The Malta Financial Services Authority (MFSA), the single
regulator of financial services in Malta, has partnered with CipherTrace to
implement a cryptocurrency intelligence solution to regulate virtual asset
businesses licensed on the island.
The technology tool, called Compliance Monitoring, rates the
risks of cryptocurrency businesses to protect consumers, investors and business
partners, and will enable the MFSA to better identify fraud and prevent money
laundering and funding of terrorism.
Malta has been pursuing the title of “Blockchain Island” as
it aims to become a hotspot for blockchain and cryptocurrency. In June, the
Maltese Parliament approved
three bills on cryptocurrency and blockchain designed to attract foreign
entrepreneurs and startups in the space. Some already made the leap including Binance,
OKEx and BitBay which
chose to either relocate or expand to the crypto-friendly island.
But the growth of blockchain in Malta has created “significant
risks” of money laundering and terrorism finance in the island’s economy, an
International Monetary Fund mission said
in January. The IMF mission called on the Maltese authorities to ensure that
virtual asset service providers fulfilled their anti-money-laundering
The CipherTrace Compliance Monitoring solution, which uses
machine learning to de-anonymize transactions, will enable the regulator to evaluate
and monitor the trustworthiness of virtual asset businesses. It tracks the risk
exposure of virtual asset businesses including cryptocurrency exchanges,
collective investment schemes and initial coin offerings (ICOs) to gauge and
measure potential exposure.
“Being strongly aware of the money laundering and financing
of terrorism risks associated with entities operating in this sphere, the
decision has been taken to engage the services of CipherTrace in order to
reduce fraud and detect transactions with illegal sources of funds,” said
Joseph Cuschieri, CEO of the MFSA. “CipherTrace Compliance Monitoring will
provide the MFSA with powerful oversight tools to automate regulatory processes
and audit the risk management of virtual asset businesses that are licensed in
Crypto crime hit record heights in 2018 with some US$1.7
billion worth of funds being stolen and exit scammed. 3.6 times more
cryptocurrency value was stolen during 2018 than in 2017 despite the so-called “crypto
to the CipherTrace Q4 Anti-Money Laundering Report.
Criminals use various methods and techniques to launder
their ill-gotten gains including mixers and tumblers services, which blend
potentially identifiable cryptocurrency funds with large amounts of other
Founded in 2015 by Silicon Valley entrepreneurs, CipherTrace
develops cryptocurrency AML, forensics and blockchain threat intelligence
solutions. The company’s machine learning algorithms calculate risk levels for
exchanges, addresses, wallets and other entities based on known associations,
criminal addresses, and money laundering services. It also profiles hundreds of
global exchanges, dark markets, mixers, gambling services, high-yield
investment products, and ATMs to determine risk levels of transactions based on
activity related to suspicious addresses and wallets.