Recently released court documents suggest the organization behind the system that manages FICO credit scoring appears to be exploring a number of different techniques that can be used to collect information from Bitcoin exchanges as part of a new anti-money laundering initiative.
The documents show that FICO has filed a patent application, published on the 21st of September 2017, that details an adaptable, programmable system that can be used to identify and track potentially illicit cryptocurrency transactions, and flag them for future review. The information gathered by the system could then be used to develop “threat scores” that can then be integrated into bank anti-money laundering strategies by specialists.
The patent application includes a description of how the system could potentially track various different data points from Bitcoin exchanges and integrate them into a scoring model.
The document states:
“Because emerging payment systems such as mobile and cryptocurrencies may have limited interaction with traditional financial institutions, there are more limited opportunities to detect laundering which involves them. To improve detection, a cloud based data store integrates information from multiple sources, including: … a) Entities associated with legal and illicit bitcoin exchanges [and] b) Entities associated with mobile payment and remittance networks.”
FICO also states in the document that “it is important to collect and centralize information on legal exchanges and administrators (miners, etc.)”, hinting toward the likelihood of the system being applied to other areas of the cryptocurrency ecosystem beyond just exchange operators.
One of the most concerning elements of the patent application suggest that the prospective system will likely be used to gather information covertly, stating that
“Having information on legal bitcoin operators helps the AML Threat Score learn their behavior, and detect changes in their behavior that may signal new illicit use (without explicit knowledge of the operator).”
With the rapid development of decentralized exchange technology, however, it’s clear that FICO and other regulatory bodies are operating in a purely reflexive and reactionary manner. Decentralized trading platforms and other trading strategies such as atomic swaps render cumbersome centralized exchange tracking technology redundant, leaving cryptocurrency investors with little to be concerned about.