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Fraudsters are switching from credit cards to Bitcoin, says consumer protection company

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Fraudsters are taking advantage of the irreversible nature of crypto transactions, says MyChargeBack’s vice president of global operations, Michael Cohen. When Bitcoin (BTC) was first envisioned, one of its selling points was the fact that it was offering better protection to retailers than credit cards. In one of his earliest emails — from November 10, 2008, Satoshi Nakamoto parried a complaint from an early adopter James A. Donald, who lamented the fact that Bitcoin transactions are not instantaneously final:

“Instantant non-repudiability is not a feature, but it’s still much faster than existing systems. Paper cheques can bounce up to a week or two later. Credit card transactions can be contested up to 60 to 180 days later. Bitcoin transactions can be sufficiently irreversible in an hour or two.”

According to Cohen, in some cases, credit card chargebacks are possible 18 months after the transaction date. There are two classifications of credit card chargebacks: unauthorized use (when a criminal gains access to one’s credit card) and authorized (where a cardholder authorized the transaction but is not satisfied with the outcome). Cohen said that when it comes to crypto, consumers may have a chance of recovering funds only in the case of unauthorized transactions, as credit companies like MasterCard and Visa exclude certain industries like crypto and gambling from the second category. Cohen opined that the ubiquity of scammers who use crypto as a tool hampers mass adoption:

“Unfortutenley, it’s a very nice tool for a scammer to have as a means to collect funds. I think it serves in the disinterest of those who are looking to promote the general and universal usage of crypto. I think it is at this point. It is somewhat of a stumbling block because of all of the people who are getting scammed. I mean, they’re not going to be the ones who are going to be promoting the usage.”

Cohen said that one of the most typical tropes of scammers involves them offering some product or service (the most common tend to be related to forex trading) to an unsuspecting customer. Then at the last moment, the scammer convinces the unsuspecting victim to pay for the service or fund their supposed-account using cryptocurrency. According to Cohen, not all is lost for the victims, however; there may be potential avenues for redress.

Cohen’s company helps the victims identify scammers by tracing their movements on the blockchain. Typically this leads to a crypto exchange where the criminals deposit the proceeds of their crimes before cashing out. Cohen said that many crypto exchanges have been receptive and are truly eager to stamp out users who engage their services for nefarious purposes.

Recently, two offices of the U.S. Department of the Treasury have issued advisories to the crypto companies, primarily exchanges, about processing malware attack payouts. A few days later, the U.S. government went after BitMex and its founder for operating an unregistered trading platform. As crypto regulation tightens around the world, it appears that cashing out of ill-gotten proceeds could become increasingly more difficult for the criminals.



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London Stock Exchange-listed firm inks FCA’s approval for crypto services

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Mode Global Holdings, a London Stock Exchange-listed fintech group, has secured major regulatory approvals for cryptocurrency and fintech operations in the United Kingdom.

The company announced Thursday that Mode has secured its Electronic Money Institution license and AMLD5 registration from the U.K. Financial Conduct Authority.

The AMLD5 registration has been granted to Mode’s crypto arm Fibermode Limited, establishing it as an official crypto asset firm in the United Kingdom, pursuant to the amended regulations on money laundering, terrorist financing and transfer of funds.

The AMLD5 registration is a requirement for crypto-related businesses in the country that fall within the scope of money laundering regulations. According to the announcement, Mode is the fifth company to have received this registration to date since the FCA became the official AML supervisor of the crypto industry in the U.K. in January 2020.

Alongside the AMLD5, Mode’s subsidiary Greyfoxx Limited also acquired the EMI license, which enables Mode to offer a “range of innovative financial services” to both businesses and consumers in the United Kingdom, the announcement notes.

Following the acquisition of new regulatory approvals, Mode is planning to further expand its crypto services, including decommissioning its investment product known as the “Bitcoin Jar.” The product aims to allow Mode customers to use Bitcoin (BTC) to generate BTC interest rather than simply holding it in a wallet or on an exchange.

Mode CEO Ryan Moore noted that the new regulatory developments provide a major step in Mode’s mission to deliver a trusted and regulated environment. “It means we now have the ability to scale our operations and continue delivering innovative payments products for our customers under our own EMI licence. Both the EMI licence and the AMLD5 registration ensure business transparency, strong oversight and give our customers confidence in our offering,” he said.

Related: UK regulator warns against 111 unregistered crypto companies… and FOMO

The latest news comes shortly after a member of the British Parliament pointed out major difficulties in the process of registering crypto firms under the FCA’s AML regulations in late May. Economic secretary John Glen elaborated that FCA was not able to process and register all applications by its previous deadline due to a significant number of firms failing to adopt robust AML control frameworks as well as employ proper staff.