As we usher in a near year, resolutions and renewed commitments, our daily lives, and the technologies we use are also seeing the light of new possibilities.
There’s no doubt in the minds of financial organizations and anti-laundering regulators that Know Your Customer (KYC) verified accounts prevent fraudulent activity– and that’s exactly the problem.
Today, the Select Subcommittee on the Coronavirus Crisis, chaired by Rep. James E. Clyburn, released a 
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Digital Identity, Privacy, KYC, AML/ATF
Whispers of Ancient Wisdom: Crypto and CBDCs
Tristram for Bitvo | Feb 24, 2023
What is civilization? The answer, of course, is highly contextual. Your answer will be based on what you believe.
- You may have been taught that civilization was a progression from hunter-gatherer to agricultural revolution to industrial revolution. And this progression is precisely the narrative behind the concept of the Fourth Industrial Revolution. In this version, the state is the ultimate form of civilization. Here, people are units in the vast enterprise of the nation. This managed economic model is the idea behind the CBDC (Central Bank Digital Currencies).
- On the other hand, we might have another vision of civilization. This idea of civilization is that human beings have always been intelligent and sophisticated in their political and economic arrangements. In this vision, people assemble, debate, and structure their associations in a way that counteracts the various ills of central authority. Authority is tempered with various informal checks and balances.
- These are like the core principles of crypto. And in 2023, we are seeing the start of the existential battle for the world play out. CBDCs are a visible manifestation of this battle. And the appearance of crypto represents something much deeper than merely a form of currency or payment system. It could be argued that it’s a reflection of ancient wisdom.
See: Signal Boss Warns The Company Will Leave the UK If Laws Weaken End-to-end Encryption
- CBDCs are a digital control grid: A Central Bank Digital Currency is a centralized control grid controlled by the central bank of a nation. It is designed to facilitate trade and remittances. But it is also designed to express power through the ability to control how and where remittances can be used and exchanged.
- This isn’t cash converted into electronic money.
- This is an entire system of governance facilitated by digitizing value exchange and placing it in control of one entity. It’s a digital centralized control grid. Augustin Carstens of the BIS (Bank of International Settlements) has said so publicly.
- While it will look like each country is developing a separate fiat like CBDC, it’s also programmable money. Which begs the question, how hard would it be to convert every national CBDC into one supranational CBDC under the control of the BIS?
- Crypto, by design, is the antithesis of a control grid: Crypto gives users the ability to opt out of the national payment infrastructure. You can exchange value and interact freely with whomever you please, when and wherever you please. As a result, the user is avoiding numerous toll booths in various peer-to-peer exchanges. The system can be utilized as a storage system or a payment system allowing you a certain freedom.
- Crypto also gives you the option to participate in whatever project you want and engage with that community. Or choose to participate in multiple projects and communities simultaneously.
- It represents a new approach to financial literacy.
- It can be used as a form of pure financial independence through self-custody. Otherwise known as being your own bank.
- And there is the concept of going to crypto school. You are learning the concepts of caveat emptor and how to employ a fiduciary standard to your own financial interactions.
See: NBA Top Shot NFT Case: Judge Says May Have to Register with Regulators
- Freedom is ancient wisdom: In the book The Dawn of Everything: A New History of Humanity, David Graeber and David Wengrow take you on a journey of ancient peoples and traditions. They ask important questions about the origins of equality, freedom, and the state. As I read this book, I thought about how crypto, in a sense, embodies some of the core principles of the ancient Americas. Although the narratives and arguments around crypto have at times muddied the core principles of the innovation by focusing on the pursuit of capital gains.
- The book describes three specific rights that the various people of the Americas held up to the 17th century. Wengrow and Graeber described these rights as “the freedom to relocate or move away from one’s surroundings, the freedom to disobey orders and commands given by others, and the freedom to shape entirely new social realities or to shift back and forth between different ones.”
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Signal Boss Warns The Company Will Leave the UK If Laws Weaken End-to-end Encryption
The Guardian | Dan Milmo | Feb 24, 2023
Image: Unsplash/Tobias Tullius
The head of the messaging app Signal has warned that it will quit the UK if the forthcoming online safety bill weakens end-to-end encryption.
- Asked by the BBC if the bill could jeopardise Signal’s ability to operate in the UK, Meredith Whittaker said: “It could, and we would absolutely 100% walk rather than ever undermine the trust that people place in us to provide a truly private means of communication. We have never weakened our privacy promises, and we never would.” Whittaker:
- it was “magical thinking” to believe we can have privacy “but only for the good guys”, adding that the bill was an example of this thinking. She said: “Encryption is either protecting everyone or it is broken for everyone.”
- Also criticised a system called client-side scanning, where images are scanned before being encrypted. In 2021 Apple was forced to pause its client-side scanning plans, which would have involved the company scanning user photos before they are uploaded to its image-sharing service.
- Whittaker said such a system would turn everyone’s phone into a “mass surveillance device that phones home to tech corporations and governments and private entities”. She added that technological “back doors” into encrypted services could be hijacked by “malignant state actors” and “create a way for criminals to access these systems”.
See: 5 Billion Profiles: Class Action Lawsuit Accuses Oracle of Privacy Breach and “Global Surveillance”
- The bill has been criticised by privacy campaigners for a provision allowing Ofcom, the communications watchdog, to order a platform to use certain technologies to identify and take down child sexual exploitation and abuse material. It also requires tech firms to make their “best endeavours” to deploy new technology that identifies and removes such content.
- Privacy advocates warn the bill could force encrypted messaging services such as Signal, WhatsApp and Apple’s iMessage to monitor users’ messages and create vulnerabilities in their platforms that could be exploited by rogue actors and governments.
- On the other hand: A Home Office spokesperson said the online safety bill, which is due to become law this year, does not ban encryption. “The online safety bill does not represent a ban on end-to-end encryption but makes clear that technological changes should not be implemented in a way that diminishes public safety – especially the safety of children online. It is not a choice between privacy or child safety – we can and we must have both.”
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Meta Agrees to $725 Million Class Action Settlement in Cambridge Analytical Scandal
CPO Magazine | Scott Ikeda | Jan 4, 2023
Image: Pexels/Pixabay
The 2018 Cambridge Analytica scandal was perhaps the biggest single event to move online data privacy into mainstream conversation, and Facebook spent 2019 being fined by various government regulatory bodies over it.
- The Cambridge Analytica scandal centered on the firm’s work for the 2016 presidential campaign of Donald Trump.
- The company identified a loophole in the Facebook API that allowed it to access profile information and the “likes” of mass quantities of platform users that it otherwise would not have had access to.
- A psychological profile test created by the company was taken by about 300,000 people, but those who took it were unwittingly granting the company access to the profile information and activity of their full network of platform friends as well.
- Scandal saw Meta CEO Mark Zuckerberg brought before Congress for an intense questioning session, which culminated in a string of fines from federal agencies (and regulatory bodies in other countries). The largest individual payment was $5 billion to settle an FTC probe, a massive overpayment based on the initial proposed fine amount but one that guaranteed Zuckerberg and other executives would not face personal liability.
See: Podcast: Whistleblower testifies about Facebook’s amplification algorithm and misleading the public
- Up to 87 million Facebook accounts had user data inappropriately accessed as the research firm leveraged a weakness in the platform’s API to harvest information that was not meant to be available to the general public.
- Meta has agreed to pay $725 million to settle a class action suit. Meta reportedly agreed to settle the suit in August, but terms have only recently been made available to the public.
- As to what Facebook users can expect to receive if the settlement is approved, after attorney fees (expected to be about 25%) the remaining amount is set to be divvied up between an estimated 250 to 280 million eligible platform users. The actual amount will depend on how many of those users file claims, which could lead to each user receiving as little as a few dollars in compensation.
- The company continues to face other privacy-related difficulties, however; it just recently reached a $90 million settlement in another case involving its use of cookies and embedded “like” buttons to track users around the web without their full knowledge.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Will 2023 Deliver the Promise of a Fully Immersive Internet?
Monaco Voice | David Lucatch | Jan 7, 2023
As we usher in a near year, resolutions and renewed commitments, our daily lives, and the technologies we use are also seeing the light of new possibilities.
- Early on Web 1, marketers learned very quickly that they could trade information, technology, and services for a user’s personal information and data, and that trade has been more valuable than gold. Data is truly portable and could be easily combined and analyzed to create even more valuable insight that an organisation could then use to deepen relationships with its users and create monetary opportunities for itself. Individuals cared little about who had the information and what they were doing with it, as long as they got something for free.
- This made smart corporations very, very rich and there were little in the way of regulations for online privacy or data protection and organisations around the world expanded and exploited a user’s private and personal information and data as they saw fit.
See: Connected Metaverse Platforms Coming to TV with Oorbit and LG Partnership
- Then along comes Web2 and the advent of social media and the opportunity to find out what a person was doing that moment, what they like, who they liked and what they were willing to tell you, give you, recommend, along with the opportunity to gather, process and use that data, exploded. This also came with a dark side, as a user could be who they said they were, or anyone else, good, or bad, have multiple and fake accounts, bots began to appear and so did online fraud in a big way.
- Users could say, generally, whatever they wanted, without retribution. Corporations who used these details grew exponentially as the quest for data and how to micromanage it, and extracting the maximum value, became paramount.
- In 2015, that all started to change with the EU’s General Data Protection Regulation, or GDPR, as companies started to have immense responsibility for how, when and what they could do and were doing, with a user’s data, and users started to have rights as well.
- 2022: Computing power, communications, and our portable devices also became faster, smarter, and more immersive. A new Internet, the one talked about for years, started to take shape, and by 2022, many countries, states, and provinces had adopted consumer data rights legislation.
- The Metaverse, that promise of the fully immersive online experience, was finally on the horizon, giving rise to Web3 and the Owner Economy and the move towards responsibility and accountability blending our everyday real and virtual existences.
See: Proof of Humanity: Aftermath Islands Metaverse Launches Blockchain-based Facial Recognition
- 2023 will be the year that the real Internet will emerge – the Metaverse. While the Metaverse will evolve over the years to become a completely immersive experience allowing us to work, play, learn, earn, entertain, create, and socialize, today’s Metaverse is just the beginning.
- Together with Proof of Humanity, to faster communications and new tools and services, like Pixel Streaming which require no downloads, and everything is active from the cloud, allowing mobile phones and other portable devices to have the capabilities of more powerful gaming devices and laptops, ushering new and exciting experiences, commerce, and collaboration on a truly global scale
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Trust Fallacy: 75% of Payment Fraud in Crypto is Carried Out by KYC-verified Accounts
Crowdfund Insider | | Nov 28, 2022
There’s no doubt in the minds of financial organizations and anti-laundering regulators that Know Your Customer (KYC) verified accounts prevent fraudulent activity– and that’s exactly the problem.
- Then: In the early 1990s, governments around the globe had a growing concern about preventing the increasingly connected banking system from harboring international transfers of illicit funds. To combat this, they introduced KYC verification– a straightforward method of ensuring that the person a banker was speaking with was who they claimed to be. In practice, new banking customers had to present various documents, set forth by their local regulatory body, to open an account in their own name. In addition, it made it difficult for fraudsters using forged documentation to physically go from bank to bank.
See: Equifax Partners with Oasis Labs to Issue Anonymous KYC Credentials to DeFi and NFT Users
- Now - KYC verification in the digital era: In line with anti-money laundering (AML) frameworks, cryptocurrency-related organizations, such as marketplaces and trading platforms, are considered a money service business (MSB) by the US government. As such, MSBs are legally required to KYC any account that reaches a daily trading threshold. In the United States, this limit is currently $10,000 per month and above.
- BUT...Payment fraud and money laundering are not the same, and preventing crime by treating them as such is a fool’s errand. the data points to something that many in anti-fraud departments already know– KYC verification no longer serves as an anti-fraud measure.
- How fraud works: A legal resident of a foreign country can open a KYC-verified account by presenting legitimate government-issued documents, then selling their login information on the Dark Web. One person can open multiple accounts per day without ever needing to leave the comfort of their own home. These fraudsters play off two key factors:
- The first is the ease of opening accounts online instead of physically traveling to bank branches makes this illegal act scaleable. Not only do they never need to ever meet a banking representative face to face, but they also don’t even need to be in the same country.
- It is cost-effective, and they can spoof an IP address as an alibi. If they are ever questioned, they can say it wasn’t them and their information was stolen. While their account may be automatically closed, their name remains clean.
- 75% of payment fraud in crypto is carried out by KYC-verified accounts.
See: Know Your Customer – and your Obligations – in the age of Real-Time Rails and Open Banking
- Solution: machine learning technology allows organizations of all sizes to implement AI-driven systems that can identify fraudsters immediately, saving businesses money and making it annoying for them to return. By creating a space that is unwelcome for fraudsters, companies can avoid chargebacks and boost approval rates to 98%, all while reducing costs, operating expenses, and ensuring a more welcoming customer experience for those who mean no harm.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Imminent Litigation Challenges of the Metaverse
Blakes | Karine Russell and Christopher DiMatteo | Nov 23, 2022
Image: Unsplash/Javier Peñas
While a virtual-reality parallel universe is likely several years away, entirely new areas of law have developed to address the online world. Cyberattack or data breach class actions have become common.
- Privacy litigation: If the metaverse develops as anticipated, it will involve the collection of an unprecedented amount of data about users. Platforms could (as they do now) collect data about what users buy in the metaverse, what they look at, and their conversations with other users. However, because a user’s access to the metaverse would be through a headset, much more data could be collected – for example, relating to user movements, physiological responses and perhaps even brainwaves – that will give platforms a deeper understanding of their users’ thought patterns and behaviours.
- Tort of intrusion upon seclusion where a defendant intentionally intrudes into the plaintiff’s private affairs in a manner that would be highly offensive to a reasonable person. In addition to a data breach scenario, it is possible to envision other metaverse cases of intrusion upon seclusion. If it is possible to buy virtual real estate in the metaverse, for example, a defendant could be liable for snooping in a plaintiff’s virtual home.
- Could a metaverse operator be liable for negligently failing to prevent a cyberattack that resulted in the compromise of user data?
- If a metaverse user breaches the privacy of another user, could the platform be liable for failing to prevent the breach?
See: Proof of Humanity: Aftermath Islands Metaverse Launches Blockchain-based Facial Recognition
- Product liability: The metaverse is projected to result in a vast market for virtual and physical products available for purchase and use by customers. Accordingly, developers, manufacturers, licensors, vendors and others in the industry may be at risk of metaverse-related product liability claims brought by metaverse participants and users of these products.
- claims could result from scenarios where individuals sustain personal injuries while immersed in the virtual or augmented reality of the metaverse world
- property damage or economic loss claims could arise where participation in the metaverse or use of related hardware gives rise to an incident that destroys property. Metaverse users may also be sued by other users for their conduct in the metaverse as it relates to another person or avatar.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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US Subcommittee on Covid Releases Staff Report: How Certain Fintechs Facilitated Fraud in the Paycheck Protection Program
US House Subcommittee on Covid | Release | Dec 1, 2022
Today, the Select Subcommittee on the Coronavirus Crisis, chaired by Rep. James E. Clyburn, released a staff report detailing the poor performance of many financial technology companies (fintechs) in administering the nation’s largest pandemic relief program, the Paycheck Protection Program (PPP)—may have themselves committed PPP fraud
- In May 2021, the Select Subcommittee initiated an investigation into the role of fintech companies Kabbage, Inc. and Bluevine and partner banks Cross River Bank and Celtic Bank in facilitating PPP fraud following public reports they were linked to disproportionate numbers of fraudulent loans. The investigation was expanded in November 2021 to include fintech start-ups Blueacorn PPP, LLC, and Womply, Inc., after an analysis determined significant percentages of PPP loans facilitated by the companies had indicators of fraud.
- The investigation was expanded in November 2021 to include fintech start-ups Blueacorn PPP, LLC, and Womply, Inc., after an analysis determined significant percentages of PPP loans facilitated by the companies had indicators of fraud.
See: Consumer Protection: Fintech Complaints Have Been Rising
Chairman Clyburn released the following statement about today’s report:
“As today’s report details, many fintechs, while promising to help disburse billions of Paycheck Protection Program dollars to struggling small businesses efficiently and expeditiously, refused to take adequate steps to detect and prevent fraud despite their clear responsibility to safeguard taxpayer funds. Even as these companies failed in their administration of the program, they nonetheless accrued massive profits from program administration fees, much of which was pocketed by the companies’ owners and executives. On top of the windfall obtained by enabling others to engage in PPP fraud, some of these individuals may have augmented their ill-gotten gains by engaging in PPP fraud themselves.
“We must learn from this inexcusable misconduct to erect guardrails that will help ensure that federal programs—including emergency assistance programs in future crises—are administered more effectively, efficiently, and equitably while keeping waste, fraud, and abuse to an absolute minimum. Based on our initial findings, I have asked the SBA and SBA OIG to conduct further investigation into these companies and pursue all appropriate remedies, and I have informed DOJ that some of our findings may warrant its attention.”
See: UK Alternative Lenders Funding Delivery Performance to Small Businesses During COVID
- Today’s staff report is entitled “‘We Are Not the Fraud Police’: How Fintechs Facilitated Fraud in the Paycheck Protection Program” and is available in full here. The report reveals the following key findings: Fintechs and Lenders Observed Significant Fraud in the PPP, Which They Attributed to Program Mismanagement as They Sought to Evade Responsibility
- Blueacorn Took Only Minimal Steps to Prevent Fraud in Its Facilitation of Billions of Dollars in PPP Loans, While Abusing the Program to Enrich Its Owners
- Womply’s PPP Fraud Screenings Failed to Prevent “Rampant Fraud”—and Were Accompanied by Questionable Business Practices—Despite Generating Over a Billion in Profits
- Capital Plus, Harvest, and Other Fintech-Partnered Lenders Conducted Little Oversight over Womply and Blueacorn’s Activities, Allowing Fraud to Infiltrate The PPP
- Kabbage’s PPP Activities Illustrate that the PPP Lacked Incentives for Fintechs to Implement Strong Fraud Prevention Controls or Appropriate Borrower Servicing
- Bluevine Initially Faced Significant Fraud Rates, but Its Longstanding Partners Intervened to Improve Fraud Prevention Over the Course of the Program
- Based on the findings, the report includes 11 recommendations to address PPP fraud and improve future programs.
- It urges the SBA to consider carefully whether businesses like fintechs that are not subject to traditional financial regulations should be permitted to play a part in future federal lending programs, and recommends that Congress take these factors into account in considering future legislation.
View the original release --> here
Download the 130 page PDF full Staff Report --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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