Finnish crypto exchange bulks up anti-money laundering protocols

anti-money laundering

Today, Danny Nelson at Coindesk reports that LocalBitcoins a Finland-based P2P crypto exchange, is investing in better Know Your Customer and anti-money laundering provisions.


“Longtime peer-to-peer exchange LocalBitcoins, a former hub for anonymous bitcoin swaps, has added two blockchain-tracing tools from analytics company Elliptic as it continues to chip away at criminal crypto cashouts,” Nelson writes. “LocalBitcoins announced Tuesday it’s using Elliptic’s Navigator risk analysis tool and Lens wallet screener to crack down on illicit crypto. Blockchain analysis firms have previously claimed that LocalBitcoins receives the bulk of Finland’s criminal coin.


New regulations, both in the EU and in Finland, have played role, but in general, exchanges are navigating toward having these kinds of systems in place. In the case of LocalBitcoins, Nelson cites a 50% reduction in dark web transactions, basing this on remarks by Elliptic Chief Scientist Tom Robinson.


We know that one of the concerns around decentralized finance is the capacity for fraud and money laundering.


A common description of decentralized transactions is that individuals do them ‘in an open room in front of (digital) witnesses.’ But with that said, there aren’t the same kinds of traditional bank verification involved, and so the identity of asset holders can be in question.


That means exchanges themselves have to be ID gatekeepers, which can be a tall order in some cases.

“In the EU, (new finance requirement) AMLD5 covers the processes that institutions should follow to help prevent cryptocurrency money laundering. The latest update includes cryptocurrency exchanges and custodial services, such as virtual currency wallets,” writes an analyst at GetID. “This directive states that exchanges and wallets must register with their regional supervising regulator, such as the Financial Conduct Authority (FCA) in the UK. Exchanges and wallets must demonstrate that they have appropriate KYC and AML compliance programs in place.”

If you have crypto holdings or aspire to do so, keep these types of requirements in mind, because they will ultimately separate the best wallet and exchange options from others.