Virtual Assets Red Flag Indicators
The FATF (Financial Action Task Force) has released on September 14, 2020 a new report detailing red flag indicators that can help national authorities and reporting entities detect whether virtual assets are being used for criminal activity.
According to the FATF, Virtual assets use innovative technology to swiftly transfer value around the world and have many potential benefits, including making payments faster and cheaper. Having said that, the anonymity associated with them also attracts criminals, who have used virtual assets to launder proceeds from a range of offences including drugs trade, illegal arms smuggling, fraud, tax evasion, cyber attacks, sanctions evasion, child exploitation and human trafficking.”
This report will also help VASPs (virtual asset service providers), financial institutions, DNFBPs (designated non-financial businesses and professions), and other reporting entities detect and report suspicious transactions. In addition, it provides useful information to help FIUs (financial intelligence units), law enforcement agencies, prosecutors and regulators analyse suspicious transaction reports or monitor compliance with AML/CTF controls.
Some of the key red flag indicators covered in the report include:
Technological features that increase anonymity, such as the use of P2P exchanges, mixing or tumbling services, or anonymity-enhanced cryptocurrencies
Geographical risks with countries having little or no national measures for virtual assets
Transaction patterns that are irregular, unusual or uncommon suggesting criminal activity
Transaction size and frequency with no logical business rationale
Senders or recipients profiles with irregularities observed during account creation, CDD process and potential and other unusual behaviour which can suggest criminal activity
Source of funds or wealth which can relate to criminal activity
The full report is available here.
This report complements the FATF’s June 2019 guidance on virtual assets and VASPs,