
The Dark Side of Digital Wallets and the Role of Crypto Monitoring

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Cybercriminals have recently exhibited a keen interest in crypto theft, in some circumstances going to the extremity of entering fake relationships to deceive a partner into fake investments.
According to a 2022 report by the Federal Trade Commission (FTC), roughly $139 million was lost in 2021 as a result of crypto romance fraud— one of the many scams happening in the crypto market. Furthermore, more than 46,000 customers reported losing over $1 billion to crypto sams from Jan 1, 2021 to March 31, 2022; the figure is substantially higher than this but is not reflected in stats or reports due to not all cases being reported.
As per the Fintech Times, Binance Smart Chain (BSC) witnessed a surge in thefts, with the cryptocurrency being pocketed 50 times in 2022. Ethereum (ETH) was the second most stolen coin in the previous year, being lost 33 times. The most stolen coin since 2021 is Bitcoin (BTC), being stolen in 94 crypto-related scams.
Binance Founder and CEO Changpeng Zhao suffered the greatest monetary loss of $82 billion following the cryptocurrency crisis of 2022. Binance founder was followed by FTX founder and CEO Sam Bankman-Fried, who lost $23 billion.
Bankman-Fried was apprehended on December 12, 2022, over securities scam, money laundering, wire fraud, and a plot to defraud the US. FTX, which was the fourth largest crypto exchange worldwide, filed for bankruptcy over a liquidity crisis in 2022. This occurred after it attempted to market a significant portion of its operating business to its competitor, Binance.
The Securities and Exchange Commission (SEC) of the US has charged Bankman-Fried with devising a fraudulent scheme to trick investors. The charges were made amid reports highlighting that the former FTX chief diverted funds of customers to his Alameda Research hedge fund. However, Bankman-Fried denied all the wrongdoings and said that he was unaware of Alameda Research utilising FTX client funds.
Here are some of the common signs of money laundering in the crypto sector:
The crypto sector has enjoyed a certain degree of autonomy since its inception. However, the trend has changed recently as governments have introduced stringent regulations to manage the sector.
In fact, crypto firms are now regulated the same way as financial institutions. In case, individuals and businesses who do not fulfil crypto transaction monitoring regulations will face the risk of prosecution over non-compliance.
Here are the penalties and other consequences that the crypto sector may encounter:
How important it is to monitor crypto transactions is obvious from the fines levied by governments for non-compliance with AML regulations. The European Parliament has announced fresh KYC (Know Your Customer) and AML (Anti Money Laundering) checks to monitor crypto transfers in June 2022; US cryptocurrency exchanges now fall under the regulatory framework of the Bank Secrecy Act (BSA).
According to Bloomberg, the investment and stock trading app Robinhood which processes about 100,000 daily transactions, is charged with a monetary penalty. The New York State Department of Financial Services has fined the company a $30 million fine over violating AML and other cyber-security regulations.
No matter in which country or jurisdiction a crypto firm is operating, the above penalties and consequences may be faced by companies that do not deploy crypto transaction monitoring solutions.
Shufti Pro offers an AML transaction monitoring solution that screens customers against 1700+ global AML watchlists within seconds. Shufti Pro’s AML solution helps crypto firms understand customer behaviour, reduce fraud rates, and stay compliant with the ever-evolving regulations.
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