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Lax cryptocurrency oversight raises KYC/AML issues

As new technologies become more prevalent in financial services, newer doesn’t automatically mean better, Kelvin Dickenson said. Mr. Dickenson is the president of Opus, an anti-money laundering and KYC compliance firm. We recently spoke about the future path for cryptocurrencies and the challenges financial companies of all types face in maintaining accurate records.

The goals cryptocurrency creators may have had when designing them are not close to being reached, Mr. Dickenson said. The market participants they have largely attracted so far have taken them in another direction.

“Cryptocurrencies are interesting. When they were first becoming popular, the topic was them becoming a currency…a means of exchanging value. Now it’s a means of speculating ABOUT value. They’re a means of storing and accumulating value as opposed to a means of settling financial transactions.”

Kelvin Dickenson

Most Opus clients are tier one and tier two banks for whom cryptocurrencies barely register, Mr. Dickenson said. But he’s fielding more queries from cryptocurrency companies and platforms worried about their exposure to fraudulent operations and those laundering criminal proceeds. That doesn’t surprise him, as cryptocurrencies operate outside of normal controls established banking systems have in place to help manage and report suspected transactions.

“There’s no system monitoring in place,” Mr. Dickenson said. “That lack of visibility is very attractive to people who want to launder proceeds of crime. The relative potential anonymity of exchanging digital currencies takes that further.”

Your ideas for how to address these issues likely depend on the role you play in the financial world, Mr. Dickenson suggested. If you are a regulator, you will wonder how to properly control cryptocurrencies so the emerging systems are not abused by criminals. If you work for a bank, you are well aware of the penalties you face for compliance lapses with well-established processes and wonder why the crypto world doesn’t have to meet the same standard.

“Banks have become the eyes and ears of global enforcement,” Mr. Dickenson said. “They’ve become the financial police force and that’s not a job they’ve asked for.

“The whole cryptocurrency system is outside of that…They are open to abuse. The cryptocurrency ecosystem is going to be regulated and watched.”


Opus’ two main business lines are data cleansing and enrichment, Mr. Dickenson said. These are massive challenges for financial institutions. They keep information on customers, counterparties, and suppliers on multiple data bases, each established for a unique purpose. 

But data changes over time, as people change jobs or move, Mr. Dickenson said. Changes entered in the data base of one area of a company’s system won’t likely migrate across a company whose systems are not synchronized. John Q may only be one person, but if changes in his information are not updated, with each job or city switch a bank could end up with several John Q’s in different cities working for different companies. The end result is a head scratcher as to which John Q is most accurate.

“Our services around data cleansing and data enrichment help banks get around this problem,” Mr. Dickenson said.

The importance of maintaining records of the utmost accuracy was made clear in the cleanup after the 2008 financial crisis, Mr. Dickenson said. Banks didn’t know their actual level of exposure, as they owned pieces of hundreds of different companies. As bad debt kept getting sliced and repackaged, no one knew what they actually had. A major investment bank deployed a large compliance team who took three weeks to determine their exposure to bad investments in companies they had an interest in, he said.

That is where Opus comes in, Mr. Dickenson said.

“Our proprietary technology makes it easier to cross reference to almost all sources of entity data. That provides a single view of the customer and allows a client to make accurate risk decisions.”

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