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Founders of BitMEX Penalised for Their Inefficacy in Preventing Money Laundering

Oliver Smith
October 02, 2020
2 minutes read
146

Arthur Hayes, Benjamin, Delo, and Samuel Reed – the co-founders of BitMEX charged for violating the US money laundering laws, which resulted in a significant decrease in their Bitcoin price.

The three were indicted in New York where federal prosecutors claim that the company served American clients, but defied the banking laws in the US. Hayes stated that they incorporated exchanges in Seychelles because bribing the authorities was not a problem there. According to the indictment revealed on Thursday, the bribe was just the cost of coconut.

Founders of the pioneering crypto-derivatives exchange BitMEX were charged with skirting U.S. laws preventing money laundering and hit with civil sanctions as well, abruptly sending the price of Bitcoin down. https://t.co/92e44jQTv1

— – Mark Fullbright (@m_fullbright) October 2, 2020

The company enabled investors to leverage their bets by a factor of 100 which became the reason for its fame. The largest cryptocurrency, Bitcoin, fell by 2.4 percent to $10,450 after the charges were announced.

On the other hand, the spokesperson of BitMEX strongly disagrees with the charges and claims that they have been complying with US laws since day 1. BitMEX is never in a loss since it matches the buyers and sellers of the future. Hence, Hayes always makes profits no matter which way crypto moves.

Arthur aggressively promoted BitMEX on different television shows and in 2018, the company rented three Lamborghinis for a Bitcoin conference in Manhattan. It was success near Hayes after the media coverage he received.

All founders have been charged for conspiring to violate the Bank Secrecy Act and violating the act. Both charges carry a maximum of five years of imprisonment. Head of Business Development, Gregory Dwyer, is also facing the same charges.

BitMEX has been the global cryptocurrency market leader for months and now, it is number two. CFTC registration is mandatory to serve US clients and ensure that the platform is not used for any illegal purposes like money laundering. The prosecution says that the founders chose to go against the laws.

Visit Protect Your Bitcoin Business With KYC Compliance for more information.

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Multi-Tier Security - Another Line of Defense Against Bank Account Scammers
The banking sector has been witnessing a significant rise in criminal activities is a major concern of security authorities these days. The latest reports revealed that banks have been violating KYC and AML regulations and there were skyrocketing penalties in 2020. Protecting banks and customers is necessary and identity verification is one of the best ways of doing so. However, conventional methods like manual document verification do not suffice for the needs. There must be more robust and automated systems like digital identity verification and video KYC that can enhance the efficiency of the process.

A single line of defence does not work when it comes to technologically advanced fraudsters. There must be layers of security to filter them no matter how hard they try to surpass ID checks. Hence, multi-tier security is what the banking sector needs. Multiple layers of security checks and identity verification methodologies will make it impossible for fraudsters to enter banks.

What is Multi-Tier Security?

Multi-tier security refers to multiple layers of identity verification to enhance security in organisations. Fraudsters are developing sophisticated ways of fulfilling their malicious intent and a single layer of security cannot help companies. Therefore, there must be multiple layers of ID verification that can prevent fraudsters from entering the business.
A Summary of Bank Scams and Frauds

Over time, many different types of frauds and scams have struck the banking industry. Due to advanced technology, not only banks are streamlining their processes, but criminals have also figured out techniques to execute their plans. Many new breeds of scams have surprised organisations, especially banks. Let’s take a look at some of the fraudulent activities.

Account Takeover Fraud

Account takeover (ATO) refers to the fraud in which criminals get illegal access to bank accounts and use them for illicit activities like money laundering and chargebacks. As technology advances, fraudsters have also become sophisticated in committing account takeover fraud. There was a 43 per cent increase in account takeover fraud during the global lockdown in 2020. The numbers are expected to increase this year as well due to rapid digitisation.

New Account Fraud

A new breed of frauds struck the world a few years ago by the name new account fraud. With time, the rate of this fraud has increased and defeated all other kinds of scams. For a new account fraud, fraudsters use stolen, forged, or synthetic identities to open a new bank account, get a new credit/debit card, or loan money from the bank. According to Javelin Strategy, 3.2 million customers were affected by this fraud alone in 2018.

Identity Theft

Identity theft has been a threat to businesses for a very long time. The numbers are continuously increasing and banks are the primary target. Unfortunately, identity theft has taken various forms as well, including child identity theft, medical identity theft, and social identity theft. This enables criminals in making purchases, opening new bank accounts, and enjoying numerous other benefits with false names.

Data Breach

Data breach is a social engineering technique that fraudsters use to acquire customer information. The stolen data is later used for bank account scams, identity theft, and numerous other illegal activities. The identities stolen from a data breach are also used for new account fraud. Around 8,000 data breaches were reported in 2019. In the first half of 2020, 540 data breaches were reported only in the United States according to Statista.

Biometric Authentication – The Additional Security Layer

Biometric authentication is the additional layer of security that not only enhances the level of security, but it is also a rigid measure that fraudsters cannot dodge. Fooling biometrics is not a piece of cake for criminals because biometric authentication requires the live presence of the individual for identity verification. Voice, face, palm, iris, pupil, and retina are some of the biometric traits of an individual that are required for biometric verification.

Biometric verification employs various artificial intelligence models and the following techniques are used for authentication:

3D depth analysis

Micro-expression analysis

Skin texture analysis

Liveness detection

All these techniques ensure the live presence of individuals and any spoof attacks or deepfakes can be identified within seconds.

How will Multi-Tier Security Help Your Bank?

Digital identity verification is a multi-tier security measure that your bank needs. This system has multiple methods of verifying identities that prevent fraudsters from entering the business. Here is how the process of multi-tier security works:

First, the individual has to register on your bank’s website for the identity verification process

Along with the registration details, government-issued ID documents are also submitted

Then, the information submitted is verified with the government-issued ID document

Once the documents are verified, biometric authentication comes in action and face verification checks are performed

Customers have to submit their selfie or video during verification which is matched with the image on the ID document

Lastly, consent verification checks are also performed in which the customer has to submit a handwritten or typed consent note

Conclusion

All in all, verifying identities with the manual method is not an adequate option in the digital world. Digital identity verification is an automated process of verifying identities with layers of security to increase the efficacy of the process. One of the strongest layers in this method is biometric authentication that ensures the live presence of the customer for verification. Fraudsters cannot bypass these checks through any of their techniques. Due to the robustness of this technique, bank account scammers fear from the additional layers of security to verify identities and transactions. Identity theft, account takeover fraud, new account fraud, and data breaches are some of the criminal activities that have increased over time. Now, banks need a multi-tier security system to ensure the security of the customers as well as the organisation.

Get in touch with our experts and learn more about the digital ID verification system and biometric authentication.

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Founders of BitMEX Penalised for Their Inefficacy in Preventing Money Laundering

A Summary of Bank Scams and Frauds

Account Takeover Fraud

New Account Fraud

Identity Theft

Data Breach

Biometric Authentication – The Additional Security Layer

How will Multi-Tier Security Help Your Bank?

Conclusion

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.

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Founders of BitMEX Penalised for Their Inefficacy in Preventing Money Laundering

What is Multi-Tier Security?

A Summary of Bank Scams and Frauds

Account Takeover Fraud

New Account Fraud

Identity Theft

Data Breach

Biometric Authentication – The Additional Security Layer

How will Multi-Tier Security Help Your Bank?

Conclusion

Let’s prove your

customer’s identity

with Shuftipro.

Let’s prove your customer’s

identity with Shuftipro.