The Financial Action Task Force (FATF) has revealed the main indicators of fraudulent transactions on the cryptocurrency market.
In a recent report titled "Virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing," the inter-governmental watchdog claims that the so-called "red flag indicators" are based on more than one hundred case studies contributed by jurisdictions from 2017-2020.
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According to the regulator, suspicious transactions can be considered as follows:
- multiple high-value transactions in short succession, such as within a 24-hour period;
- to a newly created or to a previously inactive account;
- transactions to multiple accounts, especially to the ones that registered or operated in another jurisdiction;
- fast deposit & withdrawal from an exchange;
- accepting funds suspected as stolen or fraudulent;
- large initial deposit, while the amount funded is inconsistent with the user's profile;
- trading the entire balance, or withdrawing the entire balance off the platform;
- frequent transfers in a certain period of time to the same account by more than one person/large amounts or from the same IP address;
- moving a digital asset that operates on a public, transparent blockchain, such as Bitcoin, to a centralized exchange and then immediately trading it for a privacy coin;
- the use of decentralized/unhosted, hardware or paper wallets to transport assets across borders;
However, the watchdog points out that the indicators are neither exhaustive nor applicable in every situation:
"The indicators are often just one of many elements contributing to a bigger overall picture of potential money laundering or terrorist financing risk and it is important that the indicators (or any single indicator) not be viewed in isolation."
In July, iHodl reported that a multisig HD cryptocurrency wallet BitGo added support for the FATF Travel Rule.
Thus, BitGo became the first digital wallet with a support for the Travel Rule for its cold and hot wallet services by extending existing API endpoints for clients to append the additional data required under the new rule.
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