Aussie crypto exchange turns attention to new laws

Australian cryptocurrency exchange BTC Markets has warned users to expect deposit and withdrawal delays as it “fine-tunes” transaction monitoring systems to meet new legal obligations.

Last month, financial regulator AUSTRAC was handed the authority to monitor local digital currency exchanges under new Anti-Money Laundering and Counter-Terrorism Financing (AML-CTF) laws. 

It’s the first time Australia’s digital currency sector has been regulated, and BTC Markets is the first local exchange to detail what that might mean for its operations.

The company said it already verified “the identity of our users, their source of funds, and the purpose of their transactions as they occur on our platform …  in anticipation of falling under AML/CTF Act regulation”.

“We use this information to calculate a risk score,” it said in a blog post.

“That score determines how we manage and mitigate a user’s risk. This will soon be required by the AML/CTF Act and we take our compliance obligations very seriously.”

The exchange warned this could add time to the process of verifying new users before they can trade.

The other side of AML/CTF compliance is transaction monitoring.

Again, BTC Markets said it had some systems operating in this field but warned they would be placed under pressure as the exchange erred on the side of caution when it came to meeting the new Australian regulations.

“As tempting as it is to rush these systems, we should be made aware that large financial institutions have spent years fine-tuning their suspicious activity detection and transaction monitoring,” BTC Markets said.

“Our rapid growth may not allow us time to fine-tune our systems, but we can learn from their experience in this area.”

BTC Markets said it already “red flags certain transactions” for reasons it could not share publicly “without compromising the integrity of the system”.

It warned users to expect more red flags to be triggered as its user base grows and new regulations take effect.

“When our system detects suspicious activity, the resolution requires a human to follow up,” BTC Markets said.

“As we increase our customer base, more red flags are triggered resulting in more follow-ups.”

The exchange said it had “more than doubled the size” of its support team as it tried to meet demand for cryptocurrency, and as it prepared to operate in a more regulated financial environment.

Many Australian digital currency exchanges have faced more immediate problems over the Christmas-New Year period: accepting AUD deposits from banks and financial intermediaries.

However, they will soon have to turn attention to risk systems and controls to meet their new legal obligations.

No specific date has been set in the laws: if that continues to be the case, they will come into operation around the middle of 2018.