Blockchain compliance firm Elliptic and LexisNexis bring bank-grade risk management to Bitcoin

Blockchain intelligence firm Elliptic and LexisNexis Risk Solutions have partnered to deliver "bank-grade risk management on bitcoin transactions". The deal integrates LexisNexis anti-money laundering risk management data into Elliptic's Bitcoin transaction monitoring and compliance products.

The two firms have built a proof-of-concept that leverages financial intelligence data from LexisNexis Risk Solutions and presents it alongside Elliptic's proprietary risk scoring.

While the underlying Bitcoin technology, blockchain, has gone mainstream, the financial services industry is still hesitant to embrace the full promise of Bitcoin and confidently provide banking relationships to Bitcoin companies. The lack of financial transparency on Bitcoin entities continues to stymie the ubiquitous adoption of bitcoin and other virtual currencies.

That reality, though, is soon to be short-lived. LexisNexis Risk Solutions, the global big data, technology and analytics firm, has teamed with Elliptic, a blockchain intelligence company, to remove that roadblock by exposing money launderers, human traffickers, terrorists, and drug dealers who use bitcoin to make dark web purchases, said a statement.

The alliance, which was announced today, integrates LexisNexis Risk Solutions' robust anti-money laundering data into Elliptic's Bitcoin transaction monitoring and compliance products. As a result, Elliptic clients can obtain more meaningful insights than ever before by automatically screening Bitcoin entities for links to sanctions, enforcements, politically exposed persons, adverse media and state owned companies.

Dr. James Smith, Elliptic CEO and co-founder, said: "For the first time, Bitcoin companies can leverage bank-grade risk management practices to identify Bitcoin entities that appear on sanction and watch lists from around the world. Having this enriched data set built natively into Elliptic's products takes Bitcoin AML and KYC controls to the next level."

Elliptic will use LexisNexis Bridger Insight XG platform that includes its WorldCompliance database to identify whether Bitcoin transactions are linked to identities that are related to fraud, anti-money laundering, corruption or terrorist financing.

The amount of money laundering activity taking place with any currency, whether virtual or hard dollar, is difficult to calculate due to the complex structures bad actors put in place so that they can mask transactions.

Elliptic revealed today that the largest dark marketplaces facilitate more than $250m in annual sales. "The leading Bitcoin companies globally are already using Elliptic products to assess risk on more than $1bn in bitcoin transactions each month. By integrating LexisNexis Risk Solutions' robust watchlist data, we are making it safe for a new wave of financial institutions to handle Bitcoin and bank Bitcoin companies." said Dr. Smith.

According to Ray Valdes, a Gartner analyst who covers virtual currencies and blockchain technology, et al, the core Bitcoin technology stack has functioned with near-flawless operations over its lifetime, a track record that is unprecedented when compared to complex software from commercial vendors.

However, the security track record of third-party software in the Bitcoin digital currency ecosystem is dismal. Many exchanges have been hacked — or funds have been stolen — due to a combination of unskilled programmers, poor methodologies and perhaps some criminal intent to defraud from the start, noted Valdes.

He said the situation is analogous, in the non-digital world, to a poorly run union or bank going bankrupt; such an event would not call into question the core mechanisms of a dollar-based economy. Because of the near-flawless track record of the Bitcoin blockchain and core stack, developers of competing metacoin platforms and technology stacks will have significant work to prove their capabilities to support mission-critical contexts in this regard.

In coming together, LexisNexis Risk Solutions and Elliptic represent a new global standard in Bitcoin risk management, AML Compliance and KYC Compliance.

LexisNexis Risk Solutions is used by 100 of the top US banks, and the firm also works with 80% of US federal agencies, assisting with regulatory compliance and mitigate business risk, like identity fraud, money laundering, terrorist financing, and tax evasion.

Elliptic provides bitcoin transaction monitoring products to the largest US and European Bitcoin exchanges and payment processors, and provides key evidence to law enforcement agencies in the US and Europe for major investigations involving Bitcoin.

Thomas C. Brown, SVP of US Commercial Markets and Global Market Development at LexisNexis Risk Solutions, said: "This alliance demonstrates how data, technology and analytics can be used in innovative ways to foster financial transparency from China to Germany to the US.

"More banks, Fintech startups, payments companies and eCommerce businesses can further consider the usefulness of the permissionless blockchain because as of today they are able to deploy best-of-breed money laundering screening against Bitcoin. As a result, the virtual currency potential evolves to a new level - from possible conduit for money laundering to trusted technology along the economic value chain."