Financial Crimes Enforcement Network Issues Report on Ransomware Trends
Warning of Increased Use of Anonymity-Enhanced Coins and Virtual Assets
The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has released a report highlighting the latest trends in ransomware attacks, warning of increased use of anonymity-enhanced coins and virtual assets to evade detection.
Ransom Payments Mostly Made in Bitcoin, but Monero Use on the Rise
According to the report, the majority of ransom payments are still made in Bitcoin. However, there has been a significant increase in requests for payment in highly anonymized coins such as Monero. Criminals are using tactics such as “chain-hopping” and mixing transactions with those of others to conceal their identities and avoid tracking.
Virtual Asset Service Providers Operating in Jurisdictions with Weak Regulations
The report also notes that some virtual asset service providers (VASPs) are operating in jurisdictions with weak anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations, making it easier for illicit actors to take advantage of these weaknesses.
Red Flag Indicators of Suspicious Transactions
FinCEN has identified several red flag indicators of suspicious transactions, including:
- Customers attempting to purchase large amounts of virtual assets quickly
- Using exchanges in jurisdictions with less stringent AML/CFT regulations
- Conducting multiple transactions involving virtual assets and cash
The agency is urging financial institutions to be aware of these trends and take steps to detect and prevent illegal activities.
Global Regulators Sound Alarm on Virtual Asset Risks
FATF Report Highlights Ongoing Risks Associated with Virtual Assets
The Financial Action Task Force (FATF) has released its second 12-month review report on the FATF standards for virtual assets and VASPs, highlighting ongoing risks associated with the use of these instruments.
Misuse of Tools and Methods to Increase Anonymity
The report notes that a large number of jurisdictions have not implemented the revised FATF standards, creating an environment conducive to regulatory arbitrage. It also warns of the misuse of tools and methods to increase anonymity, including:
- Tumblers and mixers
- Anonymity-enhanced coins
- Privacy wallets
Challenges in Implementing Effective AML/CFT Regulations
FATF has identified several key challenges in implementing effective AML/CFT regulations for virtual assets, including:
- Lack of common standards
- Need for greater cooperation between jurisdictions
Ransomware Attacks Expected to Increase in Complexity
Japanese Financial Services Agency Warns of Increased Sophistication
The Japanese Financial Services Agency (FSA) has released a report warning of increased sophistication in ransomware attacks, as criminals use advanced tactics such as “mixing” to conceal their identities and evade detection.
Risks Involved in Settlement of Funds
The report notes that the number of cases identified by VASPs is increasing, and urges providers to take measures to detect and prevent illegal activities. It also warns of the risks involved in settlement of funds, including the potential for businesses to be exploited by criminals using virtual assets.
Quotes from FinCEN Director and FATF Secretary General
- “The trends we’re seeing in ransomware attacks are alarming, and it’s clear that criminals are getting more sophisticated in their tactics. We urge financial institutions to stay vigilant and take steps to detect and prevent illegal activities.” - FinCEN Director Kenneth Blanco
- “The misuse of virtual assets is a growing concern, and we must work together to ensure that these instruments are used in a way that is transparent, secure, and compliant with AML/CFT regulations.” - FATF Secretary General Ronnie Hawkins