Mistakes, sanctions, money laundering: Maxim Kurbangaleev on market changes after the SUEX case

In 2021, the SUEX crypto exchange was sanctioned. This was the first time in history when the US Treasury Department imposed sanctions on a crypto company. Maxim Kurbangaleev explains how to conduct a legal exchange business and avoid the fate of SUEX.

No business is safe from mistakes, but some of the mistakes can be too expensive – the company may be sanctioned for charges of fraud, support of terrorist operations and money laundering.

Maxim Kurbangaleev: How to avoid suspicions of money laundering

“First of all, if the company does not want to make the same mistakes that SUEX made, during the opening of a crypto exchange, it is necessary to choose a jurisdiction that can work with cryptocurrency. Running a business legally without a cryptocurrency license is out of the question,” Maxim Kurbangaleev says.

Today, there are several jurisdictions in the world that license the cryptocurrency business. The cryptocurrency license allows you to officially work with virtual assets, which reduces the risk of sanctions due to money laundering and other criminal activities.

With a license, a crypto company will be able to legally exchange cryptocurrency for fiat money, conduct transactions between wallets, issue digital currency and many other things.

Maxim Kurbangaleev: What would it take to get a cryptocurrency license?

For example, in the USA, a company must meet the requirements regarding the liquidity of the authorized capital, beneficiaries and founders of the business, legal address, etc. In the USA there is a type of license “Money Transmitter License” for companies conducting operations to exchange cryptocurrencies to fiat and back.

According to the The Financial Crimes Enforcement Network of the US Treasury, if the status of the exchange is defined as “Money Transmitter”, all actions of the crypto company will be regulated in accordance with normative legal acts.

“Besides America, you can get a cryptocurrency license in Switzerland, which has legalized cryptocurrency at the federal level, in England, Estonia and other countries. When the company determines the jurisdiction, it is necessary to open a legal entity whose activities involve the sale of cryptocurrencies. The next step is to coordinate its activities with the regulators of the country in which the crypto company is opened. Next, you need to find licensed exchange platforms where cryptocurrency will be purchased and sign contracts. Make sure that they comply with the AML requirements of European and American legislation. All these actions will help not to repeat the path of SUEX and avoid sanctions and accusations of money laundering,” Maxim Kurbangaleev explains.

Maxim Kurbangaleev: Crypto exchanges need a staff of AML specialists

“So, the jurisdiction is chosen, the company is founded and the cryptocurrency license is on hand.  Everything has been agreed with the regulators, and contracts with exchange platforms have been signed. What is next? It is necessary to open fiat bank accounts and recruit a staff of AML officers. Then it is important to implement an AML policy and develop actions to prevent money laundering and terrorist financing. The company must conduct AML checks properly in order to prevent any criminal activity and not be in the place of SUEX,” Maxim Kurbangaleev clarifies.

Without a qualified staff of AML officers, it is impossible to carry out all the required checks. The task of employees is to identify, assess and determine the risks of money laundering and other fraud in time, as well as take appropriate measures. A risk-oriented approach will allow crypto exchanges to manage risks and prevent sanctions against the company.

“In addition to AML policy, you need to use AML services such as Ciphertrace, Chainalysis and others. After the company fulfills all the conditions of the legislation of the regions where it plans to operate, you can start working. But we should not forget about AML procedures, they must be followed with regard to each client. It is unacceptable to refuse AML checks for the sake of fleeting benefits at a short distance,” Maxim Kurbangaleev emphasizes.

The expert believes that, first of all, all clients must provide the following documents: a passport and their own photo. When the identity of the client is verified, it is necessary to conduct a check on terrorist, sanctions and other databases – to make sure that the user is not associated with illegal operations. In the case of cryptocurrency, it should be checked through AML services. These rules should be taken into account in each exchange.

“Illegal activity does not add capitalization to the company and does not bring the whole industry to a new level. Follow the laws when opening an exchange to prevent the mistakes that SUEX has made. Always remember: companies doing business in the legal field are required to verify the identity of the client in accordance with normative legal acts and established KYC and AML policies. Do not neglect the AML requirements in order to conduct an honest and long-term cryptocurrency exchange business,” Maxim Kurbangaleev sums up.