Day two at FinCrime Global explores crypto-regulation and the EU’s anti-money laundering tactics

Over 40 subject-matter experts gave their views through presentations and panel debates across a packed content agenda.

Key topics for discussion included the need for greater regulation across the rapidly growing crypto sector, and how the EU are leveraging anti-money laundering (AML) tactics to tackle terrorist financing.

Discussing crypto regulation through 2022, Katie Fry-Paul, Associate at Taylor Wessing, said:

“Every jurisdiction is on scale; there are jurisdictions that implemented a bespoke regime and there are other jurisdictions that prohibited it. In the UK, we don’t have a regulations regime, we have security law. We would look at a token and determine if it is a traditional financial instrument.”

“The UK implemented regulations broadly compared to other jurisdictions. I see a lot of those who are engaged in the process of regulation, and I agree that there should a nuanced bespoke regime in terms of consumer protection, and the industry needs to be involved in doing so because they know a lot about the transactions happening.”

Nathan Catania, XReg Consulting, said:

“The majority of the countries have been changing and adopting regulations. Consumer protection is definitely on the horizon.

“We have seen a lot of changes in UK and Spain where they are trying to implement these consumer protection regulations. It is interesting to see what approaches will be taken in these new innovative programmes,” Catania continued.

Money mules were centre of discussion in the second session of FinCrime Global, with Gemma Staite of BioCatch explaining how the experts are working to reverse damaging trafficking trends.

“We compare how users are interacting with their profiles to find anomalies in their behavioural pattern,” Staite said.

We then look for anomalies and compare it with the population to determine if it is indeed a criminal behaviour or just a consumer. We combine the two to understand the intent,” Staite continued.

“Mules are becoming a big problem. There was an increase of 78% in the UK in the last few years mostly in online adverts targeting younger people to use their account as mules”

“Biocatch’s behaviour analysis to detect mules includes interpreting patterns and assessing familiarity with personal details, habit changes and aggregated futures such as logging frequency,” Staite added.

Following this session, AML/KYC specialist, Robert Williams, joined Edinburgh Napier University’s cyber expert, Basil (Vassilis) Manoussos, and Cuneyt Eti, Director, Sius Consulting, for a closer look at fraudulent activities within crypto.

Ever since the launch of the first cryptocurrency, the entire industry has been embroiled in controversy. There is no denying that crypto has fuelled hundreds of rags-to-riches stories, but there is also an equal number of stories about cryptocurrency scamming and how it has enabled fraudsters to make millions from unsuspecting investors and buyers.

The profit potential of the market always draws people in, but if you truly want to real its benefits, you have to know how cryptocurrency fraud happens and how you can avoid it.

Commenting on early identification of potentially bogus campaigns, Robert Williams said:

“Look at the social media account, does it look like it’s legit, is the email disposable, does the user location match where it is sent from, it is not rocket science; just check their digital fingerprints, it is essentially AML and KYC.” 

Basil Manoussos, said:

“Anything that says that it will make you earn more money is a red flag by itself.”

I’m a crypto and Blockchain sceptic, but if you go to the crypto official websites they tell you to not trust anything that says that it will make you a lot of money, except if it is an official website. Another red flag is ignorance, people are not duly diligent, if you look at how much bitcoin has been stolen in the past.”

The afternoon sessions at FinCrime Global began with a discussion on the vital role that strong AML transaction monitoring governance frameworks play in today’s regulatory environment. 

Richard Parlour, Financial Markets Law International, said:

“Look at your AML architecture, it has to be pretty fluid. Ask yourself how you go about it working every day. Two aspects to take in consideration: what the regulation says and how you protect yourself from the risks and threats.”

Commenting on whether transaction monitoring rules should be limited by geographical boundaries, Paul Munson, Solidi Crypto Currency Exchange, said:

“It is hard to have global rules, there are different risks. The issue is if someone asks how you fit in those rules as a business in a global scale, and you can’t answer, then how can you deem it to be effective? In my experience, you need to tailor the rules to your business.”

Next up, audiences at FinCrime Global enjoyed a fireside talk between University of Portsmouth’s professor Mark Button and Dr Branislaw Hock.

The authors of the newly-published book, Economic Crime: From Conception to Response (Routledge 2022), reflected upon the most important problems associated with economic crime.

Dr Branislav Hock, said:

“The bigger point here from my perspective, is that the state should intervene in matters that are related private institutions.”

Mark Button said:

“When you come to economic crime, private policing is very present. If you look at private companies they have substantial amounts of investigators to deal with money laundering.”

Commenting on how policymakers, regulators and law enforcement rethink current practices with respect to the psychology of perpetrators, Mark Button said:

“We found a difference between economic criminal and other criminals’ psychological traits, although the former are pretty similar to the ones of successful businessmen… I have my doubts on how useful psychology is in stopping economical crime. Fraud is challenging but not impossible.”

The EU’s AML strategies and implications for terrorist financing fell under the spotlight in the penultimate session at FinCrime Global.

Beata Wisnicka, Association of Certified Financial Crime Specialists – ACFCS, underlined the importance of educating people on “how scammers think and work.”

Reflecting on how the government can help with raising awareness on FinCrime and best practice for businesses, from a corporate training perspective, Beata Wisnicka said:

“In Poland, on every bank’s main website we can see information about scammers. The banks really help clients and governments focus mostly on cyberattacks. We have to educate people and victims since scammers are getting stronger.”

Towards the end of day two at FinCrime Global, experts looked at the state of crypto regulations in USA and Europe.

Pawneet Abramowski, PARC Solutions LLC, asked:

“From your regulatory perspective, what do you think of the US jurisdiction wanting to categorise cryptocurrency as asset and liability?”

Marcos Tinedo, Billpocket, said:

“I think this is going to change the landscape of crypto in the US and give clear rules for this currency. I know some great people who want to work with the same AML and KYC frameworks in cryptocurrency against the bad ones, we don’t need to reinvent the wheel.”

Taking questions from the FinCrime Global audience, Pawneet Abramowski described how “concise frameworks” exist in eastern European countries to facilitate getting licenses for crypto services more easily.

Pawneet went on to talk about potential geographic borders for crypto currencies.

“It all depends on what blockchain tech you are on. I would hesitate to say there is no regulation; there is a standardised process. Different regulatory bodies like the IMF are all working on a homogenous process to regulate it.

“The regulations should be streamlined for the use of this product, we need a regulatory process tailored for this mainstream sector,” Pawneet explained.

Marcos Tinedo said: 

Local regulators have to be more flexible on this. Applying AML/KYC/sanctions in crypto just like any other bank framework, I do think there is no harm in that.”

Pawneet Abramowski finished:

“Government budgets need to change; they need to invest more in these regulators because they are very understaffed compared to other financial institutions.”