Cryptocurrency Red Flags: Using FATF and FinCEN Guidance to Spot Crypto Crimes
OVERVIEWFinancial Action Task Force (FATF) and FinCEN provided guidance in 2020 for financial institutions in order to help those institutions identify and mitigate virtual currency risks. Financial crimes specialists can use these cryptocurrency red flag indicators of money laundering and terrorism financing to detect and report suspicious activity. Cryptocurrency-related risks are not limited to virtual asset service providers. In September 2020, FinCEN Director Kenneth Blanco stated, “These risks are not unique to money services businesses or virtual currency exchangers; banks must be thinking about their crypto exposure as well. These are areas your examiners, and FinCEN, will ask you about when assessing the effectiveness of your AML program.” The reality is that all banks process crypto payments, as virtual assets have become increasingly intertwined with traditional finance over the course of the last decade. A thorough knowledge of cryptocurrency red flags, combined with the ability to identify and monitor all virtual currency transactions within an organization, lays the groundwork to fully embrace this asset class without taking on undo risk.