Unit four – Managing Virtual Currency Financial Crime Risks



well welcome to unit 4 I think it's an absolutely crucial unit they're all important of course but this is the unit where we really take the opportunity to think about how we apply the learning and the awareness that we've achieved from units one to three in unit four were really covering the subject of how do we now meet their considerable challenge presented by criminals and terrorists finances and how they use and abuse virtual currencies it will follow a very simple story and framework of how to conduct a risk assessment what controls can be applied of those risks and ultimately how we position the higher medium and low risk assessment of those risks we've identified how do we respond to that risk assessment and does it fall within our risk appetite do we have to terminate relationships if we don't terminate the relationship how do we monitor the relationship and the risks and we'll introduce concepts such as simplified due diligence and enhanced due diligence because we only got so much resource and time and people and technology that we can apply so we need to understand where are the highest risks and we need to spend most time in those areas naturally that's what the risk-based approach is about that's what section 4 is over what a great question that is and one that's really quite important to address we know from the learning we've already achieved in units one two and three the Genesis the for the evolution the creation of Bitcoin in particular was a desire to have higher degrees of anonymity attached to the messaging and the movement of value we need to therefore recognize that an integral part for many people and fuse iasts and supporters of virtual currency is the desire for my identity for the identity of those sending funds to be kept discreet private with the development of technology and the evolution of concepts such as scraping of information from social media and how we attach that to currency movements and value transfer through virtual currencies what we now understand because of that development in technology is that we can attribute natural person identity to virtual currency activity and that's really helpful particularly within the regulated sector where there is a desire to understand the risk attached to customers relationships and transaction for us we also need to recognize however that there are continuing blind spots that we don't have full awareness of all the information and so in this session we'll look at concepts such as mixers and tumblers and we'll look at some of the alt coins where there's privacy inherently manufactured in the coin that is designed to provide absolute anonymity so ultimately pseudo anonymity points to the fact that there are aspects of transparency whilst recognized and there are areas where we're unable to shine a light and the ability to distinguish between those risks is fundamental and helpful because now we can apply the risk-based approach to roles responsibilities customers and transactions and we can accept some business and we can avoid others virtual currencies widely disguised as being higher risk there are several factors that drive that assessment what we'll look at in this particular segment are errors such as the use of anonymizes mixers tumblers or coins that have a high level of privacy attached and designed and manufactured in there such as manera – that will also look at the potential misrepresentation of fraud attached to icos in the form of scams where consumers become the victim we'll look at their four Ponzi schemes some really notable cases where promotion of an opportunity to invest in a nice you there's nothing more than a mirage thirdly we'll look at how criminals are able to misrepresent their identity either in a natural person as a natural person or in the form of legal entities which are shell companies a front companies it's important to recognize that old crimes are being applied to this new technology and finally we'll look at the use and misuse of virtual currencies in acquisition crimes where the currency itself is quite lawful but it's use is unlawful where criminals have acquired illicit drugs narcotics online or else arms and weapons the sins that can be attributed to the use of misuse of virtual currency are therefore quite diverse well by the end of unit 4 and rather hoping expecting he says that you'll learn create great deal about how the risks attached a virtual currency can be managed we hope that you'll have a better appreciation of some very diverse risks do you may or may not been aware of and the steps that can be taken to control and mitigate those rules and this is important because in order to facilitate and support adoption of virtual currencies we need to be visionary in our risk and compliance controls we need to be supportive unless of course we spray into illegal and illicit activity defining what is acceptable and not acceptable is critical and fundamental to advisory roles and responsibilities and so in summary I hope that in this section you have gained enough information to give you the comfort and confidence to make an active contribution supportive as sensitive and commercially aware contribution to virtual currency risk manager it is important with fundamental to us that risk and compliance professionals are appropriate informed and confident and becoming enablers of the adoption of virtual currency and not blockers you

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