How Crypto Exchanges Can Scale AML/KYC Operations — Fast

Download this digital eBook about the common shortcomings in AML/KYC operations at crypto firms. You’ll learn how they can leverage AI Digital Workers to transform their FinCrime compliance operations and greatly reduce the risk of incurring hefty fines and penalties.

Recent enforcement actions by regulators demonstrate that the time has come for crypto firms to get serious about their nascent AML/KYC compliance programs. Fortunately, pre-trained AI Digital Workers can address AML and sanctions compliance issues quickly, providing scalability and consistent quality as well as a fast, responsible way to eliminate alert and KYC backlogs.
Engage with this digital eBook to learn how your AML/KYC operations team can deploy a Digital Worker and gain these immediate benefits:

  • Rapid FinCrime compliance
  • Operational scale
  • AML/KYC proficiency.
Get the eBook

Time has run out for crypto firms trying to get by with nascent AML/KYC compliance programs as has been seen in recent enforcement actions by regulators.

The good news is that pre-trained Digital Workers can address AML and sanctions compliance issues quickly, providing scalability and consistent quality as well as a fast, responsible way to eliminate alert and KYC backlogs. This rapidly places a crypto firm into good standing with regulators.

What happened: Per our cautionary post from August of 2022 following a $30-million fine against the crypto division of Robinhood, BSA/AML regulatory crackdowns are continuing across the crypto industry. The latest is the New York Department of Financial Services (NYDFS) fining Coinbase $50 million and requiring the company to invest another $50 million into its compliance program.

Just two months ago, blockchain researcher Chainalysis revealed that $5 billion in crypto “indirect flows” moved between Iranian exchanges and Binance — despite Binance having in place a transaction monitoring system.

The underlying issue for crypto firms is that their FinCrime compliance programs are nascent — immature compared to the AML and sanctions risks of the crypto space — and lack the scalability that is needed in a fast-growing financial sector where very large increases in customers and transactions occurred over a very short timeframe.

What’s driving the AML/KYC deficiencies in crypto

As the NYDFS noted in the Coinbase Consent Order, large alert backlogs that reached to over a hundred thousand as well as KYC EDD (Know Your Customer–enhanced due diligence) backlogs in the tens of thousands.

Three key drivers have converged to create these backlogs at crypto firms:

1. Nascent AML/KYC compliance programs

Compliance programs are in their infancy within the crypto industry. Considering that large, established banks have run FinCrime compliance programs for over 20 years, it’s little wonder that crypto firms, whose programs reach back maybe five years, are struggling with regulatory requirements and expectations.

The problem has both operational and knowledge-based challenges. Management teams need years of experience to understand all the nuances associated with running efficient and effective AML/KYC and sanctions processes. Then, scaling that knowledge to ensure robust compliance for all areas of the business requires additional IT and operations expertise.

Despite the challenges, regulators have drawn a line in the sand and clearly signaled (via recent hefty fines) that the time for leniency has passed. Crypto firms must comply — effectively — or pay these fines, as we’ve seen with a number of banks and broker-dealers over the past 20 years.

It’s also important to note that informing regulators that you have a program in place will not buy you time or leniency. They want immediate compliance results today. In fact, on January 28, 2023, the White House published The Administration’s Roadmap to Mitigate Cryptocurrencies’ Risks. The roadmap calls for regulators to “ramp up enforcement.”

2. Cyclicality

Crypto firms and banks alike must deal with significant fluctuations in AML and sanctions alert and KYC volumes. For example, each time a new coin offering appears, crypto firms can expect ten thousand or more new customer sign-ups that require KYC scaling. On the AML and sanctions front, a single event like the Russian invasion of Ukraine led to immediate new sanctions for over 1,300 people and entities.

These types of AML/KYC and sanctions demand surges strain any compliance program that lacks a highly elastic infrastructure or workforce. Yet, compliance teams are far from elastic. The training required to gain competence in AML/KYC and sanctions alerts analysis and due diligence can take months before a newly hired analyst becomes proficient enough to trust their work to regulatory scrutiny.

3. Human resource constraints vs digital innovation

Not only is there a shortage of qualified people to fill AML/KYC and sanctions analyst roles, the cost to hire during peak periods and to carry additional workers during slower times is prohibitive. This type of workforce strategy also runs counter to the innovative nature of crypto firms. Rather than throwing a thousand contractors and months of training at the problem, they would prefer to find a technology solution that simultaneously streamlines and scales compliance operations and fits in better with the firm’s ‘digital-first’ DNA.

Pre-trained AI Digital Workers answer the call for crypto firm compliance

Purpose-built to address the financial community’s need to rapidly scale and automate FinCrime compliance operations, AI-driven Digital Workers represent crypto’s answer to complying with regulators in 2023.

Any crypto firm can deploy a Digital Worker and gain immediate FinCrime compliance operational scaling and proficiency. That’s because WorkFusion’s Digital Workers are pre-programmed, AI-enabled forms of intelligent automation that perform full-scale compliance roles. Each unique Digital Worker can automate an entire role and immediately alleviate staffing challenges in crypto AML/KYC and Sanctions compliance operations.

Consider Evelyn, one of WorkFusion’s flagship Digital Workers. Evelyn is the digital embodiment of a Sanctions & Adverse Media Screening Analyst. We refer to “it” as Evelyn. However, “she” is a pre-trained, AI-driven technology that is an expert in AML/sanctions requirements and performs exceptional sanctions watchlist screening, PEP and name sanctions screening, plus adverse media monitoring. Evelyn can automatically review and disposition alerts from various sanctions screening tools, as well as search and analyze adverse news with great speed. Watch Evelyn in action.

Another WorkFusion Digital Worker is named Tara. Tara is the digital embodiment of a Transactions Screening Analyst. The Tara solution is pre-trained as a top AML/sanctions expert that focuses on delivering consistently high-quality results in evaluating transactions risk. Tara automatically monitors payment activity to ensure compliance, plus reviews and analyzes payment messages/cases. Watch Tara in action.

Alleviating staffing challenges with Digital Workers

The fact is, regulators are focusing their scrutiny on crypto firms in 2023, and you need to gain compliance as fast as possible. Beyond the need for speed, you must also ensure that your AML/KYC and sanctions compliance programs are both highly accurate and scalable.

By incorporating AI with automation, Digital Workers can augment compliance knowledge workers by completing compliance tasks that involve reviewing false positives (screening, fraud, monitoring, etc.) and other due diligence work, including reporting, collating information, and identifying red flags.

Digital Workers scale quickly and fit ideally with crypto firms’ digital-first business approach. In a relatively short timeframe, your firm can expertly resolve sanctions alerts and perform KYC on a massive scale. You’ll be able to eliminate the backlogs that lead to hefty fines and further regulatory actions.

To learn more about our Digital Workers, visit workfusion.com.