Financial Crime World

FINANCIAL CRIMES NETWORK ISSUES WARNING ON RANSOMWARE TRENDS AND ANONYMIZATION TECHNIQUES

Washington D.C., October 2021 - The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has issued a report highlighting the growing threat of ransomware attacks and the increasing use of anonymization techniques by cybercriminals.

The majority of ransom payments are still made in Bitcoin, but there has been a significant increase in requests for payment in highly anonymous coins such as Monero. Criminals are using sophisticated methods to evade tracking, including:

  • Chain-hopping: Transferring cryptocurrency between different blockchain networks
  • Mixing transactions: Combining multiple transactions together to obscure their origin

Red Flag Indicators of Suspicious Transactions

FinCEN has identified several red flag indicators of suspicious transactions, including:

  • Customers who suddenly attempt to purchase virtual assets in large amounts
  • Using a crypto asset exchange in a jurisdiction with less stringent anti-money laundering regulations

The Financial Action Task Force (FATF) published its second 12-month review on the FATF standards for virtual assets and virtual asset service providers, highlighting ongoing trends in money laundering and terrorist financing risks associated with crypto-assets. These include:

  • Regulatory arbitrage: Taking advantage of uneven global implementation of revised standards
  • Use of various tools and methods to increase anonymity, such as:
    • Tumblers and mixers
    • Anonymized coins
    • Privacy wallets
    • Chain hopping
    • Dusting
    • Decentralized finance (DeFi) platforms

Growing Trend of Peer-to-Peer Transactions

FinCEN has also warned about the growing trend of peer-to-peer (P2P) transactions between individuals without the use of regulated intermediaries. While P2P transactions are not necessarily illegal, they can be used to evade regulations and increase anonymity.

Importance of Close Monitoring and Robust AML/CFT Measures

The report emphasized the importance of close monitoring by financial institutions and virtual asset service providers to detect and prevent suspicious transactions. It also urged jurisdictions to implement robust anti-money laundering and combating the financing of terrorism (AML/CFT) measures to address the growing threat of crypto-asset-related crimes.

Response and Recommendations

In response to the report, FinCEN and the Office of Foreign Assets Control (OFAC) published an advisory highlighting red flag indicators of suspicious transactions that financial institutions should be aware of. The advisory recommended that financial institutions take measures to detect and prevent suspicious transactions, including:

  • Monitoring for unusual patterns of activity
  • Reporting suspicious transactions to relevant authorities

The report is the latest in a series of warnings from FinCEN and other regulatory bodies about the growing threat of crypto-asset-related crimes. It serves as a reminder of the importance of vigilance and cooperation among financial institutions, regulators, and law enforcement agencies to combat these threats and protect the integrity of the global financial system.