Cryptocurrency is a form of currency that exits digitally or virtually. This type of currency has grown in popularity with the most popular to date, being Bitcoin. Due to the attractiveness of this currency tighter regulations and controls are needed to prevent money laundering, terrorist, and proliferation financing. However, they are several compliance issues that may arise in this digital space- the origins of funds use to buy cryptocurrency is harder to track especially when traded on the stock market. Individuals who own digital wallets may not be the same individual controlling these wallets but acting as a front person. Depositing cash to invest in cryptocurrency doesn’t go through a formal banking institution therefore, the source of this cash can be from the proceeds of criminal activity. The intended purpose of owning a crypto wallet is not always clear and this can pose several risks.

The compliance regulations that can be placed on Crypto Exchanges should incorporate tighter due diligence measures where everyone completes a signed KYC form and states their source of funds which can be then vetted. Evidence of source of funds should be mandated as more and more crypto is being purchased. Exchanges should ensure they know and understand the individuals who are controlling the wallets and all funds being deposited are coming from reputable sources such as bank accounts. Customers should be screened on an ongoing basis and transactions monitored to identify any shift in behavior. A risk assessment should be conducted by crypto companies and every individual who purchases crypto should be assigned a risk rating to better understand the level of risks involve. Furthermore, all the players involve in facilitating digital or virtual currency should receive compliance training at minimum once a year tailored to their business sector. These sessions should be informative, provide examples and allow for a real discussion between players and the persons conducting the training.