The outgoing year can be called the “year of blocking”: users of the Coinbase exchange, DEX dYdX, Wasabi Wallet, LocalBitcoins P2P service and many other platforms faced them.
Cryplogger interviewed the founder of a consulting agency AML Compliance Taras Podgorodetsky. He talked about the most common reasons for blocking accounts, the uselessness of bitcoin mixers, and the future of cryptocurrency regulation.
Cryplogger: Hello Taras! Tell us about AML Compliance. Why consulting?
Taras: AMLCompliance is a full cycle agency. We help clients at all stages of interaction with centralized platforms: from communication with technical support to court hearings.
The project is less than a year old, but we have a strong background. I own a fintech company StarExchange.io, which has created more than ten cryptocurrency exchanges. Clients often contacted us on various legal issues.
In addition, a few years ago we ourselves opened an exchanger with an Estonian license. We mastered compliance from our own experience: the legislation was just being formed, and the rules of the game changed almost every week. After some time, they turned off the business and decided to use the knowledge gained in practice.
Now AMLCompliance has five people and a large number of freelancers. All team members are qualified in the field of cryptocurrency compliance – they understand the situation on both sides of the barricades well and speak with lawyers in their language.
Cryplogger: Can you share meaningful results yet?
Taras: Yes, during this time we have conducted 12 investigations, unlocked 68 accounts and helped clients recover $4.5 million. Another $122 million is in the process of unfreezing.
In the near future we will launch a service that will analyze accounts and give instructions for self-unblocking.
Cryplogger: What is the most common reason for account bans?
Taras: In 2022 – sanctions. A large number of sanctions cryptocurrencies entered the market, including from Russia. Approximately 30% of clients turn to these issues.
Analytical services mark all transfers of sanctioned counterparties: in bitcoin, Tether and other assets. Even made a few years ago.
Cold wallets end up with “toxic” coins: if you send them to a friend or business partner, the crypto exchange will block his account.
I’m talking about real cases. One of our clients received the equivalent of $12,000 in cryptocurrency, and the exchange froze his funds in the amount of $487,000.
Cryplogger: And what is the remaining 70%?
Taras: Another 20% is stolen money. When a trial begins, the defendant’s funds are flagged in the AML services. Owners of linked wallets also come under suspicion.
We had a case in Germany: an exchange blocked an account with $500,000 and accused the client of money laundering. And he just received three transactions from a company that subsequently closed.
We prepared transaction reports, formulated a position, and then spent 16 hours explaining to German lawyers how the blockchain works. The case was successfully closed: the charges were dropped from the client and the account was unblocked.
The remaining blocks are related to receiving suspicious transactions or checking sources of income. The latter is especially relevant for residents of the post-Soviet space who are used to using cash.
Cryplogger: Can all these blockages be avoided with mixers?
Taras: No. Any mixer can be analyzed: identify cleaning patterns and find the cryptocurrency that has passed through it. For all popular services, this has already been done.
In December, we unwound two mixers and found user addresses. Cryptocurrency cleaning, anonymization are illusions.
Cryplogger: And if you use non-custodial wallets?
Taras: In the case of Tether (USDT) and USD Coin (USDC), the level of control from regulators is the same as on exchanges.
It is enough to file a complaint with the police and bring the case to court for the issuer to block stablecoins even on a cold wallet.
Cryplogger: Let’s say the funds are already locked. What do we have to do?
Taras: Call us as soon as possible and do not try to talk to technical support yourself. I’ll explain why.
After blocking, the exchange employees contact the account owner and ask for proof of the origin of the cryptocurrency. As practice shows, people give answers that arouse suspicion and lead to new questions.
We prepare answers taking into account the counter questions of the platform and help not to disclose unnecessary information.
Cryplogger: Are exchanges moving forward in unlocking processes?
Taras: Yes, they are not interested in freezing accounts: this is how users do not trade, and may even go to another site. The goal of the exchanges is to get answers and documents to present to the regulator as soon as possible.
All platforms from the top CoinMarketCap are motivated to help their clients. But often the users themselves give vent to emotions and exacerbate the problem.
Cryplogger: Are there exceptions?
Taras: Yes, but very rarely. For example, STEX has been ignoring our request for half a year, although we have provided all the necessary data.
We hope that the exchange will fulfill its legal obligations and provide information to the regulator. If this does not happen, we will refund the client 100% of the prepayment.
As far as I know, today AML Compliance is the only agency that returns the money if it cannot close the case.
Cryplogger: When do you refuse help?
Taras: We do not provide services to users in the US and Venezuela. In addition, we do not work with scammers and accounts blocked for violating the law.
Several traders have already been uncovered, who took funds under management, made a couple of transactions, withdrew cryptocurrency and deleted accounts. Clients were informed that they had lost everything or the exchange blocked them – they provided photos and videos.
However, regulated exchanges retain transaction history even after deleting accounts. We got access to it – when you log into your account or through a request STR and figured out what really happened.
There was a case when the lead passed the checks, but during the communication, the representative of the exchange described it with a single word – “terrorism”. Naturally, we refused. We do not want to become partners in crime.
A separate category is stories when it is not clear who owns the account. One client tried to prove ownership of the cryptocurrency using fake documents, another wanted us to unfreeze the account of his deceased friend. All this is a gross violation of the law.
Cryplogger: Have you ever dealt with unlocking FTX accounts?
Taras: Certainly. Both before and after the crash. Recently helped clients from Turkey to return funds.
Account blocking is not a sentence. The main thing is to act quickly: this way you increase your chances of getting a refund.
Cryplogger: AMLCompliance also helps you get your crypto back if it’s stolen. How do you do it?
Taras: We receive a request and mark transactions in AML services within four hours. After blocking by the regulator, we begin the procedure for the return of funds.
In the near future, we will launch a platform where users will be able to independently submit blocking requests.
Cryplogger: After our conversation, I got the impression that the future of cryptocurrencies is in total regulation…
Taras: And the real one too. Tether and Circle are already blocking specific addresses, and decentralized exchanges are censoring transactions.
This year, Coinbase received 66% more law enforcement inquiries. Tracking tools are 110% complete and regulators are actively learning how to use them.
The fact is that cryptocurrencies have already become an ideal replacement for banks: you can send $2 billion to another country and pay 40 cents for it. But they can also become channels for sponsoring war and terrorism. This cannot be allowed.
Cryplogger: In that case, what’s in store for the industry in the coming years?
Taras: Compliance will be the main trend of 2023. And after a while the market will be completely regulated: the state will clearly know who has how much money.
The anonymity of cryptocurrencies is just a beautiful story. We were given time to play and get used to the technology.
Read Cryplogger bitcoin news in our Telegram – Cryptocurrency news, courses and analytics.
Found a mistake in the text? Select it and press CTRL+ENTER
Cryplogger Newsletters: Keep your finger on the pulse of the bitcoin industry!
The outgoing year can be called the “year of blocking”: users of the Coinbase exchange, DEX dYdX, Wasabi Wallet, LocalBitcoins P2P service and many other platforms faced them.
Cryplogger interviewed the founder of a consulting agency AML Compliance Taras Podgorodetsky. He talked about the most common reasons for blocking accounts, the uselessness of bitcoin mixers, and the future of cryptocurrency regulation.
Cryplogger: Hello Taras! Tell us about AML Compliance. Why consulting?
Taras: AMLCompliance is a full cycle agency. We help clients at all stages of interaction with centralized platforms: from communication with technical support to court hearings.
The project is less than a year old, but we have a strong background. I own a fintech company StarExchange.io, which has created more than ten cryptocurrency exchanges. Clients often contacted us on various legal issues.
In addition, a few years ago we ourselves opened an exchanger with an Estonian license. We mastered compliance from our own experience: the legislation was just being formed, and the rules of the game changed almost every week. After some time, they turned off the business and decided to use the knowledge gained in practice.
Now AMLCompliance has five people and a large number of freelancers. All team members are qualified in the field of cryptocurrency compliance – they understand the situation on both sides of the barricades well and speak with lawyers in their language.
Cryplogger: Can you share meaningful results yet?
Taras: Yes, during this time we have conducted 12 investigations, unlocked 68 accounts and helped clients recover $4.5 million. Another $122 million is in the process of unfreezing.
In the near future we will launch a service that will analyze accounts and give instructions for self-unblocking.
Cryplogger: What is the most common reason for account bans?
Taras: In 2022 – sanctions. A large number of sanctions cryptocurrencies entered the market, including from Russia. Approximately 30% of clients turn to these issues.
Analytical services mark all transfers of sanctioned counterparties: in bitcoin, Tether and other assets. Even made a few years ago.
Cold wallets end up with “toxic” coins: if you send them to a friend or business partner, the crypto exchange will block his account.
I’m talking about real cases. One of our clients received the equivalent of $12,000 in cryptocurrency, and the exchange froze his funds in the amount of $487,000.
Cryplogger: And what is the remaining 70%?
Taras: Another 20% is stolen money. When a trial begins, the defendant’s funds are flagged in the AML services. Owners of linked wallets also come under suspicion.
We had a case in Germany: an exchange blocked an account with $500,000 and accused the client of money laundering. And he just received three transactions from a company that subsequently closed.
We prepared transaction reports, formulated a position, and then spent 16 hours explaining to German lawyers how the blockchain works. The case was successfully closed: the charges were dropped from the client and the account was unblocked.
The remaining blocks are related to receiving suspicious transactions or checking sources of income. The latter is especially relevant for residents of the post-Soviet space who are used to using cash.
Cryplogger: Can all these blockages be avoided with mixers?
Taras: No. Any mixer can be analyzed: identify cleaning patterns and find the cryptocurrency that has passed through it. For all popular services, this has already been done.
In December, we unwound two mixers and found user addresses. Cryptocurrency cleaning, anonymization are illusions.
Cryplogger: And if you use non-custodial wallets?
Taras: In the case of Tether (USDT) and USD Coin (USDC), the level of control from regulators is the same as on exchanges.
It is enough to file a complaint with the police and bring the case to court for the issuer to block stablecoins even on a cold wallet.
Cryplogger: Let’s say the funds are already locked. What do we have to do?
Taras: Call us as soon as possible and do not try to talk to technical support yourself. I’ll explain why.
After blocking, the exchange employees contact the account owner and ask for proof of the origin of the cryptocurrency. As practice shows, people give answers that arouse suspicion and lead to new questions.
We prepare answers taking into account the counter questions of the platform and help not to disclose unnecessary information.
Cryplogger: Are exchanges moving forward in unlocking processes?
Taras: Yes, they are not interested in freezing accounts: this is how users do not trade, and may even go to another site. The goal of the exchanges is to get answers and documents to present to the regulator as soon as possible.
All platforms from the top CoinMarketCap are motivated to help their clients. But often the users themselves give vent to emotions and exacerbate the problem.
Cryplogger: Are there exceptions?
Taras: Yes, but very rarely. For example, STEX has been ignoring our request for half a year, although we have provided all the necessary data.
We hope that the exchange will fulfill its legal obligations and provide information to the regulator. If this does not happen, we will refund the client 100% of the prepayment.
As far as I know, today AML Compliance is the only agency that returns the money if it cannot close the case.
Cryplogger: When do you refuse help?
Taras: We do not provide services to users in the US and Venezuela. In addition, we do not work with scammers and accounts blocked for violating the law.
Several traders have already been uncovered, who took funds under management, made a couple of transactions, withdrew cryptocurrency and deleted accounts. Clients were informed that they had lost everything or the exchange blocked them – they provided photos and videos.
However, regulated exchanges retain transaction history even after deleting accounts. We got access to it – when you log into your account or through a request STR and figured out what really happened.
There was a case when the lead passed the checks, but during the communication, the representative of the exchange described it with a single word – “terrorism”. Naturally, we refused. We do not want to become partners in crime.
A separate category is stories when it is not clear who owns the account. One client tried to prove ownership of the cryptocurrency using fake documents, another wanted us to unfreeze the account of his deceased friend. All this is a gross violation of the law.
Cryplogger: Have you ever dealt with unlocking FTX accounts?
Taras: Certainly. Both before and after the crash. Recently helped clients from Turkey to return funds.
Account blocking is not a sentence. The main thing is to act quickly: this way you increase your chances of getting a refund.
Cryplogger: AMLCompliance also helps you get your crypto back if it’s stolen. How do you do it?
Taras: We receive a request and mark transactions in AML services within four hours. After blocking by the regulator, we begin the procedure for the return of funds.
In the near future, we will launch a platform where users will be able to independently submit blocking requests.
Cryplogger: After our conversation, I got the impression that the future of cryptocurrencies is in total regulation…
Taras: And the real one too. Tether and Circle are already blocking specific addresses, and decentralized exchanges are censoring transactions.
This year, Coinbase received 66% more law enforcement inquiries. Tracking tools are 110% complete and regulators are actively learning how to use them.
The fact is that cryptocurrencies have already become an ideal replacement for banks: you can send $2 billion to another country and pay 40 cents for it. But they can also become channels for sponsoring war and terrorism. This cannot be allowed.
Cryplogger: In that case, what’s in store for the industry in the coming years?
Taras: Compliance will be the main trend of 2023. And after a while the market will be completely regulated: the state will clearly know who has how much money.
The anonymity of cryptocurrencies is just a beautiful story. We were given time to play and get used to the technology.
Read Cryplogger bitcoin news in our Telegram – Cryptocurrency news, courses and analytics.
Found a mistake in the text? Select it and press CTRL+ENTER
Cryplogger Newsletters: Keep your finger on the pulse of the bitcoin industry!
