Authorities charge man with money laundering after traffic stop

By Sanford Schmidt

EDWARDSVILLE — Authorities have charged a California man with money laundering after state police found more than $263,000 in a car he was driving.

Charged with two counts of money laundering is Daniel J. Hovland, 36, of Hayward, Calif. He is accused of transporting criminally derived property and carrying the property in bundles with rubber bands to avoid a transaction requirement. Bail was set at $200,000.

The charge came after a state trooper stopped a 2018 Toyota Camry, driven by Hovland April 26 on Interstate 70 in Collinsville. The details of the case became public Friday.

He was stopped for improper lane use, and told an officer he was traveling from “out east” back to California. However, he was unable to specify exactly from where “out east” he came.

Police brought in a drug dog who alerted on the Camry. Hovland told police he had $6,000 in his position. Police searched the car and found a suitcase in the trunk containing a large amount of bundled cash. Officers also found seven cell phones in the car.

Hovland declined to be interviewed without an attorney present. The Madison County State’s Attorney’s Office filed suit under a state law that allows law enforcement authorities to obtain assets believed used in the drug trade.

The suit claims Hovland was unable to explain the money and that he did not have a legitimate source of income for that amount of money. The suit claims the cell phones were intended for use in concealing the proceeds from some form of unlawful activity.

Solving a blockchain conundrum: Biometrics could recover lost encryption keys

By Lucas Mearian

Blockchain could one day solve the online privacy problem by encrypting or scrambling personally identifiable information and issuing each person a random string of bits – a private key – created explicitly for unscrambling their data.

The person holding the blockchain private key could issue various public keys controlling who has access to the personal data on the blockchain. So, for instance, if a car rental agency needed to verify you have a driver’s license, you could use a public key to give them access to that information. You could later revoke access to that information.

The still-nascent distributed ledger technology, however, faces a vexing problem: what does a user do if they lose their private key? Essentially, a lost key means they lose access to all of their data – and if that data happens to include bitcoins or other cryptocurrency, they lose their digital money as well.

For example, Bitcoin scrambles user information through the use of the AES 256-bit encryption algorithm, which creates a 256-bit private key that can be represented by 32 or 64 alpha numeric characters.

“For Bitcoin, there simply is no key recovery. If you lose your private key, you’ve lost your Bitcoin,” said Martha Bennett, a principal analyst at Forrester Research.

Lance Morginn, CEO and co-founder of the Blockchain Intelligence Group, believes the blockchain industry and government regulators will need to collectively come to terms on a standard for reclaiming a lost private key.

The Blockchain Intelligence Group is a private company that offers blockchain search and data analytics tools; it has already been working on ID management with U.S. regulators and law enforcement agencies.

The most likely method for reclaiming a private key would be to physically go to a secure facility where the key’s owner would have to pass a number of security measures before the key is restored.

“It’s going to come down to a multitude of biometric devices. It could include a fingerprint scanner with a pulse detector, a retinal scanner and facial recognition all tied together,” Morginn said. “We’re in discussions with number of different regulators around world.”

Increasing regulatory scrutiny

While the idea of going to a private key reclamation facility may seem far-fetched, regulators in various countries are already boosting their scrutiny of cryptocurrency exchanges, including requirements that cryptocurrency be stored offline.

After a number of bitcoin thefts over the past seven years, Japanese regulators this month tightened their rules requiring exchanges to keep bitcoins offline or in “cold storage,” and bitcoin wallet access will require more than one person’s login information.

Conversely, most of the world’s other bitcoin exchanges today continue to keep the digital currency in “hot wallets” or online electronic depositories managed by the exchanges themselves.

Japanese bitcoin exchanges will also have to take more action to prevent money laundering, just as financial service companies in the U.S. must do today by following know-your-customer (KYC) and anti-money laundering (AML) guidelines.

Blockchain identity networks projects have also sprung up, offering the potential to satisfy new, more stringent requirements, such as KYC, to ensure that companies know with whom they’re doing business. KYC regulations were enacted in recent  years to address a rise in money laundering and terrorist activity funding.

Through a blockchain identifier network, banks could pre-verify who their customers are, and whether or not they’re tied to nefarious activities.

There are already blockchain networks that use biometrics to enable access to private keys and the personally identifiable information (PII) they protect.

Biometrics for accessing keys

For example, Civic, a blockchain identity-verification technology provider, pre-registers users and their identification data, encrypts it and issues a passcode accessible via a finger print scan using an app on a mobile device.

In March, Civic partnered with mobile voting provider Votem to launch a know-your-customer process that will pre-register and authenticate those participating in Votem’s crowdfunding initial coin offering (ICO). Once user IDs have been verified using blockchain, the identities are stored on the Civic App and can be reused for the ICO.

Civic’s private keys are generated by a third-party crypto wallet, providing a firewall between Civic and users’ keys app. The fingerprint scan eliminates the need for logins  with a username, password, third-party authenticator, or physical hardware token. Civic users can choose who gains access to their information and what data gets shared.

Just as physical keys only open the locks for which they were made, public keys can be used by blockchain users to control what data is released to whom; public keys are controlled through smart contracts, a blockchain business automation tool that determines what information is released based on the public key used.

There are several projects in the works to enable the worldwide exchange of PII via blockchain networks. The biggest benefit: there would be no central authority, such as a bank, governing the exchange of private data. The control would remain with the owner of that data.

For example, the Sovrin Foundation, a new nonprofit organization now developing the Sovrin Network, could enable anyone to globally exchange pre-verified data with any entity also on the network.

The online credentials would be akin to identify information that might already be in someone’s physical wallet: a driver’s license, a bank debit card or a company ID.

Instead of a physical card, however, the IDs in digital wallets would be encrypted and link back to the institutions that created them, such as a bank, a government or even an employer. Any of them, through the blockchain, would automatically verify  information to a requestor.

The owner of the digital wallet can limit what information a business receives via an electronic token.

“Let’s say I go to rent a car and you’ve got the 18-year-old behind the counter that I have to give all my information – my driver’s license, my credit cards. She doesn’t need all that information. She just needs to know that I’m authorized to drive that car. I have just given her the… token saying I’m licensed in the state of New York,” said Shone Anstey, president and co-founder of the Blockchain Intelligence Group.

“That way, if the car company has a break-in and someone steals all their databases, they don’t have my personal information,” Anstey added.

The ID2020 alliance, a global partnership, is working to create an open-source, blockchain-based digital identity system for people in the U.S. or other nations who lack legal documentation because of their economic or social status.

A blockchain-based identity token, one that contains PII, may be considered more sensitive because once in someone else’s possession it could be used to impersonate someone for any number of purposes. Witrh that in mind, regulators are considering how blockchain users would be able to revoke access to their identity tokens as well, Anstey said.

Michael Fauscette, chief research officer at G2 Crowd, a business-to-business software review site, expects that in the next five years, decentralized identity verification will no longer be a novelty; it will be the norm.

“Imagine hiring without reference checks or transcript verifications, where all that an applicant needs is a blockchain hash,” Fauscette said.

With identities, bank accounts and employer information all possibly stored online through blockchain, it will be more crucial than ever to ensure that a lost private key can be recovered.

Despite steps in the right direction, the industry isn’t even close to enabling how private keys will be recovered, Morginn said.

https://www.computerworld.com/article/3273429/blockchain/solving-a-blockchain-conundrum-how-biometrics-could-recover-lost-encryption-keys.html

El Salvador Court to Try Former President for Money Laundering

By Christine Murray

SAN SALVADOR (Reuters) – A former president of El Salvador will go on trial on charges of embezzlement and money laundering involving more than $300 million, a tribunal in the Central American nation decided on Wednesday.

A San Salvador judge said Antonio Saca, who was president from 2004 to 2009, and six other former high-level public officials would face trial for the charges that could see them imprisoned for up to 25 years.

Saca and the other defendants are accused of diverting funds from the treasury to personal bank accounts to benefit individuals, companies connected to the former president and advertising for his Nationalist Republican Alliance (ARENA) party.

The judge will keep Saca and the other accused people detained, said a prosecutor, who asked not to be identified because of safety concerns.

https://www.usnews.com/news/world/articles/2018-05-16/el-salvador-court-to-try-former-president-for-money-laundering

Combating fraud and money laundering with graph analytics

By Yu Xu at Tiger Graph

Dirty money and money laundering have been around since the existence of currency itself. On a global level, as much as $2 trillion is washed annually, estimates the United Nations. Today’s criminals are sophisticated, using ever-adapting tactics to bypass traditional anti-fraud solutions. Even in cases where enterprises do have enough data to reveal illicit activity, more often than not they are unable to conduct analysis to uncover it.

As the fight against money laundering continues, AML (anti money laundering) compliance has become big business. Global spending in AML alone weighs in at more than $8 trillion, says WealthInsight. This figure will continue to grow, considering how any organization facilitating financial transactions also falls within the scope of AML legislation.

But combating crime is never easy. Especially when organizations face pressing needs for cost reduction and faster time to AML compliance in order to avoid regulatory fees. Legacy monitoring systems have proven burdensome and expensive to tune, validate and maintain. Often involving manual processes, they are generally incapable of analyzing massive volumes of customer, institution and transaction data. Yet it is this type of data analysis that is so critical to AML success.

New ideas have emerged to tackle the AML challenge. These include: semi-supervised learning methods, deep learning based approaches and network/graph based solutions. Such approaches must be able to work in real time and handle large data volumes – especially as new data is generated 24/7. That’s why a holistic data strategy is best for combating financial crime, particularly with machine learning (ML) and AI to help link and analyze data connections.

Graph analytics for AML

Graph analytics has emerged at the forefront as an ideal technology to support AML. Graphs overcome the challenge of uncovering the relationships in massive, complex and interconnect data. The graph model is designed from the ground up to treat relationships as first-class citizens. This provides a structure that natively embraces and maps data relationships, even in high volumes of highly connected data. Conducted over such interconnected data, graph analytics provides maximum insight into data connections and relationships.

For example, “Degree Centrality” provides the number of links going in or out of each entity. This metric gives a count of how many direct connections each entity has to other entities within the network. This is particularly helpful for finding the most connected accounts or entities which are likely acting as a hub, and connecting to a wider network.

Another is “Betweenness,” which gives the number of times an entity falls on the shortest path between other entities. This metric shows which entity acts as a bridge between other entities. Betweenness can be the starting point to detect any money laundering or suspicious activities.

Today’s organizations need real-time graph analytic capabilities that can explore, discover and predict very complex relationships. This represents Real-Time Deep Link Analytics, achieved utilizing three to 10+ hops of traversal across a big graph, along with fast graph traversal speed and data updates.

Let’s take a look at how Real-Time Deep Link Analytics combats financial crime by identifying high-risk transactions. We’ll start with an incoming credit card transaction, and demonstrate how this transaction is related to other entities can be identified:

New Transaction → Credit Card → Cardholder → (other) Credit Cards → (other) Bad Transactions

This query uses four hops to find connections only one card away from the incoming transaction. Today’s fraudsters try to disguise their activity by having circuitous connections between themselves and known bad activity or bad actors. Any individual connecting the path can appear innocent, but if multiple paths from A to B can be found, the likelihood of fraud increases.

Given this, more hops are needed to find connections two or more transactions away. This traversal pattern applies to many other use cases – where you can simply replace the transaction with a web click event, a phone call record or a money transfer. With Real-Time Deep Link Analytics, multiple, hidden connections are uncovered and fraud is minimized.

By linking data together, Real-Time Deep Link Analytics can support rules-based ML methods in real time to automate AML processes and reduce false positives. Using a graph engine to incorporate sophisticated data science techniques such as automated data flow analysis, social network analysis, and ML in their AML process, enterprises can improve money laundering detection rates with better data, faster. They can also move away from cumbersome transactional processes, and towards a more strategic and efficient AML approach.

Example: E-payment company

For one example of graph analytics powering AML, we can look towards the #1 e-payment company in the world. Currently this organization has more than 100 million daily active users, and uses graph analytics to modernize its investigation methods.

Previously, the company’s AML practice was a very manual effort, as investigators were involved with everything from examining data to identifying suspicious money movement behavior. Operating expenses were high and the process was highly error prone.

Implementing a graph analytics platform, the company was able to automate development of intelligent AML queries, using a real-time response feed leveraging ML. Results included a high economic return using a more effective AML process, reducing false positives and translating into higher detection rates.

Example: Credit card company

Similarly, a top five payment provider sought to improve its AML capabilities. Key pain points include high cost and inability to comply with federal AML regulations – resulting in penalties. The organization relied on a manual investigative process performed by a ML team comprised of hundreds of investigators, resulting in a slow, costly and inefficient process with more than 90 percent false positives.

The company currently is leveraging a graph engine to modernize its investigative process. It has moved from having its ML team cobble processes together towards combining the power of graph analytics with ML to provide insight into connections between individuals, accounts, companies and locations.

By uniting more dimensions of its data, and integrating additional points – such as external information about customers – it is able to automatically monitor for potential money laundering in real time, freeing up investigators to make more strategic use of their now-richer data. The result is a holistic and insightful look at its colossal amounts of data, producing fewer false positive alerts.

As we continue into an era of data explosion, it is more and more important for organizations to make the most in analyzing their colossal amounts of data in real time for AML. Graph analytics offers overwhelming potential for organizations in terms of cost reduction, in faster time to AML compliance and most importantly, in their ability to stop money laundering fraudsters in their tracks.

Teppanyaki owners charged with money laundering, hiding $8M in sales

INDIANAPOLIS — Marion County Prosecutor Terry Curry and officials from the Indiana Department of Revenue announced criminal charges Thursday in an investigation into Indianapolis buffet restaurants accused of money laundering.

Police raided two Teppanyaki Grill & Buffet locations in Marion County in August 2016 and seized more than $600,000 in alleged money laundering proceeds.

Prosecutors also filed a civil complaint again Teppanyaki Grill, Teppanyaki West, Union Broker Limited, Hokkaido Japanese Buffet in Terre Haute and dozens of the restaurants’ managers and affiliates.

At the time, prosecutors left open the possibility of criminal charges being filed in the case.

On Thursday, the Marion County Prosecutor’s Office announced it had filed charges of corrupt business influence, theft and failure to remit taxes against seven people accused of underreporting more than $8 million in sales from seven Teppanyaki and similarly branded restaurants.

The defendants charged in the case are as follows:

  • Shua Li, owner of Teppanyaki Grill Supreme Buffet (Indianapolis)
  • Chunhua Wang, owner of Teppanyaki Grill Super Buffet (Lafayette)
  • Guo Wu Wu, owner of Teppanyaki Supreme Buffet 285 (Fort Wayne)
  • Jin Qui Zhao, owner of Teppanyaki Buffet, Inc. (Marion)
  • Ji Rong Lin, owner of Hokkaido Japanese Buffet (Terre Haute)
  • Guang Feng Li, owner of China King Feng, LLLC (Plainfield) and Teppanyaki Grill Supreme Buffet (Indianapolis)
  • Sheng Yi Li, owner of Teppanyaki West (Indianapolis)

According to a probable cause affidavit filed in the case, investigators allege the defendants used cash sales to hide hundreds of thousands of dollars a year in sales revenue – which they then failed to pay sales taxes on.

The investigation began with search warrants served at a single Teppanyaki location in Indianapolis in October 2014. Ultimately it expanded to restaurants in Terre Haute, Plainfield, Lafayette and Marion, as well as a second Indianapolis location.

Although the charges only cover alleged activities during the 2014-2016 period, Marion County Prosecutor Terry Curry said they have “no reason to believe that it hasn’t been going on at these restaurants for years and years.”

Former Oklahoma police officer accused of being a drug trafficking and money laundering kingpin

By Bill Miston

OKLAHOMA CITY – A former Edmond police officer is facing federal drug trafficking and international money laundering charges in connection to an investigation alleging he ran an illegal steroid trafficking ring out of his Edmond home and business fronts.

Christopher Thomas Caplinger and co-defendant, 54-year old Donald Ray Vincent, Jr., pleaded not guilty before a federal judge Tuesday. A trial is set for next month.

Caplinger, a retired Edmond police officer, was indicted by a federal grand jury last month on nearly two dozen counts involving possession, manufacturing, and distribution of anabolic steroids, along with maintaining a drug house and international money laundering. Vincent and two others were also indicted. That indictment was unsealed late last week.

“This is obviously the very beginning of the case and they’ve accused Chris of doing a lot of things in regards to steroids over the internet,” said Caplinger’s defense attorney Scott Adams.

According to federal court records the 55-year-old former police officer ran the illegal steroid ring from early 2014 until late 2017, when federal agents raided his home in the 500 block of Benton Road in Edmond.

It’s alleged that Caplinger was the leader of the drug ring. Court documents say Caplinger purchased raw anabolic steroids from countries, like China and Turkey, and sent the drugs to an intermediary in the United States. Michael Brandon Schott of Newport News, Va., would then re-ship the product to Oklahoma City where the manufacturing and distribution would take place, according to the indictment.

In an effort to conceal the activities, prosecutors allege that Caplinger had a woman, Deborah Ann Crawford, open post office boxes for fictional companies, where payment for the steroids would be sent, as well as online PayPal accounts, for buying and selling the drugs.

Prosecutors say proceeds from the steroid sales were concealed by Caplinger and Vincent by depositing the money into a number of bank accounts in the names of others, including Crawford, as well as using state-registered automotive businesses as fronts.

According to the indictment, the drugs were shipped to a purported auto sales business run by Caplinger out of an industrial park in the 8200 block of North Classen where the drug manufacturing was finished.

Money was also stored at Caplingers and Vincent’s homes. Roughly $280,000 was found buried in Caplinger’s backyard, according to the indictment.

“We’re dealing with a lot of issues right now and one of them is that a large sum of money found in his back yard, and some other things,” said Adams. “We’re just trying to get to the bottom of this and see exactly what the allegations are by the government. We’re getting ready to find out and then we’ll deal with it from there.”

Steroids, which are used by some in the bodybuilding, sport and fitness communities to promote muscle growth, are considered a Schedule III drug by the U.S. government. Possession or sale of anabolic steroids, without a valid prescription, is illegal.

The use of steroids in professional sports leagues across the country and the world have been banned. Prolonged use of steroids can have serious side effects.

Federal agents, including the DEA, raided Caplinger’s home last November. Sources told News 4 at the time that drugs, weapons, and cash were seized from inside Caplinger’s home. Officers also raided a second location in Oklahoma City as part of the investigation.

Caplinger is charged with 22 counts relating to conspiracy to possess and distribute, attempted distribution, distribution and manufacturing steroids. He’s also facing charges of maintaining a drug house, U.S. and international money laundering, and use of criminal proceeds. Vincent is facing four counts of conspiracy to possess and distribute, and manufacture anabolic steroids, as well as U.S. and international money laundering.

Crawford faces three counts of U.S. and international money laundering as well as use of criminal proceeds. Schott is charged with one count of conspiracy to possess and distribute anabolic steroids. Crawford and Schott are scheduled to appear in court on May 14.

This isn’t Caplinger’s first run-in with the law.

Caplinger was arrested and charged in a 2007 felony police bribery case for his role in accepting money to help drunk drivers avoid prosecution. The case also brought down well-known Oklahoma City defense attorneys Josh Welch, David Ogle and Sam Kerr.

Caplinger pleaded guilty in 2009 to bribing a police officer and conspiracy to bribe a police officer and received a deferred sentence.

Caplinger retired from the Edmond Police Department in 2004 after 20 years on the force.

Former Oklahoma police officer accused of being a drug trafficking and money laundering kingpin

ICE HSI counterfeit steroid trafficking, money laundering case leads to prison sentence in Massachusetts

BOSTON —- A Gloucester, Massachusetts, woman was sentenced to prison April 26 in federal court in Boston for her role in a conspiracy to traffic counterfeit steroids and launder money following charges brought from a U.S. Immigration and Customs Enforcement’s (ICE)  Homeland Security Investigations(HSI)-led case.

Melissa Sclafani, 30, was sentenced by U.S. District Court Judge Nathaniel M. Gorton to one year and one day in prison and two years of supervised release. Sclafani pleaded guilty in June, 2017 to one count of conspiracy with intent to distribute and to distribute counterfeit steroids and one count of conspiracy to launder money, in the case which was prosecuted by the Office of  United States Attorney Andrew E. Lelling.

HSI Boston identified a counterfeit steroid organization run by Sclafani and others operating since at least early 2016 which smuggled raw steroid from China/Hong Kong into the United States and manufactured injectable anabolic steroids which were advertised and sold over social media sites, fitness blogs, and email as “Onyx Pharmaceuticals”. The steroids were marketed and sold with counterfeit labeling, holograms and branding and distributed all over the United States.

As a result of the investigation, six federal arrest warrants and five federal search warrants were executed which yielded 9 kilograms of raw powder steroids, over 35,000 units of finished steroid units, laboratory production equipment, 14,000 fraudulent branding labels and boxes and more than $500,000 dollars in cash. The investigation was led by agents from HSI-Boston and was assisted by team members from the U.S. Postal Inspection Service, and the Food and Drug Administration’s Office of Criminal Investigation, New York Field Office.

Digital Detergent: Crypto money-laundering

AS LONG as dirty money has been around, so has money-laundering. Between $800bn and $2trn, or 2-5% of global GDP, is washed annually, estimates the United Nations Office on Drugs and Crime. Criminals have swapped money for precious metals, mis-stated invoices, rinsed cash through casinos or simply strapped it to their bodies and flown to places where banks don’t ask questions. Now they have a new detergent: crypto-currencies.

Such data as there are suggest that crypto-laundering is still a small share of the whole. But crypto-currencies’ attractions—global availability, the speed and irreversibility of transactions and the ability to hide identities—are plain. Rob Wainwright, head of Europol, Europe’s police agency, has estimated that 3-4% of the continent’s annual criminal takings, or £3bn-4bn ($4.2bn-5.6bn), are crypto-laundered. He thinks the problem will get worse. America’s Drug Enforcement Administration believes international gangs are using crypto-currencies more.

Dirty cash—from drug-dealing, say—can be washed by converting it into crypto, splitting it into smaller amounts and moving it through the crypto-sphere, perhaps via several virtual currencies. Dirty crypto, for example from a ransomware attack, can be similarly swapped around—often at high speed (“atomic swaps”) and in little chunks (“micro-laundering”)—until it is clean enough to be switched into ordinary money.

Authorities are slowly catching up. Last month a Briton was jailed in the Netherlands for taking €11m ($13.2m) in dirty bitcoin from criminals, converting these into ordinary money through his bank account, withdrawing the cash and returning it to the crooks, minus a cut. But professional launderers are using more sophisticated methods, often mixing old and new ways to evade detection, says Michael McGuire of Sussex University.

Europol recently uncovered how European crime bosses used crypto to pay a Colombian drug cartel for cocaine. European henchmen visited crypto-exchanges to convert euros into anonymous virtual currencies. These were sent to a digital wallet registered in Colombia and swapped into pesos on an online exchange. The pesos were withdrawn in cash, which local “money mules” spread over dozens of bank accounts, in sums small enough to avoid suspicion. The cartel bosses got the money by withdrawing the cash or by e-transfer.

“Sticking £10,000 down your underpants and flying to Zurich is still quite a common and easy way to launder money,” says Mr McGuire. But he warns that as governments work to get cash off the street and crack down on other ways of washing money, cyber-laundering may well be the future.

PayThink Cryptocurrency issuers must improve their anti-money laundering game

By Ron Teicher

All signs point to the end of a “Wild West” era of cryptocurrencies, specifically with ICOs. As governments step up to protect investors, companies considering an ICO should take the initial steps to self-regulate, before regulatory bodies step in and do it for them.

In July 2017, the SEC issued an investigative report “cautioning market participants that offers and sales of digital assets by ‘virtual’ organizations are subject to the requirements of the federal securities laws.”

The SEC is strongly considering labeling ICOs as securities, meaning that future offerings or sales of “blockchain technology-based securities” will have to be registered, just like the offerings or sales of traditional securities.

These unregistered offerings would then be liable for violations of securities laws in many countries including the U.S. The penalties for securities fraud are severe, and stand to increase as bipartisan groups of U.S. senators introduce a bill to raise penalties for securities law violations.

Other countries have taken even more strident regulatory actions against ICOs. In September 2017, China’s central bank announced a complete ban on ICO funding because it “seriously disrupted the economic and financial order.” China’s ban reflects a legitimate worry, shared by governments worldwide, over the danger of ICOs facilitating money laundering, online fraud, and terrorist financing.

When regulators recognize ICOs as securities offerings, they will likely require issuers to fully comply with standard Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.

Currently, most ICOs don’t perform even the most basic customer check. In our review of U.S. based ICOs, we discovered that only 11% of these offerings require investors to prove that they are U.S. citizens.

A key piece in the overall AML landscape, KYC enables financial institutions to manage risk by granting them full transparency on their customers. Broadly speaking, the KYC process analyzes basic identity information and checks this information against lists of known parties who have been associated with fraudulent practices. Using profiles of similar customers, KYC models typical transactional behavior, and then monitors actual behavior against this model.

Such traditional KYC/AML regimes, designed to verify merchant identity and business scope, have been the frontlines of fraud prevention for decades. Even before specific KYC/AML regimes are updated to include ICOs, a growing number of companies considering ICOs are proactively ensuring their compliance with basic KYC/AML tenets. KYC also ensures that companies are not concealing part of their business activities or acting as a storefront for illegal products.

And it’s not just startups that are preparing for ICO regulations. Recently, the Waves blockchain platform joined forces with the ICO Governing Foundation, the Ethereum Competencies Centre, and Deloitte CIS to launch a self-regulatory body for ICOs.

The idea is to drive change from the ground-up by having the industry itself provide reporting, legal, tax, accounting, KYC, and business due diligence standards for ICOs.

Recognizing the fact that cryptocurrency fundraising is on the rise, this move makes sense.

Without best practices and standards in place, organic growth can be impeded by perceived risks to investors and issuers. Vladislav Martynov, the Head of the Ethereum Competence Center, noted in the Deloitte release that “joint and voluntary initiatives such as this self-regulatory body for token sales are a critical element in the professionalization of the blockchain industry. As custodians of some of the most remarkable and disruptive technology ever created, we must be seen to be fostering its responsible use as well as building functionality and maintaining the security of the ecosystem.”

U.S. Court Rules Money Laundering-Related Case Against Coinbase Must Have Public Trial

By Molly Jane Zuckerman

A U.S. federal court has ruled that law firm Silver Miller’s money laundering-related class action lawsuit against crypto exchange and wallet Coinbase must be held in open court as opposed to a private arbitration boardroom, Silver Miller attorney David Silver told Cointelegraph in an email today, April 23.

The Eleventh Circuit Court of Appeals ruled today that the class action against Coinbase, brought by Silver Miller and co-counsel the Wites Law Firm, will be held in open court. The case in question alleges that Coinbase assisted in laundering around $8.2 mln of stolen Bitcoin (BTC) – valued at over $100 mln today. In July, 2017, the CEO of the now bankrupt crypto exchange Cryptsy, Paul Vernon, had been found guilty of stealing his users’ cryptocurrency and as ordered to pay $8.2 mln in damages, a case Silver Miller law firm was also involved in.

As Vernon used his Coinbase account to convert the stolen funds into fiat between 2014 and 2016 before fleeing the country, the current Silver Miller class action lawsuit against Coinbase alleges negligence in account oversight:

“Plaintiffs seek damages based upon the unlawful conduct of COINBASE in failing to properly monitor customer accounts that held investors’ money and ignoring its duty to investigate suspicious activities under U.S. anti-money laundering rules.”

Silver Miller co-founder David Silver, who was part of the original Cryptsy lawsuit, told Cointelegraph that he has long “preached that accountability, transparency, and verification are needed in the crypto exchange space”:

“This ruling brings the plaintiffs one step closer to finding out just what type of Know Your Customer protocols and Anti-Money-Laundering protections Coinbase employed and whether Coinbase complied with state and federal statutes in that regard.  Coinbase has delayed and tried to keep discovery hidden from the public long enough. That stops now.”

Miller added that the law firm is “pleased” that the case will be a public trial:

“Coinbase’s ascension to the top of the crypto exchange heap has not come without missteps in its business practices along the way.  We look forward to having Coinbase answer for its role in the millions of dollars in harm suffered by our clients.”

Coinbase is currently the subject of multiple disputes from users, including a complaint filed in March of this year that alleges that the exchange benefited from insider trading when it added Bitcoin Cash (BCH) to its exchange and wallet services. On the merchant side, Coinbase has recently received backlash online from its reported decision to suspend the account of the WikiLeaks Shop, the official merchandise arm of the whistle-blowing Wikileaks organization.