Slava Demchuk is the CEO and co-founder of AMLBot, a crypto compliance company with a proven track record of preventing $100 million in money losses since 2019. Slava is an experienced C-level executive, visionary, and AML specialist, certified by the European Institute of Management and Finance (EIMF). Having received his Master’s degree in Information Networks Security, Slava is an expert in cryptocurrency regulation, AML, and KYC compliance.
Mr. Demchuk, why was AMLBot created?
Slava Demchuk: AMLBot was created to automate and enhance the efficiency of detecting and preventing money laundering activities associated with cryptocurrencies. Its mission is to establish a secure, transparent, and compliant environment for both retail crypto users and crypto businesses.
How does AMLBot help people recover stolen crypto?
AMLBot helps in recovering stolen cryptocurrency by tracking transactions on the blockchain, identifying the destination services (such as exchanges) where the stolen funds are transferred, and flagging and blocklisting the wallets of the perpetrators with leading exchanges and other blockchain analytics tools.
We analyze transaction patterns to locate where stolen crypto is transferred or converted, allowing us to report suspicious activities to exchanges and law enforcement. While AMLBot can provide crucial data and analysis, the process of recovering stolen crypto is intricate and usually involves collaboration with exchanges and law enforcement agencies, which may freeze accounts or transactions involving the identified stolen funds.
How does the algorithm for checking the legitimacy of addresses work?
AMLBot employs a combination of blockchain analysis, pattern recognition, and risk scoring to evaluate the legitimacy of crypto addresses and transactions. By examining transaction histories, the algorithms detect typical money laundering behaviors, such as interactions with known illicit addresses or irregular transaction patterns. We utilize machine learning to adjust to changing laundering techniques and cross-reference transactions with blacklists of risky addresses.
What are the biggest challenges of enforcing AML measures today?
One of the major challenges lies in ensuring that entities operate on a level regulatory playing field and understand their obligations. When regulators frequently amend regulations, it becomes difficult for entities to stay updated on the latest requirements. In the past five years, we've observed entities relocating to other jurisdictions, including offshore ones with easier regulatory environments.
This trend may stem from misunderstandings and a lack of collaboration, undermining efforts to enhance security. It's evident that enforcing measures isn't the problem; rather, enforcing measures that align with the rapidly evolving technology poses a greater challenge. Regulations often react to past events, but the question is: How effectively do they accommodate new, dynamic crypto products and services entering the market? MiCA represents the first step in addressing some of these issues.
Can there be a globally effective compliance solution considering there are different regulations in different jurisdictions?
Countries are responsible for managing their own risks. Data sharing between countries is also a legal process, with GDPR closely monitored in the EU. For example, MoneyVal evaluates how well the EU applies AML measures. The EU provides guidelines to member states to enact legislation locally, requiring reporting for law enforcement escalation. So, in response to your question, there could be a digital ID system using blockchain, but who would fund it on a global scale?
However, global compliance isn’t currently the norm. While global collaboration and data sharing are necessary and beneficial, they are challenging to achieve. FATF continually provides risk data through a peer-to-peer system, aiding members in understanding cross-border risks for KYC and AML. However, concerning Blockchain, law enforcement needs to collaborate with the industry to investigate crypto crimes, leading to prosecutions and justice for victims, not just statistics.
Can people ever be stopped from transacting in high-risk or non-compliant exchanges? What are your personal thoughts on this?
At a peer-to-peer level, it will always be technically feasible to exchange value using blockchain technology. If one program is blocked, another can be written relatively quickly. Cryptocurrencies are inherently designed to facilitate rapid cross-border value exchange, and individuals are willing to take their own risks. However, it can be made more challenging to purchase cryptocurrencies using fiat currency by implementing AML controls and reporting suspicious transactions to Financial Intelligence Units.
What is the biggest loss a client of yours suffered?
The biggest loss one of our clients suffered was $10M. We have an ongoing case regarding this matter, so we can't provide more information at the moment. We may share details once the case is concluded.
Anonymity is a major tenet of crypto users. As efforts are made to fight crypto-related crime, can anonymity be preserved?
Solutions are available for those seeking anonymity, such as bridges, mixers, and private networks. Unfortunately, these solutions can also harbor Ponzi schemes, commonly referred to as 'Sh*t coins', with their own agendas. High risk often leads to slow progress. A regulated, compliant exchange will refuse to open accounts for individuals who refuse to cooperate with KYC and identification checks, and transactions to and from such systems can be blocked. Investor safety is paramount for the crypto market to realize the lofty predictions, as evidenced by BTC ETFs.
While regulations may initially seem to hinder business, especially for startups due to added costs, they are essential in the long term. I urge regulators to collaborate closely with the private sector to gain deeper knowledge and education, aiming for the best outcomes. Security is a fundamental requirement in the investment industry; while it may appear to decelerate progress, technology demands accelerationism.Striking the right balance is key to achieving ultimate success.
What kind of AML training does your company provide?
Our company offers two AML training programs through AMLBot:
1. General AML Requirements for Crypto Business: This program focuses on the essential AML requirements that every crypto business must adhere to, irrespective of its country of incorporation.
2. Training on Blockchain Analytics: This program delves into the role of blockchain analytics in combating money laundering and terrorist financing. It covers topics such as crypto asset screening and crypto investigations, which have become indispensable in today's landscape. Understanding blockchain analytics is crucial for any company or individual dealing with crypto assets to prevent their services or activities from being exploited for illegal purposes.
There are numerous instances where bad actors employ various techniques involving crypto assets to conceal their origins, such as through the dark market or sanctioned entities. Therefore, grasping the full potential of blockchain analytics is vital for businesses operating in the crypto asset space.
What improvements can be made to standard KYC procedures?
Improvements to standard KYC procedures can be multifaceted. MiCA's initiative to launch an EU-wide centralized system for blacklisted companies is a significant step, preventing bad actors from exploiting loopholes across Europe. While KYC measures are generally standardized and verification solutions are well-developed, the efficacy of KYC checks largely depends on how rigorously Crypto Companies implement them and adhere to AML regulations.
A critical aspect is the tone set from the top, as a casual attitude or wilful blindness poses significant risks. Despite having robust systems in place, it's essential to maintain separation between revenue-focused objectives and compliance-driven detection and prevention goals. Instances like the Binance case underscore the importance of this separation, as regulatory fines can be substantial.
Furthermore, individuals in the KYC industry can contribute to improvements by developing a genuine interest in AML topics. Understanding complex regulations and risk assessments may seem daunting, but visual media, such as documentaries on financial crimes and scams, can provide a more engaging perspective on the importance of compliance.
Looking ahead, digital identification is emerging as a potential solution. Major airports like those in Dubai and London have already introduced passport-less borders using biometric scanners. It's conceivable that blockchain technology will play a role in online identity verification in the coming decade.
Contributors
