decentralized finance companies in the country.

Furthermore, in a major milestone for the crypto industry, leading travel rule solutions nonprofit Travel Rule Information Sharing Alliance, or TRISA, from Ciphertrace and developer of the world’s first tracing tool for Monero, together with Sygna Bridge from CoolBitX announced their interoperability proof-of-concept, allowing crypto service providers from both platforms to meet the requirements as outlined by the travel rule. It is available to the public on GitHub.

The travel rule was introduced by the Financial Action Task Force in June 2019 and requires financial institutions participating in cryptocurrency transactions to exchange relevant beneficiary and originator Know Your Customer, or KYC, information. As a result, Virtual Asset Service Providers, or VASPs, between the two solutions can communicate compliance data with minimal disruption.

As Michael Ou, CEO of CoolBitX and creator of Sygna Bridge, explained: “In the last few years, several innovative solutions have appeared to help crypto and virtual asset businesses comply with anti-money laundering regulations that are beginning to develop around the world — each addressing the needs of different audiences. At the end of the day, money-laundering and terrorist financing are global issues that require the collaboration between different entities. This all begins with ensuring that the solutions are able to communicate effectively between each other. By adapting industry standards such as the IVMS101 and building tools to ensure correct translation and connectivity, Sygna Bridge and TRISA are working together to ensure that the cryptocurrency industry is growing and maturing in a positive direction.”

John Jefferies, chairman of TRISA, added:

“Achieving global interoperability for Travel Rule compliance across jurisdictions is vital for a successful sunrise phase. We are pleased to enable message interoperability and extend mutual VASP authentication in this Travel Rule proof of concept.”

According to statistics released by the United States Office on Drugs and Crime, up to $2 trillion is laundered on the global market annually, which bypasses the latest cryptocurrency KYC measures. Financial institutions could be missing up to 90% of cryptocurrency-related transactions, as they overlook lesser-known digital asset exchanges, according to the latest report by CipherTrace.

Until they are eventually caught by United States law enforcement, criminals prefer using cryptocurrency tumblers or cryptocurrency mixing services when paying for illicit goods and services that are transmitted with no oversight by governments or central banks, thereby obscuring the trail back to the fund’s original source.

Nearly a month after announcing the largest-ever seizure of cryptocurrency assets used by terrorist organizations in a multi-agency investigation conducted alongside the Federal Bureau of Investigations, Department of Homeland Security Investigations and Internal Revenue Service Criminal Investigation, the U.S. Department of Justice showcased the results of a five-year operation targeting Mexican drug cartels on Sept. 3.

Robert Murphy, the Drug Enforcement Administration’s special…