New York-based blockchain analytics firm Chainalysis is set to provide crypto exchange Bitfinex with its Anti-Money Laundering compliance solution.
In a press release published on Dec. 12, both firms took pains to stress that the solution will be privacy-safe, but help Bitfinex to crack down on bad actors using its platform.
1. Enhanced monitoring
Chainalysis is one of the highest-profile firms in the blockchain intelligence industry, providing solutions — such as its proprietary KYT (Know Your Transaction) tool — that enable firms, governments and law enforcement agencies to monitor blockchain transactions and track suspected illicit activities.
Earlier this year, the firm expanded its monitoring capacities beyond Bitcoin (BTC) to cover 41 further cryptocurrencies including Ether (ETH), Bitcoin Cash (BCH), Litecoin (LTC), ERC-20 tokens such as Maker (MKR) and Dai (DAI), and various stablecoins, including Bitfinex’s affiliated token Tether (USDT).
Bitfinex will ostensibly be able to use the real-time monitoring capabilities of Chainalysis’ technology to identify high-risk outliers amid a high volume of transactions. Automated and granular due diligence tools can help the exchange to better allocate resources, enforce compliance policies and robustly counter financial crime, the press release claims.
2. Troubled history
Bitfinex’s move to tighten up its compliance and due diligence in partnership with a veteran intelligence firm like Chainalysis comes after months of protracted legal difficulties.
Among these, Bitfinex, Tether and parent firm iFinex have been accused by the New York Attorney General’s office to have lost $850 million of commingled client and corporate funds and then to have attempted to cover-up the purported shortfall.
In October, the U.S. Attorney’s Office for the Southern District of New York indicted the principal of controversial Panama-based shadow payment processor Crypto Capital on three criminal counts. Crypto Capital had, in the exchange’s own words, “processed certain funds for and on behalf of Bitfinex for several years.” Bitfinex has argued that it is itself a victim of the fraud.
Last month, Bitfinex dismissed a separate, fresh lawsuit as “mercenary and baseless”. It has redoubled its denial of persistent controversies, including claims that Tether’s issuance was used to manipulate the cryptocurrency markets and long-standing allegations that the token is not backed 1:1 by the U.S. dollar.