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suspicious activity

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Detecting Suspicious Activity on the Bitcoin Blockchain

It is a globally accepted belief that financial crimes such as money laundering, fraud and the financing of terrorism are societal evils warranting enormous preventative and investigative efforts.  Such a belief has been translated into a corpus of guidelines, principles, statutes and implementing regulations around most of planet Earth known as anti-money laundering (AML) and countering the financing of terrorism (CFT) or AML/CFT.

Generally speaking, AML/CFT regulations are intended to deter criminal activity before it happens, and to detect it when it has happened.  Because doing this on their own would be an impossibly gargantuan task, governments issue regulations whereby they deputize financial intermediaries as crime fighters on behalf of the public.  Each and every financial service provider categorized by law as an “obligated subject” is thus mandated to implement processes, procedures and controls aimed primarily at warding off criminals and, if they manage to penetrate the financial institution, identify them, report them, and ideally stop them in their tracks.

The primary crime deterrent is the obligation to identify customers and beneficial owners, a process known as customer due diligence (CDD) or Know Your Customer (KYC).  The Continue reading

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Is US Regulation the Single Biggest Threat to Bitcoin?

[Reading time: 6 minutes]

On March 4, 2013 I gave a talk titled just like this post at the New York City Bitcoin Meetup.  The talk blurb read:

If you are a Bitcoin ecosystem participant (user, entrepreneur), you may be aware that there is a myriad of rules and regulations, at the federal, state and even international level, that may apply to you.  Why?  Because Bitcoin is technically a “value transfer” system, and such systems are heavily regulated to protect consumer rights and deter financial crime, including the financing of terrorism.  Join us for a lively discussion of potential obstacles to the growth of the Bitcoin ecosystem.

The rather hyperbolic title attracted a few dozen very smart (and gracious) entrepreneurs and geeks, most of whom, unsurprisingly, were not aware that the United States has a very convoluted and onerous regulatory regime that can potentially stifle innovation or, at a minimum, slow down the spread of virtual peer-to-peer value transfer systems like Bitcoin. Continue reading

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