Malta is turning to crypto sleuthing startup CipherTrace for technical help addressing the risk of financial crimes in its licensed digital asset industry.
The Malta Financial Services Authority (MFSA) announced March 11 that it would integrate CipherTrace’s Compliance Monitoring product to “protect consumers, investors and business partners.”
The tool uses blockchain analytics and forensics to look out for “suspicious” addresses and wallets, according to CipherTrace’s website. The firm says it profiles cryptocurrency exchanges, ATMs, coin mixers and money laundering systems, as well as known criminal addresses, to score transactions and gauge the level of risk.
Machine learning and analytics are used to help estimate transactional risk based on activity related to the identified addresses and wallets. The MFSA said the system also de-anonymizes blockchain addresses, allowing regulators to “evaluate and monitor the trustworthiness of virtual asset businesses.”
MFSA CEO Joseph Cuschieri said:
“Being strongly aware of the money laundering and financing of terrorism risks associated with entities operating in this sphere, the decision has been taken to engage the services of CipherTrace in order to reduce fraud and detect transactions with illegal sources of funds.”
CipherTrace’ said in an email that the integration would provide risk ratings on Malta’s crypto operators to “evaluate their trustworthiness and continuously monitor them for compliance.”
The MFSA will track the risks relating to digital asset businesses, including cryptocurrency exchanges, collective investment schemes and initial coin offerings (ICOs).
“Cryptocurrency businesses often have difficulty establishing trust and maintaining banking relationships because of their perceived risk,” said Dave Jevans, CEO of CipherTrace.
CipherTrace’s tools can help financial institutions decide which crypto businesses to trust and avoid declining “valuable customers,” he added.
The company raised $15 million from investors including Mike Novogratz’s Galaxy Digital, it announced on Feb. 20. The round was led by Aspect Ventures, with Neotribe Ventures and WestWave Capital also participating.
