The State of Crypto Compliance: Survey Reveals Alarming Oversights

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Recently, the burgeoning cryptocurrency market has been scrutinized for its customer verification processes. A groundbreaking report by SmartSearch has unearthed some concerning statistics that call into question the industry’s approach to compliance.

Customer Verification Lapses in Cryptocurrency Firms

A striking 83% of cryptocurrency entities might fall short of adequate customer verification standards. The study divulged that only 17% consistently ensure they are performing comprehensive checks. This revelation is even more startling considering that the remaining half admitted to conducting these vital checks only occasionally.

Spanning a diverse array of sectors, SmartSearch’s in-depth investigation extended its lens to high-street banks, emerging challenger banks, property magnates, cryptocurrency platforms, and gaming enterprises. Managed by Censuswide, this pivotal research engaged 500 UK-based compliance specialists, all pivotal decision-makers, from late May to early July 2023.

OTC Traders and Compliance Adaptations

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A major geopolitical event, Russia’s invasion of Ukraine, and the resultant sanctions have led to noticeable shifts in compliance procedures. Notably, 42% of over-the-counter (OTC) traders have revisited and tweaked their compliance guidelines. On a brighter note, cryptocurrency exchanges appear to be ahead of the curve, with 52% stepping up their compliance measures.

However, these numbers, while encouraging, may not suffice. As Martin Cheek, the esteemed managing director of SmartSearch, remarked, “The statistics highlight a deeper issue of neglecting strict compliance within crypto firms. Sporadic customer screenings don’t cut it in this dynamic landscape.”

Regulatory Authorities Tighten the Noose

The UK’s Financial Conduct Authority and law enforcement agencies are doubling down on their mission to curtail sanctions evasion. This is particularly pertinent in the spheres of cryptocurrency and digital assets. Amplifying their dedication, the National Crime Agency (NCA), akin to the FBI in the US, has made moves to bolster its investigative team dedicated to cryptocurrency-related infractions.

The nation has been tirelessly working to demystify anonymity in cryptocurrency transactions. A testament to this is the 2020 introduction of the Money Laundering and Terrorist Finance Act. This legislation intensifies anti-money laundering protocols and broadens its scope to envelop virtual currency intermediaries and custodian wallet facilitators.

A Glimpse into Money Laundering Compliance in Crypto

Prior research by SmartSearch has shed light on the escalating concern of money laundering within the crypto realm. An alarming 28% of crypto firms have noted an uptick in Suspicious Activity Reports in just half a year. Given the potential repercussions, it’s hardly surprising that 69% of UK crypto enterprises express apprehension over inadvertently flouting anti-money laundering regulations.

While the cryptocurrency domain offers boundless possibilities, the gravity of ensuring compliance cannot be overstated. As the industry matures, one can only hope for heightened adherence to the standards that ensure its legitimacy and security.

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