• After an impressive run at the U.S. Treasury’s financial intelligence unit, Kenneth Blanco, who shepherded and worked to implement some of the country’s most significant updates to financial crime compliance rules in the last 20 years, is making the jump to the private sector.
• Citigroup, in the midst of a shakeup to refocus, retool and converge its financial crime departments after a series of high-profile penalties, has hired Blanco, the director of the Financial Crimes Enforcement Network (FinCEN), as the chief compliance officer of a freshly minted and merged financial crimes unit.
• At FinCEN, Blanco worked to better craft and graft AML rules to crypto coins and use the millions upon millions of filings in FinCEN’s database to find broader trends, producing reports tied to cyber-enabled frauds and ransomware attacks, along with deeper dives on the red flags of human trafficking and elder abuse, just to name a few.
• But what Blanco likely will most be remembered for is several seminal compliance-bolstering initiatives at the tail end of 2020, including a broad overhaul of the country’s AML defenses, shifting more toward creating “effective and reasonably designed” programs that produce filings with a “high degree of usefulness” to law enforcement.

After two days of learning and a crash course to set the foundation for learning, ACFCS’ “Cryptocurrencies and Cryptocrime Workshop,” is in the books.

The dynamic, interactive event done in partnership with blockchain analytics heavyweight Chainalysis was crafted to take some of the mystery and fear out of the notoriously volatile virtual value sector, bolster compliance and innovate on investigations.

The dynamic, interactive event done in partnership with blockchain analytics heavyweight Chainalysis was crafted to take some of the mystery and fear out of the notoriously volatile virtual value sector, bolster compliance and innovate on investigations.

The event saw dozens of speakers and sessions engage hundreds of professionals in the public and private sectors to analyze and scrutinize some of the current challenges and historical vulnerabilities in the crypto sector, the related exchanges – where digital and fiat converge and convert and vice versa – and brick-and-mortar banks.

Day two covered a broad ambit of tips, tactics and techniques to better tie the seemingly random strings of letters and numbers on a transparent, immutable yet enigmatic blockchain back to individuals, businesses and entities engaged in fraud, money laundering and organized crime – and an overarching acknowledgement that as crypto’s value has risen, so has interest from criminals of all stripes.

More money, more problems.

With the value of Bitcoin and other crypto coins reaching record heights – Bitcoin itself in recent months has flirted with $60,000 and a $1 trillion market cap – more individuals and companies are jumping aboard the hype train. But so are criminals, scammers and fraudsters. One law enforcement official stated that last year, financial services firms filed some 500 suspicious activity reports (SARs) tied to potential illicit virtual asset activity, representing $800 million, in just one month. This year, in the same month period, financial institutions filed more than 800 SARs representing a value of some $3.4 billion in aberrant crypto transactions in one month. Even so, the estimated overall percentage of illicit crypto is less than fiat, 1.3 compared to 1.8 percent.

Less mystery, more transparency – except when it comes to holding accounts.

From the perspective of law enforcement, and the classic financial services sector, virtual asset service providers (VASPs) have taken great strides toward transparency. Many of these operations have opened up their compliance programs and processes to scrutiny to their banking connections – in the desperate hope to keep accounts and prevent an unceremonious de-risking. Not surprisingly, speakers also concluded that if you’re a financial institution, even if you say you “don’t bank crypto,” you’re still an off-ramp and a gatekeeper for illicit crypto. Many crypto exchanges create fake names and don’t tell banks they are engaged in crypto transactions, putting more pressure on fincrime compliance teams.

Privacy does not always equal criminal activity.

Even so, many speakers noted that the crypto sector is more nuanced, with the majority of actions and actors engaged in perfectly legal activity. In short: move away from monolithic views of crypto risk. Banks holding crypto exchange accounts need to take a refined risk-based approach to act as a gatekeeper – but it can and is being done. But, even at just a percent of illicit virtual asset activity, equating to billions of dollars, there are criminal groups, narco traffickers, cyber-enabled fraudsters and sanctions evaders looking to use the “pseudo-anonymous” aspect of crypto for their own gain. How to fight them: Surprisingly, some of the approaches should be low-key and old school – so don’t reinvent the wheel, but know the details. Criminal typologies and red flags are broadly similar in crypto and fiat, with important distinctions based on the technology and user behaviors. As one attendee said: “You still have to do old school cop work. In your investigations, look for leads in the real and virtual worlds. The tech is going to change and your skills are going to have to flow with the technology.