The great thing
about innovation is that it typically results in making everyday tasks easier
and less time consuming for individuals and businesses. For example, Ive always loathed going
shopping, because it is such a time consuming process. Whether Ive had to get one item or a
full cart, I always get stuck in line waiting forever. Today going to the
grocery has become a much more bearable experience, due to the innovation of
self-checkout. On the other hand,
several individuals skip the brick and mortar store completely and choose to
purchase everything online because of the Internet. Thank goodness for
innovation! Can you imagine life
without your email, smart phone, car or social networks?
Peer-to-peer
money transfer and payment processing is one of those areas that continues to
experience transformation. Although
there have been a number of different methods and new companies are always on
the rise with the next big idea, there has always been the consistent fact that
a bank or clearinghouse is involved in the process, until now. Bitcoin has erupted onto the scene as the
first decentralized digital currency. Now individuals can send bitcoin payments
directly to their friends around the world via the web without the larger
processing imposed by banks. At
the same time, this is very appealing to the under banked, because you dont
have the same requirements of opening a checking account. Although the bitcoin
currency is very volatile, the launch of the first
bitcoin ATM in Canada this past month and their recent surge in demand in
areas such as China, points to the fact that they are here to stay.
A myth that bitcoin
providers bought into is that they would not have the same KYC and AML compliance regulations that are faced by other financial
institutions. It is evident thats not the case. If someone is looking for
anonymity for laundering money, it would seem that bitcoin would become a
primary target. Thailand has seen such a threat from the digital currency, that
it has been banned from their country all together. The New Yorks State department of financial
services has also voiced concerns over regulating Bitcoins. They were in
fact so concerned that they subpoenaed 22 major players from the bitcoin
industry to get a better understanding of their current practices and to see if
regulation is indeed needed for virtual currency.
For bitcoin
providers, this should serve as a major red flag. Too many times, companies are
reactive instead of proactive in their fraud prevention and compliance strategies. The time for implementing the proper risk
management tools is not when a fraudster has laundered money through your
platform or once a company has been cracked down on by regulators for lax
processes. The time for implementing the proper identity verification and authentication
tools is now.
[Contributed
by Shea Allen, Account Specialist]
