Datanamix | AML Sanctions Screening

Guide for the Crypto Industry

Enjoy full access to a comprehensive suite of products and information that will assist you in minimise your credit risk and making more informed decisions.

Sanctions & PEP Data API for the Crypto Industry

The Importance of Sanctions & AML Screening for the Crypto Industry

Comprehensive AML Screening API for the Virtual Currency Industry

AML Regulations in the Crypto Industry

Anti-money laundering regulations do not just apply to banks and other traditional financial institutions – these regulations must also be followed by firms involved with cryptocurrencies.


Legal Requirements

The crypto industry is required by law to carry out sanctions and AML screenings.

The Office of Foreign Asset Control (OFAC) has made it clear that the crypto industry must, as a top priority, ensure cryptocurrency is not used to evade sanctions.

OFAC is committed to using its authority to counter the use of digital assets for illegal activities. In line with this, the body has expressed that any US person, who engages in crypto transactions, is responsible for confirming that their exchanges do not violate sanctions.

The regulator has already taken steps to act against providers that fail to screen their customers against sanctions and watch lists – and it expects to have more involvement as the industry evolves.

For example, OFAC has:

  • Cracked down on crypto transactions involving blocked persons and specially designated nationals (SDNs).
  • Identified digital currency addresses known to be tied to these individuals and created a public list, so organisations can more easily screen for this activity.
  • Restricted crypto transactions that involve exchanges that indirectly benefit SDNs. So, if an SDN or blocked entity is involved in or benefits from a cryptocurrency transaction taking place, the firm could face serious penalties.
  • Criminalised transactions with entities that are 50% or more owned by an SDN.

The property of a blocked person, and any assets that they have an interest in, will continue to be sanctioned regardless of how many times it is transferred away from them. Crypto providers should be alerted to chain hopping, tumblers, and other methods used to obscure the true parties involved in the transaction.



Q: What happens if the crypto address is not linked to a blocked person when the exchange is facilitated?

A: The transaction could be considered a sanctions violation if that address becomes linked to an SDN later. OFAC sanctions are strict – and they expect firms to take steps to identify these individuals, regardless of how much they attempt to evade the system.


Q: What are the consequences of failing to comply with AML regulations?

A: Aside from fines and penalties, government agencies may block individuals from transacting on a platform, or with a particular digital asset, altogether.




Although the regulation around crypto transactions is ongoing and dynamic, organisations are required to follow sanctions laws. At a minimum, firms should implement a KYC and sanctions screening process to identify high-risk individuals.

Specific Challenges for the Crypto Industry



Fast Transaction Speeds


This presents criminals and money launderers with an opportunity to move significant volumes of illicit funds very quickly.



High Levels of Anonymity


Users can complete cryptocurrency transactions without disclosing personal details.


Increased Potential for Structuring


Structuring refers to breaking up large transactions into smaller ones to avoid the scrutiny of regulators.


Regulatory Unfamiliarity


The industry is new and different, so legislators and governments have not developed uniform rules and best practices for these businesses.

Red Flags: How is Money Laundered Through Cryptocurrencies?


It is estimated that the amount of fraud, theft, and hacks that occurred in the crypto industry totalled more than $1.4B – in the first six months of 2020 alone.

Cryptocurrencies will pose a significant threat to the integrity of financial systems if these issues are not addressed.

To better understand and address the threats, the Financial Action Task Force (FATF) conducted an investigation and put together a report on red flags relating to cryptocurrency money laundering schemes.

Let’s review some of the most prevalent red flags in the crypto industry:


Minimal customer due diligence



Red Flag #1


Companies that apply minimal customer due diligence, for the sake of avoiding identification requirements. Companies that apply minimal customer due diligence, for the sake of avoiding identification requirements.


Red Flag #2


Criminals tend to exploit the fact that cryptocurrencies are anonymous. By trading on unlicensed platforms, proxies, or with privacy coins, they can mask their identities completely. *


Red Flag #3


This anonymity creates another red flag called money muling. This is where criminals take advantage of vulnerable consumers that are not familiar with the technology and use them to carry out transactions for money launderers.

Geographical Risk



Red Flag #4


Another red flag that is tied to anonymity, is the geographical risk. It is easy for users to transfer money in and out of high-risk jurisdictions, or exchange currency in a country where they do not reside.


Red Flag #5


The use of VPNs (virtual private networks) to access crypto services. This could indicate the user is trying to mask where they live to evade regulatory requirements or sanctions screenings.


Red Flag #6


Another red flag that is tied to anonymity, is the geographical risk. It is easy for users to transfer money in and out of high-risk jurisdictions, or exchange currency in a country where they do not reside.

High-Frequency Transactions


Red Flag #7

Any time there is a large volume of exchanges occurring over a short time, it is a red flag. This also includes quickly depositing and withdrawing funds from an account that was just recently opened.

A user that engages in more transactions than the average person could also be involved with structuring. By deliberately breaking up larger

trades into smaller amounts, criminals can avoid triggering currency transaction reporting thresholds.

This red flag is the same as what would trigger a bank alert when done with cash – making multiple transactions under the $10 000 reporting minimum could indicate illegal activity




Q: What about making several high-value exchanges in a short timeframe?

A: Behaviour like this can also be a red flag, especially when it is done in a regular pattern and the user has long periods with no additional activity afterward. Ransomware cases may look just like this!



Spreading Assets Between Various Providers



Red Flag #8


Any time there is a large volume of exchanges occurring over a short time, it is a red flag. This also includes quickly depositing and withdrawing funds from an account that was just recently opened.


Red Flag #9


Any time there is a large volume of exchanges occurring over a short time, it is a red flag. This also includes quickly depositing and withdrawing funds from an account that was just recently opened.

Setting up an AML Process

Now that you understand the importance of sanctions screening and AML processes in the crypto industry, let’s get into the best way to set them up. The key is to develop policies and procedures to address red flags and prevent money laundering from occurring.

The first step is to understand the risks your business is exposed to and the applicable regulations that you must comply with. Cryptocurrency service providers are now under the scope of most of the existing AML and counter-terrorist financing regulations, so you must prepare appropriately.

As most of these laws require you to implement a risk-based customer due diligence program and transaction monitoring measures, you should start there. The goal is to develop a process that can identify the money laundering risk that each of your users presents.

To comply with regulations, you must use a risk-based approach. It is the only way to avoid expensive fines and penalties for non-compliance and ensure that you can detect and prevent money laundering risks.



Address red flags



Step 1


Understand the risks your business is exposed to, and the applicable regulations that you must comply with. Cryptocurrency service providers are under the scope of most AML and counter-terrorist financing regulations, so you must prepare appropriately. The goal is to develop a process that can identify the money laundering risk that each of your users presents.


Step 2


Use a risk-based approach to comply with the regulations you identified. This is the only way to avoid expensive fines and penalties for non-compliance and ward off money laundering risks.


Sanctions lists


Our Sanctions Database covers Sanctions Lists from OFAC, Canada, HM Treasury, EU, Australia and many more regions and organisations globally.

Supported Sanctions Lists

PEP data


Our Politically Exposed Persons (PEP) database covers about 1million records from every country worldwide. Lists also include family members and close associates of PEPs.


Global PEP Data

Crime Watchlists


Our Crime Database includes more than 8k records from Interpol and the FBI. More Watchlists are being added continuously.
*Only available on our Standard Plan

Crime and Watchlist Data

Adverse media


Bolster your AML compliance with our global adverse media data screening. Screen against more than 60k global news sources with custom keywords.

Adverse Media

Key Industries Solutions

We provide vital support to compliance teams across a wide array of sectors, including FinTechs, enterprise SaaS providers, InsurTechs, cryptocurrency firms, and many more.

For a detailed guide on how AML Sanctions Screening applies to your industry, click the relevant icon below.


Global Sanctions Lists

The sanctions lists below are included in every sanctions data subscription. Additional sanctions lists can be included on request, please contact support for more information.

United States

Office of Foreign Asset Control (OFAC)

Specially Designated Nationals (SDN), Consolidated Sanctions List (Non-SDN) and various additional sanctions lists (MBS, CCMC, CMIC, CAPTA, FSE, PLC, SSI).

Canada

Global Affairs Canada

Consolidated Canadian Autonomous Sanctions List incl. Special Economic Measures Act (SEMA) and the Justice for Victims of Corrupt Foreign Officials Act.

United States

Department of State (DoS)

ITAR Debarred (ITAR), Nonproliferation Sanctions (ISN), Cuba Restricted List.

United States

Bureau of Industry and Security (BIS)

Entity List (EL), Denied Persons List (DPL), Military End User List (MEU), Unverified List (UVL).

United States

Financial Crimes Enforcement Network (FinCEN)

311 Special Measures.

United States

Department of Homeland Security (DHS)

Uyghur Forced Labor Prevention Act Entity List (UFLPA).

United States

U.S. Customs and Border Protection

Withhold Release Orders.

Argentina

Ministry of Justice

Public Registry of Persons and Entities Linked to Acts of Terrorism and Financing (RePET).

Brazil

Brazil Central Bank

Register of persons disqualified from senior roles, and Entities Prohibited from Offering Auditing Services.

Brazil

Brazil Federal Government

Empresas Inidôneas e Suspensas (Disreputable and Suspended Companies).

Brazil

Brazil Tribunal de Contas da União (TCU)

List of individuals disqualified from public service and debarred bidders.


* Additional sanctions lists can be added on demand. Just reach out to our Customer Success Team.

Politically Exposed Persons

What are Politically Exposed Persons (PEPs)?

Domestic Politically Exposed Person (DPEP)

These are individuals who hold prominent public positions within their own country.

This includes:

  • Heads of state or government
  • Senior politicians, government ministers, and judiciary officials
  • Senior executives of state-owned corporations
  • High-ranking military officials.They are classified as DPEPs due to their potential access to public resources, which could make them vulnerable to corruption or abuse of power.

Foreign Politically Exposed Person (FPEP)

These are individuals who hold, or have held, similar high-level roles in foreign countries. FPEPs are foreign officials or their associates who might also be in a position to abuse their influence for personal or financial gain.

Examples include:

  • Foreign heads of state or government officials
  • Senior politicians or diplomats from foreign governments
  • Foreign judges or military leaders

Domestic Politically Influenceable Person (DPIP) - Family Members

These are close relatives of Domestic PEPs (DPEPs).

Family members can include:

  • Spouses or partners
  • Children and their spouses or partners
  • Parents, siblings, or other close relatives. Due to their relationship with a politically exposed person, they may have access to privileged information or influence, which makes them susceptible to exploitation or corruption.
  • Close associates are individuals who are closely connected to a PEP, either socially or professionally.

Foreign Politically Influenceable Person (FPIP) - Close Associates

These are individuals who maintain close business or personal relationships with Foreign PEPs (FPEPs).

A close associate could be:

  • Business partners
  • Close friends or advisers
  • Legal representatives or those with significant control over a PEP’s assets FPIPs are often involved in business dealings or transactions that may raise concerns about conflicts of interest or the misuse of political connections.
  • Close associates are individuals who are closely connected to a PEP, either socially or professionally.

Each of these classifications is used in anti-money laundering (AML) and know-your-customer (KYC) processes to identify and mitigate risks associated with potential corruption or financial crimes. Identifying these individuals helps institutions flag potentially suspicious activities that may be linked to political influence.

Smart screening technology for effective AML compliance

Less False Positives and False Negatives


Name matching is the real challenge in Sanctions & AML compliance. Transliteration issues, nicknames, honorifics, and spelling errors are some of the factors that make name screening a challenge. This cannot be solved with simple fuzzy algorithms.

Our industry-leading screening technology is based on the latest research and achievements in Natural Language Processing (NLP) and Artificial Intelligence (AI) used by organisations such as Amazon, LinkedIn, and U.S. Homeland Security.


This technology helps reduce false positives significantly, while making sure that no real matches slip through the cracks.

Easily integrated into your own system environment

Integrate Business Partner Screening with your own system environment by simply using our REST API, our Sanctions Database Exporter option, or our pre-built integrations for SAP, BigID and API3 Airnode.


Sanctions & AML API


Developer friendly, easy to implement and Enterprise-ready RESTful API with a guaranteed uptime of more than 99.99% and > ~200ms response time.


Batch AML


Through batch verification, businesses can efficiently manage and update large volumes of data, ensuring compliance with ease.


Integrations


Easily integrate our AML sanctions screening into your system environment using our pre-built connectors and apps.

Crime Watchlists

Complement your AML Screening with Criminal Watchlists Data



FBI and Interpol Data


Gain access to our comprehensive global Criminal Watchlists database covering more than 8k records.


Updated Every 60 Minutes


Mitigate sanctions risk with hourly data updates. Audit relevant timestamps for increased transparency.


Smart Matching Technology


Maximise the benefits of our screening technology: Significantly reduce false negatives and false positives, and boost accuracy.


FBI and Interpol Watchlists


Image

FBI's Most Wanted & Fugitives


The FBI's Most Wanted list is maintained by the FBI and publicly available on their website. Removal from the list typically occurs only upon capture, death, or dropped charges.

*Only available on our Standard Plan

Why AML compliance is important

For businesses to actively prevent financial loss and reputational damage, it's crucial that comprehensive due diligence processes are carried out. 

Datanamix’s due diligence product suite includes AML (anti-money laundering) sanctions screening, PEP (PIP) data, Adverse Media and Crime data – all customisable depending on your specific industry, and unique business needs.


Datanamix offers a suite of AML Sanction Screening products to enable the right level of risk mitigation for every class of business – from accountable institutions bound by the FIC Act, to SMEs simply looking to protect their interests.


Datanamix due diligence product suite includes AML (anti-money laundering) Sanctions Screening, PEP (PIP) data, Adverse Media and Crime Data – all customisable depending on your specific industry, and unique business needs.

Crypto

Sanctions Compliance for Crypto Businesses


This guide will help to understand the Crypto Industry's specific challenges, how to identify red flags and implement best practices for a comprehensive compliance process.


Read more

Digital Banking

Anti-Money Laundering Guide for Digital Banks


The convenience and speed of digital banks continue to lure new customers to their businesses, with statisticians predicting that the total number of digital banking users will soon reach new records.

Read more

InsureTech


AML Guide for the Insurance Industry


Insurance companies are especially at risk for individuals who are attempting to launder money because they can structure transactions, enforce appropriate reports, and force employees to collaborate to create the appearance of legitimacy.

Read more

Legal


AML Guide for Law Firms


This guide will provide an overview of how Law Firms are affected by Money Laundering, which regulations need to be taken into consideration, as well as compliance best practices.

Read more

Real Estate


AML Guide for the Real Estate Industry


Money laundering is a concern in many industries, and real estate is no exception. This guide will help you understand the AML considerations for the real estate industry and why implementing these practices are so important.

Read more

Tax Consultants


AML Guide for Tax Consultants


This guide will review the risks that tax consultants face regarding Money Laundering as well as what procedures they need to have in place to address these.

Read more

Software

Why OFAC Sanctions Compliance Is Important For Software Companies


Sanctions impose restrictions on commerce with specific individuals, entities, and states, and export controls impose limitations on the distribution of particular products and services, including software and applications.

Read more

Adverse Media

Adverse Media Screening is the process of monitoring public sources, like news and social media, to detect negative information about individuals or organisations. It helps businesses identify risks such as criminal activity, fraud, or regulatory violations, which could harm their reputation or legal standing. Used for risk assessment and compliance (e.g., anti-money laundering or Know Your Customer regulations), adverse media screening is often automated to handle large volumes of data and provide real-time alerts. It's a key part of due diligence and risk management strategies.

60k News Sources


Custom Keywords


Global Coverage

Looking for some reading material

More leaders using Datanamix


Gomo
Hollard
NedBank
Standard Bank
Luno
Bidvest Bank
Ozow
Purple Group
CCD Couriers
Momentum
Altron
Altron
Altron
Altron
Altron
Altron
Altron
Altron
Please contact us for more information on our range of services