How identity verification is helping the fight against cryptocurrency crime

3 min readDec 19, 2020

Cryptocurrencies and stablecoins are finally emerging as a mainstream market, pushed along faster now by the global impacts of COVID-19. For all the damage it’s done in many industries, one upside of the pandemic is that it has advanced and expanded use of digital services and online payments.

That’s the good news. But the not-so-good news is that cyber criminals love digital money. It ticks two main things on their checklists: global online access and lingering confusion as the sector becomes more organized. In such a climate, shrewd online criminals are reaping the benefits.

PYMNTS December AML/KYC Tracker,® developed in collaboration with Trulioo, examines the issues around protecting cryptocurrency exchanges from money launderers who rinse unlawful billions using crypto’s vulnerabilities to their advantage. The Tracker states that:

“One common avenue for money laundering is cryptocurrency, a burgeoning market expected to be valued at $1.4 billion by 2024. Its skyrocketing popularity obscures an ever-expanding web of money laundering schemes and other cybercrimes: experts predict that cryptocurrency-related crimes totaled $4.3 billion in 2019, including $2.8 billion in laundered money. This is up from $1 billion laundered in 2018, and the problem is expected to rise as cryptocurrencies become more popular.”

Helping determine the identities on both sides of a transaction is one feature of sophisticated identity verification solutions, which are now poised to play a critical role in hardening defenses around this growing cryptocurrency usage.

Exchanges need to up their game

The Tracker also notes that lax security is plaguing the cryptocurrency industry, which means that gaps are being exploited.

“Part of what is fueling money laundering and other cybercrime on cryptocurrency exchanges is that the majority of these exchanges have few methods in place for verifying their users. One recent study found that 56% of cryptocurrency exchanges have weak or nonexistent KYC systems that do little to prevent money laundering.”

Worse yet is the fact that many exchanges deliberately obscure their country of origin to avoid having to comply with any sort of KYC guidelines at all, which only worsens the global money-laundering problem.

Banks and financial institutions are using groundbreaking identity verification tech that unites artificial intelligence (AI) with machine learning (ML) and massive data sets to manage increasingly strict regulations.

Some cryptocurrency players are meeting the demand for improved AML/KYC compliance by partnering with third-party providers to more effectively onboard their users. One example is the cryptocurrency exchange platform Metal Pay, which recently integrated Trulioo Global Gateway to ensure efficient customer onboarding that complies with strict AML/KYC regulations. As Metal Pay operates in 24 countries with 30 different cryptocurrencies, it needed a solution that was able to function in multiple global markets, provide a seamless experience for customers and also allow for quick expansion.

Banks and regulators want crypto verified

According to the Tracker, many banks still view crypto exchanges as the “Wild West”; a reputation that isn’t helped by things like “mixing sites” — a common practice among cryptocurrency users in which users mix their currencies in a pool with other users and then withdraw the same amount they put in, attempting to obscure the link between their blockchain identifiers and their real-life identities.

These behaviors don’t foster the atmosphere of trust that is vital to the future of cryptocurrencies.

This is where connecting commercial and device data can create an environment where digital currencies can be trusted by all users and made a natural part of the payments experience.

According to a recent joint survey from Guidehouse Inc., Compliance Week and the International Compliance Association (ICA), one way to potentially smooth over the frictions associated with AML/KYC compliance is through machine learning technology.

The Tracker further supports this, with 80% of the 364 compliance professionals surveyed saying that ML could potentially reduce compliance risk, with 61% reporting that they had already seen results from ML. These ML applications are in place at several banks, with nearly two-thirds of FIs devoting up to $1 million toward ML and 71% developing their own in-house applications.”

Download the December’s AML/KYC Tracker

Learn how to protect cryptocurrency exchanges from money laundering and other financial crimes.




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