Crypto Analytics Firm Elliptic to inform Congress Privacy Coins Need Stricter AML Rules

Crypto Analytics Firm Elliptic to inform Congress Privacy Coins Need Stricter AML Rules

  • By Admin
  • February 6, 2020

At a Wednesday hearing revisiting landmark legislation passed 20 years ago, the House of Representatives’ Tom Lantos Human Rights Commission will check out the impact of the Trafficking Victims Protection Act, also as analyze new, technology-enabled threats that require to be addressed. Liat Shetret, head of policy and research at London-based crypto forensics firm Elliptic, is scheduled to testify at the hearing. 

Elliptic co-founder Tom Robinson told CoinDesk that cryptocurrency and therefore the dark web are two such areas the House commission will examine.

Shetret is predicted to elucidate how current tools can help enforcement agents track illicit cryptocurrency payments. Elliptic tells CoinDesk the U.S. can play a leadership role in creating new regulations – or supporting the recommendations of the Financial Action Task Force (FATF) – round the global use of cryptocurrencies.

One recommendation Shetret is slated to submit: Exchanges using privacy coins should be subject to strict AML rules.

Previous testimony on human trafficking has been critical of cryptocurrencies’ role, driving recommendations that Congress increase regulatory oversight of the industry, Robinson said. 

“What i would like to try to to is put cryptocurrency usage in some context and say … the supply of blockchain analysis has been successful in curbing illegal use of cryptocurrency,” he said.

Indeed, fellow crypto analytics startup Chainalysis announced inOctober it had worked with the U.S. Department of Justice (DOJ) to trace bitcoin transactions related to the web’s largest child porn site. The DOJ arrested or indicted nearly 40 individuals, several of whom were traced through their bitcoin use. 

Privacy coin concerns

While an outsized number of crypto transactions are often traced, privacy coins are an exception. 

To that end, Shetret’s prepared remarks, which were shared with CoinDesk, will recommend Congress and regulators develop new guidance for banks and crypto exchanges on the way to approach privacy coins and therefore the individuals who trade them.

“We respect every individual’s right to financial privacy, and privacy coins have societal value,” Shetret’s testimony says, citing people living under authoritarian regimes. 

Still, privacy coins are getting used by criminals, and most dark web marketplaces currently accept these cryptocurrencies, she said. 

“Regulators should make sure that cryptocurrency businesses that support privacy coins enforce anti-money laundering policies that are appropriate to the shortage of traceability inherent to them,” she said.

As a part of this, Shetret involves the Financial Crimes Enforcement Network (FinCEN), the U.S. Treasury Department’s concealment monitor, to issue guidance specifically detailing how privacy coins should be treated.

Shetret told CoinDesk during a call that Congress should be commended for watching cryptocurrencies, but the U.S. government and financial institutions should fully grapple with crypto’s incumbent risks.

“There’s an enormous role that banks generally, financial institutions got to understand their own role and exposure to crypto, and enforcement must understand their transaction monitoring,” Shetret said. “We can’t just mention it during a vacuum.”