Are banks hypocrites by not working with cryptocurrency companies?


History after history of cryptocurrency companies struggling to open bank accounts (or even bankruptcy) show how difficult it is to pioneer this new technology. Most banks do not want to work with cryptocurrency companies. But why?

Most often, they indicate lax controls on AML. But with billions of dollars in fines for AML offenses imposed on banks over the years, this excuse has little weight.

Banks do not want to work with cryptocurrency companies

Take Lamassu, the oldest Bitcoin ATM manufacturer, for example. The company finally moved to Switzerland a few months ago, after struggling to get paid in its original country, Portugal. According to a blog post on the subject, some fifteen banks rejected the company's request "simply because we are manufacturing terminals for Bitcoin". Lamassu added:

"We want to be in a place where the rules are well defined and the regulators favor innovation. Our struggle to keep a bank account over the last year is one example. And when I say fight, I mean we have been without a bank for a year. "

Do cryptocurrency companies escape their AML obligations?

According to the research of P.A.ID Strategies, 68% of the exchanges and custodians of crypto-currencies do not have adequate measures of KYC / AML. It is also unlikely that they meet the FATF requirements that will be released later this year.

Alma Angotti, Executive Director of Navigant Consulting Inc (NYSE: NCI), has held positions of enforcement at the US Securities and Exchange Commission (SEC), FinCEN (Financial Crimes Enforcement Network) and FINRA regulation of the financial sector). . She is also one of the best money laundering experts in the country. She explains:

"Banks are highly regulated and required to detect and prevent money laundering and terrorist financing, and many cryptocurrency exchanges are not well regulated or regulatory requirements are unclear or undeveloped."

In addition, many large banks still do not know enough about cryptocurrency companies.

"Digital assets and cryptocurrency are new and poorly understood. Cyber ​​criminals use cryptocurrency a lot, including ransomware, hacking and the escape of US sanctions. "

This may be true. However, there are also the very real problems of what Fabio Canesin, co-founder of Nash's decentralized cryptocurrency exchange, calls "a mixture of hypocrisy and protectionism on the part of many others".

Most major banks are facilitators of illicit financial flows

Warren Buffet did not delay in rejecting Bitcoin as an "illusion" that attracts "quacks". But let's not forget his investment. Wells Fargo has been fined nearly 100 times since the year 2000.

Wells Fargo, an investment by Buffett, has been fined 93 times for fraud and other abuses, for a total of $ 14.8 billion in fines since just 2000

I will take Bitcoin "quacks" for this every day

– Barry Silbert (@barrysilbert) March 9, 2019

The UK is certainly not lagging behind in dirty money. The five largest banks in the United Kingdom have been sanctioned for money laundering offenses over the last decade.

And do not even start with German Deutsche Bank. More Bank estimates that the bank has settled more than $ 18 billion in AML litigation over the last 10 years.

Some banks, including the Danish bank Danske, have even been forced to close branches in some countries because of their heinous behavior.

All the illicit funds that go through the banks that do not want to work with the innovators of a transparent technology are, at best, ironic.

Studies place the level of illegal activity and money laundering practiced on Bitcoin at less than 1% of all transactions.

Canesin commented: "This is well below the official GDP declared by several countries on the black market … By definition, this means that there is a lot more black money in the fiduciary currency than in the cryptocurrency. "

Banks are shortsighted in cryptocurrency

One of the problems is that the technology of the blockchain is still new. Many regulators and providers of banking have difficulty understanding the methods required by companies to comply with the AML. It's simply easier to close their doors to this emerging threat.

Yet Canesin believes:

"It's a big mistake because blockchain can actually help solve a lot of LMA problems. Many people realize this and will become important partners in the industry. Others do not go beyond superficial knowledge. They are naively trying to remove a potential competing solution, rather than taking advantage of the benefits of this technology. "

The story continues

Cryptocurrency companies should also adopt LBC solutions

Canesin adds that for any business to be legitimate, it must prosper in its markets. Therefore, any company chain or off-line must comply with the AML. The advantage of blockchain-based solutions is that LMA could actually be extremely efficient, far more than existing solutions used by banks.

For example, it would be impossible for a money launderer to bypass a smart contract whitelist, but it is much easier to bribe an employee of a local branch, as it happened in the past. famous case of money laundering by HSBC.

"Blockchain-based compliance is not guaranteed by an employee's buffer, but is cryptographically guaranteed by the network and whitelist process, which can be followed. This means that there are many promising opportunities in auditing and attesting. "

In fact, on many networks, sources known to be associated with illegal activities can be blocked. This happened recently on the Bitcoin network after the WannaCry ransomware case.

In summary

Banks do not want to work with cryptocurrency companies, which is a problem for many. However, it is impossible to put an end to accusations of innovation, especially when the institutions of existing institutions are tainted by the dye of dirty money.

And as Canesin reminds us:

"Legitimate companies will do their best to comply with the AML, but blockchain companies will have better tools to do so."

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