Crypto mania is creating a 10x sales boost for compliance businesses: 'No company wants to deal with North Korean drug traffickers'

Oscar Williams-Grut
Onfido's document capture technology.

Onfido


  • The crypto boom is leading to a surge in business for compliance companies that help businesses verify customer identities and make sure their funds are legitimate.
  • Onfido, which automates ID checks, saw a 10x increase in crypto-related business in the fourth quarter of last year.


LONDON — The recent boom in cryptocurrencies isn't just creating wealth for companies issuing their own digital tokens or investors speculating on them — compliance guys are doing well too.

"The start of Q4 to end Q4 [there was] a 10x increase in checks for crypto clients," Eamon Jubbawy, the cofounder and COO of document verification business Onfido, told Business Insider.

The global cryptocurrency market surged towards the end of 2017, doubling in size in a matter of months as startups rushed to raise money issuing their own cryptocurrencies and new investors piled into the market in the hopes of making big returns.

Onfido cofounder Eamon Jubbawy

OnfidoThe surge in interest meant many cryptocurrency exchanges, where coins are traded, were overwhelmed with demand. Many of the biggest closed their doors to new customers as they grappled with a backlog in customer verification.

While crypto remains a largely unregulated space, regulators around the world have signalled they are watching it closely. Crypto companies have been proactively following the kind of ID checks and money source verification that are commonplace in the world of regular finance in a bid to head off any future regulatory troubles.

"Quite often they’re doing it in the house themselves before they come to us," Jubbawy said. "They’re doing it manually and then they realise they need someone to be able to automate it and do it at scale."

Onfido runs automated checks of ID documents to make sure they are real, helping companies comply with so-called "know your customer" regulation. Its main crypto customers are exchanges and ICOs, Jubbawy said. Bitstamp, Europe's oldest bitcoin exchange, recently announced that it is working with Onfido after it was overwhelmed with the level of new sign-ups over the Christmas period.

Jubbawy said that Onfido is now doing "millions" of document checks for crypto clients and has verified investor documents from 214 countries.

"Asia is massive, obviously Europe and the US as you’d expect but also places like India as well are big," he said. "It’s a global phenomenon. I’m just looking at the map now and there are all these Pacific Islands where people are buying crypto — it’s quite funny."

Charlie Delingpole ComplyAdvantage

ComplyAdvantageCharles Delingpole, the CEO and founder of anti-money laundering checking service ComplyAdvantage, told BI that his business is also seeing a big uptick in crypto business.

"We had a guy who went to the Miami crypto conference and we have a landing page for ICOs but without much trying we’ve had a lot of inbound leads and referrals," Delingpole said. "We’ve had a definite uptick in companies using us for crypto-related activities."

The motivations for crypto companies to work with companies like ComplyAdvantage and Onfido is the same as for any other finance business.

"No company wants to deal with North Korean drug traffickers, right?" Delingpole said. "No company wants to have a supplier who’s linked to corrupt Venezuelan politicians exporting cash."

Echoing the old adage "in a gold rush, sell shovels", Delingpole said: "Levis obviously made jeans for the gold miners right? We would argue that we’re critical components of companies being able to do this without inadvertently laundering money."

Jubbawy said: "The guys who are coming to us are saying hey, we want to make sure the people who are investing are legitimate people rather than people who are looking to move around dirty money, can you verify they’re not on any terrorist watch lists or anything like that?

"We love the fact we can inject a bit of trust and security into an industry that is otherwise set up for potential criminal activity."

For ComplyAdvantage, crypto represents a "small but growing" part of its overall business, Delingpole said. "For us, it’s an additional thing that gives us more scale but it’s a very small portion of our overall business."

Jubbawy said: "It’s not insignificant. A 10X uptick in any industry you’re serving is going to show. It’s definitely helped our growth recently but we work with such a wide variety of people."

Pawel Kuskowski, Coinfirm

CoinfirmThis growing revenues have not gone unnoticed. Pawel Kuskowski, a former senior RBS compliance banker, set up Coinfirm in 2016. The company specialises in providing "know your customer" and anti-money laundering services to crypto companies.

Kuskowski told BI: "Demand is huge, and it is increasing. And this demand isn’t just being pushed by smaller crypto and blockchain startups, but by huge, blue-chip multinationals who want to transact in crypto. This demand will become too big to ignore.

"We work with a large number of companies ranging from ICOs, crypto exchanges, and banks. These companies want to know that the business and individuals that are transacting using cryptocurrencies are ‘honest actors’ — in other words, they are not exposed to illicit activities or involved in any other shady practices.

"By ensuring that the necessary compliance procedures are in place, these companies are able to confidently work with a larger client base. It makes sense to all parties involved."

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