On July 22, BUIDL, a Japanese company engaged primarily in blockchain consulting, demonstration experiments, and tool development, launched SHIEDL, an anti-money laundering (AML) and counter financing of terrorism (CFT) tool for cryptocurrency exchanges.
SHIEDL is an address risk analysis tool that calculates the risk score of a random blockchain address and provides it via an application programming interface (API). It handles seven key cryptocurrencies in total, namely, Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Bitcoin Cash ABC (BCHABC), Ethereum Classic (ETC), Litecoin (LTC), and Monacoin (MONA).
Using machine learning, SHIEDL analyses the flow of transactions from each address and the pattern of use of anonymization techniques (e.g. coin mixing services), which is difficult to identify with human eyes, to calculate the risk score of each address. According to the company, the tool not only monitors transactions when depositing/withdrawing cryptocurrencies, but also constantly monitors transactions derived from addresses of exchanges where deposited cryptocurrencies have been purchased and those of cryptocurrencies that have been withdrawn. The tool informs exchanges when transactions are identified to be high risk in order to ensure an appropriate response. Using the tool, addresses of countries, organizations, and other parties subject to sanctions disclosed by various institutions and those whose involvement in past incidents is recognized can be registered on a list as high risk addresses.
Regarding AML measures for cryptocurrencies, the Financial Action Task Force on Money Laundering (FATF) adopted Interpretive Note to Recommendation 15 on New Technologies in June 2019, requiring over 190 FATF member countries and regions to develop laws quickly. Because Japan will undergo the 4th Round of Mutual Evaluations by FATF in October, regulatory authorities are expected to take a more cautious approach in the future. Demand for AML measures for cryptocurrency exchanges in Japan is expected to increase further.
*This article was written by Fisco