Auditor warns crypto regulators to update standards on money laundering

July 02, 2018
Chris Wheal

KPMG, the global auditing and business consulting firm, warned global regulators that they must step up to the challenges posed by financial criminals, criticising the “reactive” nature of regulation.

KPMG warns regulators to be more proactive in AML efforts: KPMG report

The challenge with regulation is that it can be out of date by the time it comes into force – especially now the pace of criminal activity is rising dramatically through the use of online cybercrime and cryptocurrencies, the report said.

Cryptocurrency growth

“The growth of cryptocurrency has gathered pace over the past 10 years, and many financial institutions are only just starting to get to grips with this highly complex topic,” it said.

Financial institutions can do much to help combat money laundering, such as not accepting fund flows from exchanges that do not require scrutiny on customer identification.

“Effectively containing the risks of cryptocurrency requires an expansion of worldwide know-your-customer (KYC) standards when issuing e-wallets.”


The report suggested other measures, such as regulating digital exchanges – not just those that offer fiat currency exchange for primary cryptocurrencies but also advanced digital exchanges that offer transfers from primary digital currencies to altcoins to keep on top of the audit trail.

KPMG also suggest better use of blockchain to reduce money laundering risks. “It is technically feasible to revise the blockchain protocol to limit transactions to KYC-verified wallets.”

Ultimately, the most effective approach will be a combination of considerations, but it concluded that all parties – regulators, financial institutions and crypto exchanges – should utilise the latest technologies such as blockchain to take the fight to the financial criminals.

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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