A Web-Based kNN Money Laundering Detection System

Money laundering is synonymous to clothes laundering and it is the process of transforming the real nature of the source of an income or money. This transformation of the source is usually from an illegitimate source to a legitimate source. Explicitly programmed system, rule-based system and machine learning system exist as anti-money laundering system, however these systems have one or more setbacks, mostly the explicitly programmed and rule-based systems due to their inability to learn from experiences and to improve their performance as they used. The k nearest Neighbour (kNN) model was developed using open datasets on financial transaction from Kaggle.com, which is an open-source website that holds a lot of data. An accuracy of 98.4% was achieved for the selected model. In this article, we developed a web-based money laundering detection system which is based on the kNN Machine Learning model

Can Machine Learning, as a RegTech Compliance Tool, lighten the Regulatory Burden for Charitable Organisations in the United Kingdom?

Purpose: The purpose of this article is to explore the extent to which machine learning can be used as solution to lighten the compliance and regulatory burden on charitable organisations in the United Kingdom. Design/methodology/approach: The subject is approached through the analysis of data, literature, and domestic and international regulation. The first part of the article summarises the extent of current regulatory obligations faced by charities, these are then, in the second part, set against the potential technological solutions provided by machine learning as at July 2021. Findings: It is suggested that charities can utilise machine learning as a smart technological solution to ease the regulatory burden they face in a growing and impactful sector. Originality: The work is original because it is the first to specifically explore how machine learning as a technological advance can assist charities in meeting the regulatory compliance challenge

LEGAL REMARKS ON THE OVERARCHING COMPLEXITIES OF CRYPTO ANTI-MONEY LAUNDERING REGULATION

ABSTRACT Objective:The paper analyzes money laundering through crypto-assets and offers a legal perspective on how this new technology can be used to commit these felonies. The study intends to shed light on the matter, helping to visualize how future anti money laundering – AML regulation should focus on tackling crypto criminal activity effectively. Methodology: The research adopts an inductive approach, bibliographic and documental research technique, with an exploratory and propositional methodological objective. Results: The paper proposes the following framework of anti-money laundering principles for crypto-focused action: transnational approach for AML action; going beyond basic gatekeeper compliance approach, considering the lack of structural chokepoints in a blockchain protocol; private-sector cooperation and clear AML standards; usage of tracking and reverse-engineering anonymization techniques for the tracing of crypto transaction history; and adoption of a global blacklist for cryptoasset prefixes, preventing money laundering integration. Contributions: The study addresses a topic that is still unfamiliar in the academic world due to its innovation and complexity, as well as elaborates a set of principles to combat money laundering with crypto-assets that could be of great value to companies and financial institutions. KEYWORDS: Crypto-assets; crypto-currencies; bitcoin; blockchain; money laundering. RESUMO Objetivos: O artigo analisa a lavagem de dinheiro através de ativos criptográficos e oferece uma perspectiva jurídica sobre como essa nova tecnologia pode ser usada para cometer tais crimes. O estudo busca esclarecer o assunto, ajudando a visualizar como a futura regulação contra a lavagem de dinheiro cometida através destes ativos deve ser estruturada para assegurar efetividade. Metodologia: A pesquisa adota uma abordagem indutiva, a técnica de pesquisa é bibliográfica e documental, seu objetivo metodológico é exploratório e propositivo. Resultados: O artigo propõe o seguinte conjunto de princípios para o combate à lavagem de dinheiro com criptoativos: a abordagem transacional para combate à lavagem de dinheiro; ir além de uma abordagem focada em intermediários, considerando a falta de pontos de estrangulamento em um protocolo block chain; a cooperação com o setor privado e padrões claros de compliance para prevenção à lavagem de dinheiro; uso de técnicas de rastreamento e de engenharia reversa para processos de ocultação de histórico de transações; e a adoção de listas sujas globais para evitar a fase de integração do processo de lavagem de dinheiro com criptoativos.Contribuições: O estudo aborda um tema ainda muito pouco divulgado no meio acadêmico devido à sua inovação e complexidade, bem como elabora uma proposta de conjunto de princípios para o combate à lavagem de dinheiro com criptoativos que poderá ser de grande valia para empresas e instituições financeiras. PALAVRAS-CHAVE: Criptoativos; criptomoedas; bitcoin; blockchain; lavagem de dinheiro

Terrorism Financing Indicators for Financial Institutions in the United States

At least since the Financial Action Task Force (FATF) first published its Forty Recommendations, financial institutions in FATF-compliant jurisdictions have been required to implement preventive measures that require FIs to identify customers, establish client profiles, monitor for unusual transactions, review those transactions to see if there was suspicion that they involved the proceeds of crime and, if so, report the transaction to the authorities in the form of a suspicious transaction report (STR). When these requirements were first established, neither financial institutions nor their supervisors/regulators had much experience as to what in a client\u27s profile and the client\u27s patterns of transactions might indicate money laundering. However, based on an expanding knowledge of how criminals tend to launder their money, over time financial institutions have developed increasingly effective detection and reporting systems. By studying known examples of laundering, the FATF, FATF-Style Regional Bodies, and national competent authorities (especially financial intelligence units) have identified patterns or indicators of possible money laundering, and made them available to financial institutions as money laundering typologies. In addition, there has been some feedback from financial intelligence units and other competent authorities to financial institutions with respect to their anti-money laundering programs. Using these sources, financial institutions have been able to develop systems to help them determine which transactions carry a materially greater risk that laundering is involved

Cryptocurrency and Financial Risks

Since its inception, the cryptocurrency\u27s exceptional growth has put financial institutions at high risk of exposure to money laundering. In financial institutions, specifically banks, Anti-Money Laundering and Bank Secrecy Act (AML/BSA) risk specialists, bank managers, and compliance officers get challenged in identifying cryptocurrency-related transactions and customers who conceal illegal funds. Interviews conducted with the AML/BSA risk specialists, bank managers, and compliance officers were analyzed to understand how banks combat the cryptocurrency-related money laundering in the USA banking system. Interview with the Director of Financial Investigations & Education at CipherTrace as an expert in blockchain forensics was evaluated to recognize bank regulation and compliance. The case studies were assessed to understand the banks\u27 program and regulation deficiencies and their inability to identify suspicious accounts. Interviews and case studies findings suggest that cryptocurrency-related money laundering is a risk for banks who lack proper tools, programs, and adequate well-trained and well-educated staff in mitigating cryptocurrency-related risks. Support provided by FinCEN regulation and guidance and external vendors is seen as critically valuable in assisting banks to combat cryptocurrency-related money laundering financial crimes