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Binance-Backed OTC Firm Releases Anti-Money Laundering Compliance-as-a-Service Product

Koi Trading in partnership with IdentityMind have developed an AML compliance-as-a-service product supporting cryptocurrencies.

Binance-backed over-the-counter (OTC) desk Koi Trading has partnered with IdentityMind, a platform for online risk management, to develop an Anti-Money Laundering (AML) compliance-as-a-service product. The development was announced in a press release published on March 12.

The parties have reportedly released an AML compliance-as-a-service product dubbed “Koi Compliance,” supporting digital currency and targeting money services businesses. The new platform will purportedly enable companies to focus on conducting their business, letting Koi Compliance to perform Know Your Customer (KYC) procedures, monitor transactions, conduct sanctions screening, and keep records.

Last November, Koi Trading received $3 million in investment from Binance Labs, an incubator arm of the world’s leading cryptocurrency exchange (as of press time) Binance. The move was purportedly taken to enable Binance Labs to utilize Koi’s quantitative research, data science, and compliance consulting services.

That same month, Binance confirmed to Cointelegraph that it would use an automated KYC application provided by financial software firm Refinitiv. That would allow Binance to integrate the World-Check Risk Intelligence database into their internal workflow and streamline the screening process for onboarding, KYC, and third-party risk due diligence.

In January, Cointelegraph reported that blockchain compliance startup TRM, which developed a so-called token relationship management platform to help crypto businesses streamline their AML compliance, closed a funding round totalling $1.7 million led by United States-based investment firm Blockchain Capital.

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Blockchain Analytics Firm Chainalysis Outlines User Data Policy Amid Coinbase Allegations

Blockchain analytics firm Chainalysis has published a statement clarifying that it does not collect or sell users’ personal data when it provides its services to cryptocurrency exchanges.

New York-based blockchain analytics firm Chainalysis has published an official statement clarifying that it does not collect or sell users’ personal data when it provides its services to cryptocurrency exchanges. The statement was published in a company blog post on March 5.

Chainalysis is one of the highest-profile firms in the blockchain intelligence industry, providing technology — such as its proprietary KYT (Know Your Transaction) tool — that enables firms, governments and law enforcement agencies to monitor blockchain transactions and track suspected illicit activities, such as money laundering or terrorist financing.

As reported, allegations that such firms may be circulating their clients’ user data surfaced last week in the midst of community backlash over Coinbase’s controversial acquisition of blockchain analytics firm Neutrino. To justify the acquisition, a senior Coinbase executive had claimed in an interview that their previous intelligence tool providers were purportedly selling Coinbase users’ data to third parties.

While the executive did not explicitly identify these intelligence firms by name, Chainalysis has evidently responded by clarifying that it does not require or store — let alone circulate — any personal data in order to conduct transaction analyses:

“Exchanges that use Chainalysis KYT […] submit their transaction data — not personally identifiable customer data — to Chainalysis to automate the process of transaction monitoring. […] Any link from a transaction back to the person or people involved […] must be made outside of Chainalysis because we do not collect any personally identifiable information from exchanges.”

The statement continues to outline that Chainalysis’ focus is on flagging transactions “based on indicators of risky behavior,” such as destination addresses known to be illicit entities (a darknet market or terrorist financing organization, for example). This contextualization, it continues, requires only the basic knowledge that a given wallet address belongs to a crypto exchange customer, not personally identifiable information.

As per the blog post, the firm’s blockchain analytics tools are thus aimed at monitoring service-level transaction data, not at labeling individual users’ wallets.

Chainalysis further states that based on its counterparty analyses and KYT screening “risk appetite and investigations are the exchange’s own responsibility.”

As reported yesterday, London-based blockchain analytics firm Elliptic — which provides technology to Coinbase — has refuted allegations that it collects and sells clients’ user data to third parties for financial gain. In an official statement, Elliptic’s CEO and co-founder James Smith stated that the firm has never “enabled the violation of individuals’ financial privacy,” and that such accusations represent a fundamental misunderstanding of Elliptic’s industry role.

Also yesterday, Coinbase CEO Brian Armstrong revealed that Neutrino staff with prior connections to the contentious software firm Hacking Team will transition out of their new roles at the exchange.

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Coinbase Technology Partner Refutes Alleged Collection, Sale of User Data to Third Parties

Elliptic has refuted allegations that it collects and sells clients’ user data to third parties for financial gain.

London-based blockchain analytics firm Elliptic — which provides technology to major United States crypto exchange Coinbase — has refuted allegations that it collects and sells clients’ user data to third parties for financial gain.

In an official statement published on March 4, Elliptic’s CEO and co-founder James Smith stated that the firm has never “enabled the violation of individuals’ financial privacy,” and that such accusations represent a fundamental misunderstanding of Elliptic’s industry role.

Elliptic is one of key players in the blockchain intelligence sector, providing analytics tools that allow companies, governments and law enforcement agencies to monitor blockchain transactions and track suspected illicit activities, such as money laundering.

As reported, accusations that such players may be circulating their clients’ user data surfaced when a senior Coinbase executive was prompted to justify the exchange’s now-controversial acquisition of blockchain analytics firm Neutrino.

The executive had claimed that the integration of Neutrino into the Coinbase outfit had been necessary, given that existing external technology providers were allegedly selling Coinbase users’ data to outside sources.

In his statement, Smith robustly denied these allegations, which did not explicitly isolate Elliptic or any other blockchain intelligence firm by name. Nonetheless, he wrote, such insinuations “fundamentally misunderstand the data we analyse, the insight we share with our clients, and the role we play in the industry.” Smith added:

“Our exchange clients, including Coinbase, do not provide us with any personally identifiable information about their users. Our clients use our solutions to screen specific transactions for risk […] We only allow our solutions to be used in order to combat financial crime, and do not allow it to be used for marketing, business intelligence, or any other purpose.”

In addition to Smith’s statement, Elliptic has published an extensive FAQ in which it outlines the exact mechanisms and nature of the data it uses for transaction screening and the analysis of potentially suspect actors and funds transfers.

The FAQ section again affirms that “Elliptic never, ever requests or requires any end-user data from its clients,” and neither holds nor distributes any KYC data whatsoever, which it states is not relevant for its activities.

As reported today, in response to the crypto community furore over the Neutrino acquisition, Coinbase CEO Brian Armstrong has revealed that Neutrino staff with prior connections to controversial software firm Hacking Team will transition out of their new roles at the exchange.

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Coinbase CEO: Ex-Hacking Team Neutrino Members Will Transition Out of Company Roles

Brian Armstrong says that Neutrino staff with prior connections to controversial software firm Hacking Team will transition out of their new roles at Coinbase.

Brian Armstrong, co-founder and CEO of major United States crypto exchange and wallet Coinbase, has said that Neutrino staff with prior connections to controversial software firm Hacking Team will transition out of their new roles at Coinbase. Armstrong made his announcement in an official blog post published on March 4.

Controversy has surrounded Coinbase’s recent acquisition of blockchain analytics firm Neutrino, due to the backgrounds of key Neutrino staff at the contentious software outfit Hacking Team. The latter firm is alleged to have provided its surveillance tools to global law enforcement agencies, corporations and governments — with authoritarian regimes allegedly among them.

Responding to the crypto community’s outcry at the Hacking Team connections, Armstrong has given his official statement, which concedes that “while we looked hard at the technology and security of the Neutrino product, we did not properly evaluate everything from the perspective of our mission and values as a crypto company.” He then stated:

“Together with the Neutrino team […] [we] have come to an agreement: those who previously worked at Hacking Team (despite the fact that they have no current affiliation with Hacking Team), will transition out of Coinbase.”

The CEO characterized the backstory of the acquisition as a “gap in [Coinbase’s] due diligence process.” He stated that bringing Neutrino’s Anti-Money Laundering and Know Your Customer technology and blockchain analytics tools in-house remains of critical importance to Coinbase, which aims to operate as a legally compliant, modernized and regulated platform.

Noting that “Bitcoin — and crypto more generally — is about the rights of the individual and about the technological protection of civil liberties,” the CEO conceded that Coinbase had not made “the right tradeoff in this specific case.”

Ahead of Armstrong’s statement, Christine Sandler — director of institutional sales at Coimbase — had defended the Neutrino acquisition, stating that it was necessary for the exchange to migrate away from its existing blockchain analytics tools providers because they had been selling Coinbase clients’ data to outside sources.

On March 4, one of these providers — blockchain intelligence firm Elliptic — published a statement refuting Sandler’s claims it had been selling users’ data for financial gain, saying these accusations represent a fundamental misunderstanding of its industry role.

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Coinbase: Former Provider Sold User Data to Third Parties, Prompting Neutrino Acquisition

Christine Sandler, Coinbase’s director of institutional sales, has defended the crypto exchange’s controversial acquisition of Neutrino.

Christine Sandler, Coinbase’s director of institutional sales, has defended the crypto exchange’s controversial acquisition of blockchain intelligence firm Neutrino. In an interview with financial news channel Cheddar on March 1, Sandler said that previous client data providers were selling Coinbase user data to outside sources.

As reported, major United States crypto exchange and wallet Coinbase first announced the Neutrino acquisition on Feb. 19, saying it would make use of the startup’s advanced blockchain analytics tools, Anti-Money Laundering and Know Your Customer technology.

The move swiftly became controversial as details of the Neutrino’s co-founders’ backgrounds came to light: specifically, their prior involvement with commercial software firm Hacking Team, whose spyware has reportedly been used by a broad canopy of international governments and law enforcement agencies, with authoritarian regimes allegedly among them.

In response to the crypto community’s furore over these connections — which spawned the #DeleteCoinbase hashtag — Sandler defended the exchange’s decision, telling Cheddar that it was important to leave their current providers due to their data selling practices:

“We are aware of the backgrounds of some of the folks that were involved in Neutrino […] It was important for us to migrate away from our current providers. They were selling client data to outside sources and it was compelling for us to get control over that and have proprietary technology that we could leverage to keep the data safe and protect our clients.”

Characterizing Neutrino’s technology as “really industry leading and best-in-class,” Sandler said that the acquisition represented a decision to bring these tools in-house — downplaying the importance of the talent and senior employees’ histories.

Sandler also gave a mention to Coinbase Pro’s decision to list XRP, whose ambiguous status in the U.S. as a possible security token has hitherto complicated its listing on the California-headquartered exchange. Sandler clarified Cheddar that Coinbase’s acquisition of broker-dealer Keystone in June 2018 enables the platform to list securities, adding:

“There had been a groundswell of interest in adding the asset to the platform. There was some speculation about whether the asset would be classified as a security or not — we’re not securities lawyers. We felt there were compelling arguments on either side.”

As recently reported, Ripple’s head of markets has taken to social media to emphasize that the Coinbase decision to list XRP was an independent one — countering rumors that Ripple had either paid or offered the exchange an incentive to do so.

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Advisory Council of UAE Banks Federation Considers Adoption of Blockchain in Banks

The Advisory Council of the United Arab Emirates Banks Federation discussed applying blockchain in its member banks to improve KYC processes.

The Advisory Council of the United Arab Emirates Banks Federation (UBF) discussed applying blockchain in its member banks, according to the Dubai-based English language newspaper Gulf News on Dec. 17.

The Advisory Council of UBF, a non-profit organization representing 50 member banks in the country, considered using blockchain to improve Know Your Customer (KYC) processes at entrant banks. UBF’s chairman, Abdul Aziz Al Ghurair, claimed that the discussed initiative represents an effort to create and maintain a “thriving banking ecosystem.”

Participants also discussed issues pertaining to the country’s national digital transformation program and Emiratization — a government employment initiative to place its citizens in roles in the public and private sectors.

Aref Al Ramli, chairperson of UBF’s Digital Banking Committee, presented a blockchain-based study that explores the benefits of digitizing various processes within member banks via distributed ledger technology (DLT). The study has outlined a number of blockchain applications by banking institutions, including cross-border payments, compliance reporting, customer onboarding, and others.

Al Ghurair said that emerging technologies are “continuing to shape customer needs and expectations,” putting banking industry participants “at the forefront of innovations.” He also claimed that new technologies like blockchain can assist banks in creating new revenue streams, “which will in turn drive sustained business growth.”

In late November, the governmental AI and Blockchain Joint Working Group hosted an annual meeting that concluded with the launch of two initiatives intending to boost blockchain and artificial intelligence (AI) development. At the meeting, participants considered strategies to attract foreign investments and build a necessary infrastructure by using AI and blockchain.

Also in November, Abu Dhabi-based Al Hilal Bank announced it completed “the world’s first sukuk transaction” based on blockchain technology. Sukuk, a legal tool that is known as “sharia compliant” bonds, allows investors to generate returns in compliance with Islamic law.

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Dutch Central Bank Proposes License Requirement for Cryptocurrency Service Providers

Cryptocurrency service providers will soon be required to hold a license issued by the Dutch Central Bank in the Netherlands.

Cryptocurrency service providers will soon be required to obtain a license from the central bank of the Netherlands, major Dutch news outlet DeTelegraaf reports Dec. 11.

The article explains that the measure has been undertaken hoping that it will “prevent such cryptocurrencies being used to launder money obtained through crime or to fund terrorism.”

To qualify for a license, providers will reportedly need to know who their customers are and report unusual transactions. All of this data will be monitored by De Nederlandsche Bank, the Dutch central bank.

After the implementation in April of similar laws in Japan obliging cryptocurrency exchanges to report dubious cryptocurrency transactions, a notable increase in the number of such reports was noted this winter.

In August, an executive at the Dutch central bank stated that cryptocurrencies aren’t recognized as “real money,” but that the bank has no plans to ban them. Also in August, an advisor of the central bank claimed that Bitcoin’s (BTC) price changes coincide with Google searches for the cryptocurrency.

As Cointelegraph reported in October, the Port of Rotterdam has partnered with both a major Dutch bank and Samsung to test blockchain use for shipping in Europe’s largest port. Also in Holland, the country’s largest supermarket chain, Albert Heijn, revealed in September that it is using blockchain to make the production of its orange juice more transparent.

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Abu Dhabi Global Market Concludes First Phase of Blockchain-Based KYC Project

Abu Dhabi Global Market, an international financial free zone within the capital of the United Arab Emirates, has concluded the first phase of its blockchain-based KYC project.

An international financial free zone within the capital of the United Arab Emirates (UAE) has concluded the first phase of its blockchain-based Know Your Customer (KYC) utility project, according to an ADGM press release Dec. 4.

The Abu Dhabi Global Market’s (ADGM) regulatory body, the Financial Services Regulatory Authority (FSRA) along with “Big Four” audit firm KPMG have published a review of the project’s “successful” first phase in order to provide key takeaways for members of the financial industry.

The review outlines the project’s development over a period of four months, together with a consortium of major UAE-based financial institutions – including Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, First Abu Dhabi Bank and others.

FSRA’s review of legacy KYC systems characterized them as “cumbersome, repetitive and cost intensive,” providing financial institutions with inefficient information sharing systems between siloed data sets, hampering KYC compliance and anti-money laundering (AML) monitoring.

A blockchain-based system was found to “radically simplify” the KYC process by providing an “immutable audit trail, seamless and secure data sharing,” which could moreover allow for individual clients to decide how their personal data is shared in the utility, in keeping with data protection (GDPR) and customer consent requirements.

As the review outlines, the use of cryptography and digital signatures, among other features, can contribute toward a secure, unified, and convenient system for upholding robust KYC standards across the industry.

The review also proposed the possibility of developing a commercial model of the project that could offer a fee-based rewards system to incentivize data contributors for uploading and updating their data, and charging data consumers for access.

Richard Teng, CEO of ADGM’s FSRA unit, has said the blockchain-based e-KYC project “demonstrated tangible benefits,” and would be able to “achieve significant cost efficiencies and financial inclusion driven by unified KYC standards.”

Following the successful first phase of the blockchain-based KYC project, the FSRA says it is now planning to launch its next phase, which will aim to facilitate small and medium enterprises’ access to banking services

As reported two days ago, 26 French companies and five major banks have just completed a KYC Proof-of-Concept (PoC) based on blockchain consortium R3’s Corda platform.