AML Compliance Terrorist Financing and how to prevent it with the use of blockchain technology. Presentation from London Startup Grind

1. B L O C K C H A I N | R E G T E C H | B I G D A T A
CREATING A SAFER CRYPTO ECONOMY: COMPLIANCE,
AML AND KYC
PA W E L K U S K O W S K I , C E O

2. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
blockchain and cryptocurrencies –
is this the basis for more transparent and
compliant economy?

3. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
on bitcoin
Child abuse
imagery found
within bitcoin's
blockchain
general approach
towards bitcoin
Can be hacked and
people can loose
money
BlackRock CEO
Larry Fink
Money
Laundering
Index
Jamie Dimond
on bitcoin
It’s a fraud.
what these statements have in common?

4. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
MISLEADING!
MISCONCEPTION!

5. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
via CNBC on Jamie Dimond
Jamie Dimond says he regrets calling
bitcoin a fraud and believes in
the technology behind it
9 Jan 2018

6. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
first
published:
2010
brought
back in:
2018

7. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
Money back.
Coincheck:
430 mln $
Bear Sterns, Lehman
Brothers, AIG:
?

8. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
WHAT ABOUT ANTI MONEY
LAUNDERING?

9. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
Current size of
money laundering
problem
2 tn $

10. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
Current size of
money laundering
problem
2 tn $
≈1%

11. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
global regulations are increasing

12. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
global regulators

13. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
crime
and terrorism
40 Rec’s
and MEC visits
FATF
Global Standards
virtual
currency
supranational
response 4th and 5th
EU MLD
country level
response
jurisdiction
regulations
complex issues

14. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
virtual currency AML regulations
regulation being considered
(EU)
regulated
chaos and confused
· EU 5th Money
Laundering Directive
· Gibraltar
· Malta
· Japan
· Singapore
· Canada

15. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
Anti Money Laundering ≠ Know Your Client
AML IS MUCH MORE!

16. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
MONITORING,
STUPID!

17. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
TRANINGS
• PROCEDURES
• RISK MATRICES
• RISK BASED
APPROACH
POLICIES KYC
• IDENTIFICATION
• VERIFICATION
• SANCTIONS
• PEPS
• NEGATIVE NEWS
MONITORING
• SOURCE OF WEALTH
• SOURCE OF FUNDS
• TRANSACTION
• MONITORING
• ONGOING PROFILE
MATCHING
AML compliance framework
TOTAL: $$ $$ $ $ $ $ $ $
COST: $ $ $ $ $ $ $$
REPORTING

18. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
IF YOU DON’T GET THIS RIGHT…

20. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
20 BLN € ANNUALY
P R E V E N T I N G A M L R I S K S F O R V I R T U A L C U R R E N C I E S
COST OF AML COMPLIANCE MEASURES
ONLY IN EUROPE

21. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
with all this effort…
Barlcays Plc in June 2012
$450 million
Standard Charter Plc in June 2012
$340 million
HSBC in December 2012
$1.9 billion
UBS in December 2012
$1.5 billion
Rabobank in December 2013
$1.0 billion
Credit Suisse in May 2014
$2.6 billion
BNP Paribas in June 2014
$8.9 billion
Top fines imposed
on overseas banks by
the U.S.

22. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
OLD SYSTEM VS BLOCKCHAIN

23. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
blockchain is a database
user controlled and synchronised
C L I E N T S
D A T A B A S E

24. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
traditional banking vs blockchain
C E N T R A L
B A N K
B A N K A
B A N K B
C L I E N T B 2
C L I E N T B 1
C L I E N T A 1
C L I E N T A 2
C L I E N T
A
C L I E N T
B

25. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
what we can get out of
blockchain
· Blockchain identification
· Transaction details
· Sender address
· Recipient address
· Transaction value (ex. 2 BTC)
· Value currently on the address
· Transaction size (ex. 15 kB)
· Transaction cluster
· Time of transaction
· Transaction cost
· Transaction content
· Exchanges
· E-Commerce
· Payment operators
· Ransomware
· Mixers
· Hackers
· Deepweb / Darkweb
· Stolen IDs
· And more…
mapping blockchain
to the real world

26. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
TRANINGS
• PROCEDURES
• RISK MATRICES
• RISK BASED
APPROACH
POLICIES KYC
• IDENTIFICATION
• VERIFICATION
• SANCTIONS
• PEPS
• NEGATIVE NEWS
MONITORING
• SOURCE OF WEALTH
• SOURCE OF FUNDS
• TRANSACTION
MONITORING
• ONGOING PROFILE
MATCHING
Traditional AML compliance framework
TOTAL: $$ $$ $ $ $ $ $ $
COST: $ $ $ $ $ $ $$
REPORTING

27. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
TRANINGS
• PROCEDURES
• RISK MATRICES
• RISK BASED
APPROACH
POLICIES KYC
• PAPER IDENTIFICATION
• SANCTIONS
• PEPS
• NEGATIVE NEWS
MONITORING
• SIMPLE IDENTIFICATION & VERIFICATION
• SOURCE OF WEALTH
• SOURCE OF FUNDS
• ONGOING TRANSACTION MONITORING
• ONGOING PROFILE MATCHING
• REPORTING
BLOCKCHAIN AML compliance framework
TOTAL: $
COST: $ $ $$

28. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
Standarized monitoring to
replace expensive and ineffective KYC
central repository of data
– also decentralised
checks only for transactions
above $ thresholds
onboarding based on
transaction history
KYC supported
by history profile
ongoing
profile matching
exchange of data
in real life

29. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
financial institutions
to manage crypto risk
PROCEDURE
CLIENT’S ADDRESS
ADDRESS ASSESSMENT
ONGOING MONITORING

30. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
building global standard
big data + network of partners
Structured database
for blockchain
transactions
Identification
and risk analysis
algorithms
Internal/external
data sources
Partners,
individual users
and entities

31. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
Anti Money Laundering
and Counter Terrorist Financing is…
more effective in blockchain
based economy90x
than in traditional one and…
10x cheaper

32. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
WE CAN
PROVE IT.

33. C R E A T I N G A S A F E R C R Y P T O E C O N O M Y : C O M P L I A N C E , A M L A N D K Y C
if you build your FinTech don’t forget
about RegTech .
otherwise you end up having
the old problems .

34. thank you!
pawel.kuskowski@coinfirm.io
PAW E L K U S KOW S K I
Canary Wharf – Level 39
One Canada Square – E14 5AB London
Phone: + 44 20 312 977 91