Banks are required by law to do this type of tracking on their normal bank accounts and file reports of any suspicious activity they see. The fact that the transactions aren't public means there isn't a third party that can do it and one bank can't follow the chain once a transaction goes to another bank. That work has to be done in the context of a legal investigation.
Under the Bank Secrecy Act (BSA), financial institutions are required to assist U.S. government agencies in detecting and preventing money laundering, such as:
-Keep records of cash purchases of negotiable instruments,
-File reports of cash transactions exceeding $10,000 (daily aggregate amount), and
-Report suspicious activity that might signal criminal activity (e.g., money laundering, tax evasion).
Isn't this already required, sort of? AFAIK you have to report fiat transfers exceeding $10k. If you're cashing out at an exchange, and you sell $10K of bitcoins and then transfer to your bank account, that transfer would have to be reported. I suppose this requirement would cover crypto-to-crypto trades, but most of the volume aren't on US exchanges so I doubt this would do much.
edit: misunderstood FINCEN requirements, only cash transactions over $10k have to be reported
The Bank of an England does as it requires reports from each of the banks in the Sterling Framework.
Anti money laundering regulations allow the authorities to gather a full picture if they need to.
Including any accountants or financial or legal professionals you interact with - all of whom are required by law to report any activity they consider suspicious.
Don't forget that due to increasingly heavy financial regulations adopted by FATF require financial institutions to have extreme surveillance data on all financial transactions and to report anything they themselves deem to be suspicious to the authorities. This includes things such as cross-border activity (logging in from a foreign ip) to using a VPN.
The financial reforms following 9-11, introduced reporting requirements. This could be under this umbrella? One example is suspicious deposits must be reported by those in the financial services industry to the federal government. Once reported your broker is prohibited by law from informing you of the report. We lost a lot of financial freedom following 911. Paypal is just following US law.
Same as banks have to inform tax or money laundering authorities when certain types of transactions take place, you require any French bank to notify the currency crime unit of a transaction from a known Libra exchange. Maybe you fine the bank for accepting the transaction without proof it was a legal cryptocurrency.
Your comment on Fincen infra is on point. Its sometimes tragic to see that an org directing enterprises to provide confidential info on money launderers/terrorists sets such low security specs for setting up the info transmission. http://bsaefiling.fincen.treas.gov/Why_use_BSA_004.html
Millions of these are filed per year. Obviously not all of these - probably not even most of these - are about actual crimes or end up in actual prosecutions, but the banks still have to file them.
The state monitors transactions first for illegal activity under mechanisms like the Bank Secrecy Act (BSA). Any payments or financial services company follow Know Your Customer standards including running OFAC checks to ensure that the recipient is not a known terrorist.
And I believe banks seem to cooperate as well to the limits of what is allowed. Detecting Financial Crime (DFC) is (becoming) a big part of operations.
Welcome to OFAC compliance. In case you did not know, it is the finance sector's job to make sure you do not transact with any embargoed or sanctioned entities or groups the United States decides shouldn't be given entrance to the U.S. financial system. This responsibility is part of doing business.
You will not find a licensed payment processor that will not do this type of surveillance/due diligence, as they are strictly liable for any violations. If this creeps you out, join the club.
How confident are you on that point? I don't have a reference on me right at this moment but I expect it is illegal for a non-bank entity to hand out IOUs at scale. People would be arrested.
^. Simplest use case I can imagine for big data analysis on financial transactions, detect sudden spikes in income (esp. from different sources) and expenses, flag for further investigation. I'm sure the tax services do this. Banks too, to detect mules and other suspicious activity (repeated transactions of $999 to a different account are suspicious already imo).
From experience, Chainalysis is already in use with government financial regulators and law enforcement.
reply