Financial Crime World

VA Message Fields Indicate Illicit Activity: A Growing Concern

A recent analysis of Virtual Asset (VA) message fields has revealed a disturbing trend: many transactions are indicative of illicit activity, including the purchase of illegal drugs and stolen credit card information.

Red Flag Indicators

Experts have identified several red flag indicators that may indicate illicit activity:

  • Repetitive Transactions: When a customer repeatedly conducts transactions with a subset of individuals at significant profit or loss. This could be an indication of account takeover and attempted extraction of victim balances via trade, or a money laundering scheme designed to obfuscate funds flow through a Virtual Asset Service Provider (VASP) infrastructure.
  • Suspicious Transaction Indicators: The Financial Action Task Force (FATF) has developed indicators to assist VASPs in identifying suspicious transactions related to the source of funds or wealth. These indicators include:
    • Transactions with VA addresses or bank cards connected to known fraud, extortion, or ransomware schemes
    • VA transactions originating from or destined to online gambling services
    • The use of multiple credit and/or debit cards linked to a VA wallet to withdraw large amounts of fiat currency (crypto-to-plastic)
    • Deposits into an account or VA address significantly higher than ordinary with unknown source of funds
    • Lack of transparency on the origin and owners of funds, including shell companies or Initial Coin Offerings (ICOs)

Geographical Risks

The FATF has also developed indicators related to geographical risks:

  • Unregistered Exchanges: Customer funds originating from or sent to an exchange not registered in the jurisdiction where either the customer or exchange is located
  • High-Risk Jurisdictions: Customer utilizing a VA exchange or foreign-located Money Transfer Service (MTS) in a high-risk jurisdiction lacking adequate Anti-Money Laundering (AML)/Counter-Terrorism Financing (CFT) regulations

Compliance and Consequences

It’s essential for VASPs to be aware of these red flags and take prompt action to report suspicious activities to the relevant authorities. Failure to do so can result in severe penalties, including financial fines and even criminal prosecution.

  • Nauru’s AML-TFS Act 2023: The AML-TFS Act 2023 makes provision for proportionate and dissuasive sanctions, with penalties applicable to VASPs, senior management, and even the Board of Directors if they knowingly allowed the VASP to operate without complying with legal requirements.
  • Compliance is Not Optional: The message is clear: compliance with anti-money laundering and counter-terrorism financing regulations is not optional. VASPs must be vigilant in monitoring transactions and reporting suspicious activity to avoid severe consequences.

In conclusion, the analysis of VA message fields has revealed a growing concern about illicit activity. It’s essential for VASPs to be aware of red flag indicators and take prompt action to report suspicious activities to ensure compliance with anti-money laundering and counter-terrorism financing regulations.