Since cryptocurrency started showing up on the radars of traditional financial institutions, for many banks, they may view every transaction with the same risk lens – high, and report the incident with a weighting more focused on virtual value alone.
But that may be a mistake, as a transaction between a brick-and-mortar bank account and a crypto exchange may be cover for a range of interlinked illicit activities, including human trafficking, if financial crime compliance professionals know how and where to look.
But from the perspective of some banks, each crypto-tinged transaction, regardless of the context provided by the customer’s know-your-customer (KYC) information – a foundational block of any institution’s anti-money laundering program – and account history, was assumed to represent the red flags of a potential crime.
Well, that is, according to at-times alarmist news articles, blog posts, and guidance from outside consultants about the supposed rampant infiltration of the crypto sector by organized criminal groups, darknet markets and malicious and malignant hacking collectives.
However, by not analyzing bitcoin transactions in the context of the account activity as a whole, financial institutions may find themselves over-escalating alerts associated with cryptocurrency.
At the same time, banks may be filing suspicious activity reports (SARs) with cryptocurrency transactions inaccurately being attributed to the wrong typologies or without even a specific typology stated – and missing underlying connections to trafficking networks.
Read more here.