Binance Increases Anti-Fraud Measures With Chainalysis Partnership

Binance is using Chainalysis’ AML/KYC product to grapple with multiple international jurisdictions’ regulations.

Crypto compliance provider and research firm Chainalysis announced it had partnered with exchange Binance in a press release Wednesday, Oct. 17, in order to improve its detection of suspicious transactions.

Binance, currently the world’s largest cryptocurrency exchange by volume, continues to expand into various international markets, being required to comply with each jurisdiction’s anti-money laundering (AML) and know-your-customer (KYC) rules.

Chainalysis eases this process, the firm claims, through the use of real-time monitoring to track the provenance of each transaction made on Binance’s platform.

The solution, known as know-your-transaction (KYT), saw its initial release in April, the press release notes.

“Cryptocurrency businesses of all sizes face the same core challenge: earning the trust of regulators, financial institutions and users,” Jonathan Levin, co-founder and COO of Chainalysis commented in the press release, adding:

“We expect many to follow Binance’s lead to build world-class AML compliance programs to satisfy regulators globally and build trust with major financial institutions.”

2018 has seen various well-known exchange platforms — including P2P ecosystem Localbitcoins — introduce additional compliance measures, some of which have jarred with cryptocurrency users that value anonymity. As well, in September, crypto exchange ShapeShift introduced a membership program that will gradually become mandatory and require the provision of “basic” personal information.

Explaining its own implementation of AML and KYC rules, Binance implied such measures were necessary to permit further expansion.

“Our vision is to provide the infrastructure for a blockchain ecosystem and increase the freedom of money globally, while adhering to regulatory mandates in the countries we serve,” Binance CFO Wei Zhou said.

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Crypto Exchange Hack Losses Already 250% Higher Than 2017, Q3 Report Shows

Losses caused by crypto exchange hacks hit $927 million in the first nine months of 2018, already 250 percent higher than throughout all of 2017.

Losses caused by cryptocurrency exchange hacks hit $927 million in the first nine months of 2018, already 250 percent higher than throughout all of 2017, Reuters India reports October 10.

Reuters cites a Crypto Anti-Money-Laundering (AML) report for Q3 2018 from crypto intelligence firm CipherTrace, which pitted the $927 million figure against last year’s $266 million total.

According to the report, “smaller” thefts of crypto worth between $20-60 million are also steadily rising, hitting $173 million in the third quarter.

Reuters interviewed CipherTrace CEO Dave Jevans, who is also chairman of the global anti-cybercrime organization, the Anti-Phishing Working Group.

Jevans told the agency that the real figures are likely to be 50 percent higher than those that were successfully traced in the report, emphasizing that CipherTrace is “aware of” over $60 million stolen in crypto that was not reported.

Jevans underscored that many leading crypto exchanges operate within countries that still have “weak” AML regulations, and estimated that $2.5 billion has been laundered in Bitcoin (BTC) since 2009, noting:

“The regulators are still a couple of years behind because there are only a few countries that have really applied strong anti-money laundering laws.”

To reach the $2.5 billion estimate, CipherTrace is said to have monitored around 350 million transactions on the top twenty trading platforms by global traded volumes, correlating 100 million of these with “highly suspect” or “criminal” counterparties that matched its own criminal activity data records.

“All exchanges get these money-laundered funds. You really can’t stop them,” Jevans is quoted as saying. The report is said to have indicated that these top exchanges — which CipherTrace declined to name — have been used to purchase 236,979 BTC worth of “criminal services,” worth around $1.56 billion as of press time. Jevans added:

“We learn about the criminal stuff often times after it actually happened. So there’s no way to know in real time. You can know 80-90 percent of the time, but it’s impossible to know 100 percent.”

2018 started with the industry-record-breaking $532 million hack of Japanese crypto exchange Coincheck, which seems to account for over half of CipherTrace’s rolling 2018 figure.

Earlier today, Cointelegraph reported that another hacked Japanese exchange, Zaif — which suffered a theft resulting in losses of crypto worth around $59.7 million this September — has just released its official plan to provide financial support for affected customers’ assets.

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Hodler’s Digest, September 16-23: Elon Musk Wants Advice on Twitter Crypto Scammers, the US SEC Wants Comments on BTC ETFs

A Japanese cryptocurrency exchange is hacked of almost 6,000 bitcoins, and Elon Musk turns to Dogecoin creator to get rid of Twitter crypto scammers

Coming every Sunday, the Hodler’s Digest will help you to track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions, and much more — a week on Cointelegraph in one link.

Top Stories This Week

Japanese Cryptocurrency Exchange Zaif Hacked Of Reported 5,966 Bitcoins

As a result of a security breach on September 14, hackers have managed to steal 4.5 billion yen from Japan’s Zaif cryptocurrency exchange, as well as 2.2 billion yen from the assets of the company, with total losses amounting to 6.7 billion yen or around $59.7 million. Tech Bureau Inc, which operated Zaif, stated this week that the exchange detected a server error on September 17, after which Zaif suspended deposits and withdrawals. On September 18, the exchange realized that the error was a hack, and reported the incident to Japan’s financial regulator, reporting losses of 5,966 bitcoins (BTC) in addition to some Bitcoin Cash (BCH) and MonaCoin (MONA).

SpaceX CEO Elon Musk Turns To Dogecoin Creator To Stop Crypto Scammers

Elon Musk, the CEO of SpaceX and Tesla Elon Musk asked Jackson Palmer, the creator of Dogecoin (DOGE), to help him combat “annoying” cryptocurrency scammers on Twitter this week. Musk, directing his tweet at Palmer, asked for help getting rid of scam spammers, to which Palmer replied by sending Musk a short script in direct messages to try to fix the problem.

US SEC Postpones VanEck Bitcoin Exchange Traded Fund, Asks For Further Comments

The U.S. Securities and Exchange Commission (SEC) has requested further comments regarding its decision on the listing and trading of VanEck and SolidX’s Bitcoin (BTC) exchange-traded fund (ETF), which is expected to list on the CBOE BZX Equities Exchange (BZX). In a notice, the SEC asks for additional comments from interested parties addressing the sufficiency of the BZX’s statement in support of the proposal. In particular, the SEC is seeking comments on eighteen key issues, among which are commenters’ views on BZX’s assertions that BTC “is arguably less susceptible to manipulation than other commodities that underlie exchange-traded products (ETPs).”

New York Attorney General Report: Crypto Exchanges Vulnerable To Manipulation

A new report published by the New York Attorney General’s office states that cryptocurrency exchanges are vulnerable to manipulation, conflicts of interest, and other consumer risks. The findings, part of the “Virtual Markets Integrity Initiative” that consisted in surveying 13 cryptocurrency exchanges, found that an absence of standard methods for auditing virtual assets results in the lack of a consistent and transparent approach to independently auditing digital currency traded on exchanges.

Researchers Explain How Gemini Dollar Transactions Can Be Changed Or Paused

The implementation of the recently launched Gemini dollar (GUSD) stablecoin can be completely changed by a Gemini custodian every 48 hours, according to a study authored by blockchain researcher Alex Lebed and crypto consultant Alexey Akhunov. In the study, the authors review the code of the GUSD’s smart contract in order to demonstrate that the implementation of the Gemini USD can become non-transferrable or frozen at any moment, which is noted in the Gemini dollar’s white paper.

 

 

Most Memorable Quotations

“The data age is major opportunity for manufacturers to reform the industry. But blockchain and IoT will be meaningless tech unless they can promote the transformation of the manufacturing industry, and the evolution of the society towards a greener and more inclusive direction,” — Jack Ma, founder of Chinese e-commerce giant Alibaba

“Cryptocurrencies are perfect, but are used for bad purposes today, so [one has to be] careful. Blockchain and distributed ledger technologies are also perfect, they are big, big tools,” — Francisco Gonzalez Rodriguez, executive chairman of multinational Spanish banking group Banco Bilbao Vizcaya Argentaria (BBVA)

“As the government and regulators decide whether the current Wild West situation is allowed to continue, or whether they are going to introduce regulation, consumers remain unprotected,” — UK Treasury Committee on cryptocurrency regulation

Laws And Taxes

Ukrainian Parliament Seeks To Tax Cryptocurrency Assets With New Bill

Ukraine’s parliament has proposed a bill that would tax operations with crypto assets with a five percent tax on individuals and legal entities operating with virtual currency assets, such as cryptocurrencies and tokens. Starting Jan. 1, 2024 crypto-related profits by businesses would be taxed at 18 percent, which is a basic rate for corporate and personal income tax in Ukraine. According to the lawmakers, the introduction of this tax would make it possible to “draw 1.27 billion hryvnia ($43 million) to the budget annually from 2019-2024.”

US Lawmakers Send Open Letter To IRS Asking For Crypto Taxation Clarity

U.S. lawmakers have called on the Internal Revenue Service (IRS) to issue clarified and “comprehensive” crypto taxation guidance in an open letter this week. The representatives deem that the IRS has had “more than adequate time” to work through complexities after its preliminary rules were issued four years ago, arguing that while the IRS has proactively continued to remind taxpayers of the penalties for non-compliance with its guidance, its failure to introduce a more robust taxation framework “severely hinders taxpayers’ ability” to meet their obligations.

Financial Task Force Says International AML Standards For Crypto Coming Soon

The Financial Action Task Force (FATF) said it is getting closer to the establishment of a global set of anti-money laundering (AML) standards for cryptocurrencies. The agency’s president Marshall Billingslea reportedly said that he expects the coordination of a series of standards that will close “gaps” in global AML standards at an FATF plenary in October. At that time, the FATF will purportedly discuss which existing standards should be adapted to digital currencies, as well as revise the assessment methods of how countries implement those standards.

Adoption

Binance To Soon Begin Private Beta Testing Of Crypto-Fiat Singapore Exchange

Binance, the largest global crypto exchange, will soon start private beta testing a crypto-fiat exchange in Singapore, as Binance co-founder and CEO Changpeng Zhao (CZ) tweeted this week. According to CZ, the testing will be launched on September 18, and while no further details have been specified, the crypto-fiat Singapore-based exchange will presumably support the local Singapore dollar.

US PNC Bank To Use RippleNet For Customers’ International Payments

PNC, which is ranked among the top ten U.S. banks with 8 million customers and retail branches in 19 states, will use RippleNet to process international payments for its customers. A particular PNC unit — Treasury Management — will use Ripple’s blockchain solution xCurrent to speed up overseas transactions held by U.S. commercial clients. Ripple emphasises that xCurrent will allow PNC business clients to receive payments against their invoices instantly, changing their approach to managing both accounts and their working capital.

Ripple Executive Hints Of xRapid Launch Coming Soon

Head of regulatory relations for Asia-Pacific and the Middle East at Ripple Sagar Sarbhai told CNBC this week that Ripple has been making strides toward the launch of its product xRapid, noting that a commercial version of its payment platform could launch “in the next month or so.” The xRapid product is a real-time settlement platform designed to speed up international payments that addresses the issues of minimizing liquidity costs and making cross-border payment transactions faster.

Canadian Coinsquare’s Investment Subsidiary Launches Two Tech-Based ETFs

Coinsquare’s subsidiary — Coin Capital Investment Management — has reportedly become the 30th ETF operator in Canada, with the launch of the Coincapital STOXX Blockchain Patents Innovation Index Fund (LDGR) and the Coincapital STOXX B.R.AI.N. Index Fund (THNK) on the Toronto Stock Exchange (TSX). LDGR is a research-focused ETF that intends to provide investors with global equity securities of firms that invest in the development of blockchain technologies, while THNK, aims to provide investments in global equity securities concentrated around four “megatrends” in technology — biotechnology, robotics, artificial intelligence (AI), and nanotechnology.

Brazil’s Largest Brokerage To Launch Bitcoin, Ethereum Exchange

The largest brokerage in Brazil, Grupo XP, will enter the crypto space by launching an exchange for Bitcoin (BTC) and Ethereum (ETH) in the near future called XDEX with around forty employees. Grupo XP is the biggest financial group in Brazil, comprising companies with various business models. XP has reportedly set a goal to have $1 trillion reais ($245 billion) under custody by 2020, which is four times what the company expects to raise by the end of this year. In addition, XP will launch a bank in the next few months.

Mergers, Acquisitions, And Partnerships

Crypto Exchange Huobi Joins Russian Bank Innovation Fund

Cryptocurrency exchange Huobi has joined Russia’s VEB Innovation Fund to share notes on crypto regulation. Russia’s cryptocurrency regulation draft law, which passed in a first reading in May, are tentatively set to be passed in October. One of the main goals of the partnership with Huobi and the VEB Innovation Fund is to draw on the crypto regulation experience gained by Huobi and to apply it in Russia, especially for adjusting the legal framework on digital assets.

Switzerland And Israel Agree To Share Blockchain Regulation Experience

Switzerland and Israel have agreed to share their experience on regulating the blockchain industry.Switzerland’s Minister of Finance Ueli Maurer and State Secretary for International Financial Matters Joerg Gasser have recently visited Israel to officially request access to the local markets for Swiss banks.As Gasser told Reuters, by the end of 2018 he plans to prepare a report on blockchain regulation for the Israeli officials that would outline general recommendations.

R3, Dutch Digital Security Company Partner For Blockchain-Based IDs

Blockchain consortium R3 has deployed a digital ID application developed by Dutch digital security company Gemalto on the latest version of the Corda Platform. The parties now expect to conduct several pilots of the application — called the Trust ID Network —  that will reportedly be launched later this year. The application enables digital service providers to operate “fully verified and secured” user personal data by creating a Digital ID, allowing consumers to register within various banking, e-commerce, and e-government services while avoiding repeated due diligence procedures.

Poland’s Largest Bank Partners With Coinfirm To Launch Blockchain Solution

Poland’s largest bank , PKO Bank Polski, will launch a blockchain solution for its customer documents via a partnership with UK-based Coinfirm “in the coming days,” the parties confirmed this week. As part of a drive to enhance security of customer data, PKO Bank Polski will use Coinfirm’s Trudatum to provide blockchain-issued paperwork to its some five million account holders.

Funding Rounds

Chinese Blockchain Fund To Raise Almost $13 Million For Japanese Stablecoin

Yao Yongjie, whose $1.5 billion Grandshores Blockchain Fund has the backing of well-known Chinese Bitcoin investor Li Xiaolai and the local government of the city of Hangzhou, is seeking to create up to three new stable cryptocurrencies (stablecoins) pegged to various fiat currencies. The first reported stablecoin project would involve the Japanese yen, and a second company Yao chairs, Hong Kong-based Grandshores Technology, aims to raise HK$100 million ($12.7 million) in financing for the cryptocurrency.

Winners And Losers

The crypto markets have experienced a comeback this week, with Bitcoin trading for around $6,756 and Ethereum at $245. Total market cap is now around $228 billion.

The top three altcoin gainers of the week are Carebit, Bob’s Repair, and the Ultimate Secure Cash. The top three altcoin losers of the week are Protean, Abulaba, and Bitmark.

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

FUD Of The Week

Bitcoin Core Updates Fixes Vulnerability That Could “Take Down The Network”

Bitcoin Core has released an update following the recent detection of a vulnerability in the software: Bitcoin Core 0.16.3 was released with a fix for a denial-of-service (DoS) vulnerability.The vulnerability could reportedly cause a crash of older versions of Bitcoin Core if they attempted processing a block transaction that tries to spend the same amount twice. According to Casaba Security co-founder Jason Glassberg, the recent vulnerability found on Bitcoin Core software could “take down the network.” He explained that the network crash “does not appear” to target users’ wallets, but would rather “affect transactions in the sense that they cannot be completed.”

China’s Central Bank Warns Public Of Risks With ICOs, Crypto Trading

The People’s Bank of China has issued a new public notice this week “reminding” investors of the risks associated with Initial Coin Offerings (ICOs) and crypto trading. Today’s notice ,released from the bank’s headquarters in Shanghai, censures the “unauthorized” and “illegal” ICO financing model for posing a “serious disruption” to the “economic, financial and social order.”

German Finance Minister Doubts Whether Crypto Could Ever Replace Fiat

Germany’s Finance Minister Olaf Scholz doubted publicly this week that cryptocurrencies can currently replace traditional fiat currencies. Scholz compared cryptocurrencies to the tulip fever bubble in the Netherlands in the 17th century saying, “and the danger is great that there will be such a tulip inflation,” noting that cryptocurrencies should also be closely observed by regulators, as they could be used for terrorist financing, money laundering or other criminal activities.

Reuters: Brazilians Antitrust Regulator To Inspect Six Major Banks Over Crypto Trade

Brazil’s antitrust regulator, the Administrative Council for Economic Defense (CADE), is reportedly inspecting six major national banks for alleged monopolistic practices in the crypto space, according to Reuters. The probe, which was initiated n the request of the Brazilian Blockchain and Cryptocurrency Association (ABCB) following several complaints, will determine whether the country’s largest banks closed the accounts of brokerages trading in Bitcoin.

Malware Reportedly Stolen From NSA Contributes To Skyrocketing Cryptojacking

Leaked code targeting Microsoft Systems which hackers allegedly stole from the U.S. National Security Agency (NSA) sparked a fivefold increase in cryptocurrency mining malware infections, according to a report from the Cyber Threat Alliance. Eternal Blue, which was reportedly stolen and then used for the infamous cyberattacks WannaCry and NotPetya, has been used by hackers to gain access to computers in order to covertly mine for cryptocurrency, with detections up 459 percent this year.

Prediction Of The Week

Bitcoin To See 30 Percent Rally By End Of 2018, Says Mike Novogratz

Billionaire investor Mike Novogratz predicted this week on Twitter that Bitcoin will see a 30 percent rally by the end of 2018. Stating that the $8,800 to $10,000 threshold would be the the defining moment for institutional investors to enter the space, Novogratz claimed that it is impossible for BTC to not reach the $8,800 to $10,000 price points by the end of the year.

Best Features

Bitcoin Miners Flock To New York’s Remote Corners, But Get Chilly Reception

The New York Times visits Massena — a region formerly filled with American corporations offering unions jobs — that now has one of the state’s highest unemployment rates. However, as the Time notes, the “abundant, cheap electricity flowing from a dam in the St. Lawrence River,” has brought in the cryptocurrency mining companies, bringing mixed reactions from the area’s residents.

No One Knows What to Call the Hottest Cryptocurrency

After Ripple (XRP) saw an unprecedented amount of growth this week, the question arose: what is it really called — Ripple or XRP? While Ripple Labs Inc. notes that the tokens are different than its open-source network, the token did used to be referred to as “ripples (XRP).”

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IMF Urges Marshall Islands to Reconsider Adopting Digital Currency as Second Legal Tender

The IMF has warned the Marshall Islands about the risks of adopting a digital currency as a second legal tender, urging it to “seriously reconsider.”

The International Monetary Fund (IMF) has warned the Republic of the Marshall Islands (RMI) about the risks of adopting a cryptocurrency as a second legal tender, according to an official press release published on September 10.

In the report, the U.S.-based agency backed by the United Nations addresses the government of the Republic of the Marshall Islands, stating that the introduction of digital currency as an official form of legal tender will pose risks to the country’s financial integrity, as well as relationships with foreign banks.

By adopting digital currency as a second official currency after the U.S. dollar, the Bank of Marshall Islands (BOMI) — the only local commercial bank of the country — will elevate the risk of losing “the last U.S. dollar correspondent banking relationship (CBR)” as a result of heightened diligence by banks in the U.S., the statement says.

Since the Marshall Islands are “highly dependent on receiving and spending U.S. grants,” the IMF states that the loss of important banking relationships could harm the country’s economy.

Moreover, the IMF believes that the costs of adopting cryptocurrency, such as the development and enforcement of anti-money laundering (AML) and counter financing of terrorism (CFT) policies, are “considerably smaller” than any potential financial gains:

“The potential benefits from revenue gains appear considerably smaller than the potential costs arising from economic, reputational, AML/CFT, and governance risks. In the absence of adequate measures to mitigate them, the authorities should seriously reconsider the issuance of the digital currency as legal tender.”

The IMF urged Marshalese authorities to reconsider issuing a digital currency until the government is able to provide and implement “strong policy frameworks” in regards to economic, reputational, AML/CFT, and governance risks.

The Republic of the Marshall Islands — with a population of roughly 53,000 — first revealed plans to release its own cryptocurrency dubbed the Sovereign (SOV) in February 2018. As officials then claimed, the Sovereign currency would be “another step of manifesting [their] national liberty.” The Sovereign is set to be an alternative to the official currency of the U.S. dollar, and is planned to be distributed via Initial Coin Offering (ICO).

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Bermuda Signs MOU with Blockchain Project Shyft for $10 Mln in Economic Development

Bermuda signs memorandum of understanding with Shyft blockchain network that provides compliance and identity checks.

The Government of Bermuda has recently signed a memorandum of understanding (MOU) with Shyft network which provides blockchain-based ID solutions for Know-Your-Customer (KYC) and anti-money laundering (AML) compliant data transfers, Shyft reported in a blog post May 15.

According to the MOU, Shyft network will spend up to $10 mln on blockchain technology education and economic development. Premier and Minister of Finance of Bermuda David Burt signed the MOU, commenting that the partnership with Shyft will promote high standards of technology and regulations. Burt said that Bermuda “is able to accelerate economic growth, create jobs and attract global interest.” He stated:

“The Government of Bermuda has decided to lead the way and build interoperability into the government legislation, in essence, approach regulatory frameworks with exportability in mind… We’re leading the world in digital assets regulation, there’s no other country that provides comparable certainty and [a] progressive regulatory environment.”

The terms of the MOU state that the Toronto-based blockchain network will collaborate with the government in developing and improving “a robust legal and regulatory framework.” Shyft will also train Bermudians in blockchain technology and development through the country’s Department of Workforce Development.

While MOUs are useful instruments for showing intent and building bilateral relationships between governments and businesses, they are not legally binding. One advantage of MOUs for some governments in that, since they do not carry legally enforceable conditions, they may be issued and adopted without legislative approval.

In April, the Premier of Bermuda signed a MOU with Binance, the world’s second largest cryptocurrency exchange by market capitalization, to receive funding for educational programs related to fintech and blockchain startups. According to the MOU, Binance will provide up to $10 mln for university level training for Bermudians in the blockchain field, as well as invest up to $5 mln to support new blockchain-based firms in the country.

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Russia’s Digital Economy Bill Supported by State Duma Committee in Move Towards Crypto Regulation

The State Duma’s Committee for Legislative Work will support a digital economy initiative that will “minimize” the risks of citizens using digital assets.

Russian State Duma’s Committee for Legislative Work will support the first reading of an initiative that will add the basic norms of digital economy to the Russian Federation Civil Code.  This is the latest step on the road to regulating cryptocurrency in the country, local news outlet Izvestia reports Wednesday, May 16.

Pavel Krasheninnikov of political party United Russia and head of the Legislative Work committee, told Izvestia that the initiative aims to “minimize the existing risks of using digital objects for transferring assets into an unregulated digital environment for legalization of criminal incomes, bankruptcy fraud or for sponsoring terrorist groups.”

The initiative, which is scheduled to be considered next week, does not mean that digital currencies will now become a legitimate means of payment. Instead, a separate law developed by the Central Bank, the Ministry of Finance, and the Ministry of Economic Development will set conditions for digital currencies to be used as payment “in controlled quantities.” The initiative does assert that digital confirmation by a user in a smart contract is equal to his written consent.

Russia first prepared a bill “On Digital Financial Assets” in March of this year, which would provide federal laws governing cryptocurrencies and Initial Coin Offerings (ICO) inspired by President Vladimir Putin’s decision to begin crypto regulation on July 1.

The March 20 draft defines crypto and digital tokens are assets only to be traded on authorized exchanges, also requiring user account at crypto exchanges to comply with AML and counter terrorism financing regulations. A review draft of the bill from mid-April added that the exchange of crypto for fiat above around $9,600 will be subject to mandatory currency exchange regulation.

Igor Sudets, the director of the program “Blockchain for Lawyers” at the Plekhanov Russian University of Economics in Moscow, told Izvestia that “it is important that the crypto currency and tokens are included in the legal field of the Russian Federation”:

“On the one hand, these are opportunities that we have no right to miss. On the other hand, while they are outside the legal field, they can be used to give bribes, withdraw money in the case of bankruptcy, pay ‘black salaries, and simply get stolen – with no repercussions [for criminals].”

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