Date: October 14th 2021
Published on: Global News, Regulation
AML, AML/CFT, Blockchain Analytics, CFT, crypto AML, Crypto Compliance, Cryptocurrency, Cryptoregulation, Entity Directory, Risk assessment,
Today, there are more and more blockchain analytics tools available for companies processing cryptocurrencies. In this article, we will explain why they are of utmost importance for such companies.
Unlike common thinking, blockchain transactions are not anonymous but rather pseudonymous. Everyone can see transactions recorded on the blockchain. However, it can be complicated to understand the transactions, to know who owns which wallet, or to see how wallets interact with each other.
Blockchain analysis aims at simplifying the reading of blockchains by identifying and deanonymizing their data. It allows companies working with cryptocurrencies to monitor their transactions and assess the level of risks to meet regulatory requirements worldwide.
Blockchain analysis tools providers are using clustering methods to deanonymize blockchain data by grouping together addresses that belong to the same owner. These clustering methods rely on a complex algorithm to work. Today there are several providers of blockchain analytics tools helping compliance teams in monitoring and risk assessment.
The first reason is compliance. The cryptocurrency market becomes increasingly regulated. A growing number of countries putting cryptocurrencies under the scope of anti-money laundering and combatting the financing of terrorism (AML/CFT) regulations. The aim of this is to prevent cryptocurrencies from being used for fraudulent purposes. And, this sustains the integrity of the market.
For companies processing cryptocurrencies, whether it’s pure crypto companies or financial institutions, blockchain analytics tools are needed to comply with the regulations mentioned above. Often the requirements will include risk management, risk mitigation, due diligence, or reporting for example. All of which, blockchain analytics tools can help with. Besides, having a blockchain analytics provider is often key in the licensing process in many jurisdictions.
The second reason is risk. Companies can reduce their exposure to cryptocurrency risks using blockchain analytics tools. The tools can identify suspicious activity and show clear visualization of how wallets interact with each other.
Companies can thus reduce and mitigate their exposure to risks. Also, they can take appropriate steps such as refusing or freezing risky funds: they can easily protect themselves from risk and also keep their customer safe.
The third reason is that it simplifies the compliance process. As shown below, blockchain analytics tools facilitate the reading of blockchain data. Therefore, it allows compliance teams to easily spot which transactions they can accept and which ones they should refuse. With these tools, compliance teams can also thoroughly investigate any detected suspicious activities and use the data for regulatory reporting.
Today, several blockchain analytics providers are available on the market. All of them have different methodologies when it comes to data collection and clustering. It is thus important for companies looking for a provider to carefully choose their partner for blockchain analytics.
Scorechain provides excellent data quality and useful features such as customizable risk-AML scoring, risk indicators, Entity Directory, and very soon an Exploration Tool for all of our supported blockchains (namely Bitcoin, Bitcoin Cash, Ethereum, Litecoin, Dash, XRP Ledger, and Tezos).
In the end, blockchain analytics is not complicated. With the help from the right provider, the process is very smooth. Compliance teams can thoroughly analyze their cryptocurrency transactions helping to remain compliant in their local jurisdiction. Would you like to assess if our solution could be a match for your company’s needs? Don’t hesitate to request a free demo.
Scorechain is a Risk-AML software provider for cryptocurrencies and digital assets. As a leader in crypto compliance, the Luxembourgish company has helped more than 200 customers in more than 40 countries since 2015, ranging from cryptocurrency businesses to financial institutions with crypto trading, custody branch, digital assets customers onboarding, audit and law firms, and some LEAs.
Scorechain solution supports Bitcoin analytics with Lightning Network detection, Ethereum analytics with all ERC20 tokens and stablecoins, Litecoin, Bitcoin Cash, Dash, XRP Ledger, and Tezos. The software can de-anonymize the Blockchain data and connect with sanction lists to provide a risk scoring on digital assets transactions, addresses, and entities. The risk assessment methodology applied by Scorechain has been verified and can be fully customizable to fit all jurisdictions. 300+ risk-AML scenarios are provided to its customers with a wide range of risk indicators so businesses under the scope of the crypto regulation can report suspicious activity to authorities with enhanced due diligence.