ICO Risk: Why is Compliance with AML

Initial bids of coins (ICO) appeared over the last year as an effective new way for companies to collect capital. Funding comes in the form of crypto, such as ETER and Bitcoin, in exchange for “tokens”. ICO eliminates many intermediaries that have traditionally separated investors and companies, and already are Collected billions for endeavors at an early stage.

The ICO initially functioned in a regulatory vacuum, profiting from the lack of clear guidelines on how they fit in the regulations on securities and financial crime. In July 2017. SEC indicated that US Securities Laws can be applied to the sale of tokens, depending on the circumstances of the ICO, and recently started execution actions.

This is amazing complex Theme, but not the topic we will focus on here.

ICO and the threat of money laundering

Another sign of questions regarding the ICOs related to the regulation against money laundering (AML) and terrorism financing.

Simply put, ICO takes one tool (cryptula like Ether or Bitcoin) and purchased it for another: token. These tokens can be freely transferred and trading for other crypto or fiat currencies on stock exchanges.

This system is a high risk for ICO: used to wash income acquired crime. By redeeming the crypto for tokens, ICO publishers potentially replace Cryptula formed by unauthorized activities For freshly sloped tokens, which can then be sold for US dollars, euros or other FIAT currency.

Lack of records in these ICOs, along with large sums and the speed that can happen, makes them an attractive money laundering, especially for cable crime revenues.

ICO risk and regulations

Regulators are now beginning to deal with the risk of money laundering. In March 2018. The US Department of Finance announced a letter summarizing his interpretation of the Law on Bank Secrets (Primary US Law Acts) in terms of the ICO. The letter is stated that:

“In general, according to existing regulations and interpretations, a programmer that sells convertible virtual currency, including ICO coins or token, in exchange for another type of value is the transfer of money and must comply with the requirements of the BPPN / BPFT.”

This means that every party selling newly used tokens (ie issues ICO) including US residents, among other things:

• Register with Fincen as a gear money
• implement appropriate AML compliance program
• submits reports on suspicious activities and currency transactions
• maintain the records of transactions
• Execute deep client analysis, including checks of your client’s knowledge (KYC).

Those who do not meet these conditions may be accused of unlicensed money transmission, resulting in a fine of up to five years in prison. Criminal responsibility can also expand to employees and investors in the company that sold tokens.

In addition to regulations, compliance with AML is critical

Even if they are not subject to AML regulations, ICO publishers must be aware of compliance with the AML to reduce the received crypto. It was very difficult for many to find a bank that will accept these income as deposits. Banks are subject to strict requirements for preventing money laundering, which oblige them to understand the source of funds, something they think they are unable to do when it comes to ICO.

Ellipticov ICO Risk Report helps solve this problem, and used by ICO issuers and banks for reliance with compliance with AML / CTF. Using BlockChain Analysis techniques, the ELLiptic determines the source of the crypto used to buy tokens in the ICO, ensuring that they do not originate from illegal activities such as breeds in dark markets, the activity of Ransomware and more.

Contact yourself on Request a sample ICO Risk Report and learn more about our ICO services.