• Transactions with high frequency, volume, or velocity inconsistent with the customer’s profile. To address this risk, firms should establish transaction monitoring systems capable of identifying unusual patterns or deviations from the customer’s typical behavior (FATF Recommendation 24, Interpretive Note to Recommendation 24, Paragraph 6).
  • Transactions involving high-risk jurisdictions or customers. Firms should conduct enhanced due diligence on customers and transactions associated with high-risk jurisdictions and apply risk-based measures to mitigate potential risks (JMLSG Guidance, Part 1, Section 4.6).
  • Inconsistent source of funds or wealth declaration. Firms must take reasonable measures to verify the source of funds and wealth of their customers and ensure that the information provided is consistent with the customer’s profile (FATF Recommendation 10, Interpretive Note to Recommendation 10, Paragraph 11).
  • Transactions between unrelated accounts with no clear purpose. Financial institutions should apply risk-based procedures to identify and scrutinize transactions that appear to have no clear purpose, and report any suspicions to the relevant authorities (FATF Recommendation 20, Interpretive Note to Recommendation 20, Paragraph 2).
  • Transactions with mixing services or privacy coins. Firms should employ effective systems to identify and monitor transactions involving mixing services or privacy coins and apply enhanced due diligence when dealing with such transactions (5AMLD – Article 47, and UK MLR 2017 – Regulation 28(12)).
  • Rapid and frequent transactions between multiple wallets without a clear purpose. Financial institutions should monitor customer activities to identify and investigate unusual transaction patterns involving multiple wallets (JMLSG Guidance, Part 1 – Section 5.3.7).
  • Transactions linked to darknet marketplaces or illegal goods and services. Firms should develop systems to identify and block transactions related to illegal goods and services, and report such activities to the relevant authorities (POCA – Section 328).
  • Transactions involving known or suspected criminal addresses. Financial institutions should maintain up-to-date records of sanctioned individuals and entities, and implement systems to screen transactions against these lists (UK Sanctions and Anti-Money Laundering Act 2018 – Section 54).
  • Use of VPNs, TOR, or other tools to mask IP addresses. Firms should deploy systems to detect the use of VPNs, TOR, or other tools used to mask IP addresses and apply appropriate risk-based measures to transactions involving such technologies (JMLSG Guidance, Part 1 – Section 5.3.72).
  • Transacting with entities operating in high-risk jurisdictions or customers from high-risk countries. Enhanced due diligence measures should be applied to customers and transactions involving high-risk jurisdictions, including obtaining additional information about the customer and the purpose of the transaction (JMLSG Guidance, Part 1 – Section 4.6).
CitationCTF RiskPreventative MeasureUK Statutory Law / Legal CaseExplanation
Elliptic Financial Crime Typologies in Crypto assets The Concise Guide for Compliance LeadersAnonymity of transactions and lack of transparency in identifying parties involvedImplement a robust Know Your Customer (KYC) and Customer Due Diligence (CDD) processThe Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017Mandates businesses to conduct due diligence on their customers, verify identities, and keep detailed records of customer transactions.
Chainalysis (2021) Crypto Crime Trends for 2021: DeFi, Hacks, and the Future of Money LaunderingDeFi platforms being exploited for money laundering and terrorist financingContinuous monitoring of transactions and suspicious activity, as well as collaboration with other DeFi platforms to share information and mitigate risksProceeds of Crime Act 2002
Criminalises benefiting from, or assisting in, the proceeds of criminal conduct, including through cryptocurrencies. Ensure robust systems are in place to identify and report suspicious activities.
FATF Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (2019)Risks posed by unregulated and unsupervised Virtual Asset Service Providers (VASPs)Register with the appropriate regulatory authorities and comply with all applicable Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulationsThe Financial Services and Markets Act 2000 (FSMA)Regulates the operation of financial markets in the UK. The business must be registered and supervised by the FCA as per the requirements of the FSMA.
Wolfsberg Group’s Statement on Cryptocurrency Due Diligence (2019)Criminals using cryptocurrencies to evade sanctions and conduct illegal transactionsImplement transaction monitoring systems that screen for sanctioned individuals, countries, and entitiesThe Sanctions and Anti-Money Laundering Act 2018Provides the UK government with the powers to impose sanctions and AML regulations to prevent and detect money laundering and terrorist financing. Ensure the business complies with all sanctions and conducts due diligence to avoid transactions with sanctioned individuals or entities.

The Blockchain Transparency Institute’s Crypto Anti-Money Laundering Report (2020)Risk of money laundering through mixing services and privacy coinsAdopt advanced analytics tools to detect and trace suspicious transactions involving mixing services and privacy coinsThe Terrorism Act 2000Outlines offenses related to terrorist financing and provides authorities with investigative and preventative powers. Implement measures to identify and report transactions that may involve funding terrorism.
IACCP Cryptocurrency AML Certification ProgramInadequate training and understanding of cryptocurrency-related risks among compliance professionalsEnroll key personnel in the IACCP Cryptocurrency AML Certification Program to ensure a comprehensive understanding of AML/CTF compliance in the cryptocurrency industryThe Money Laundering and Terrorist Financing (Amendment) Regulations 2019Introduced the requirement for cryptoasset exchange providers and custodian wallet providers to comply with AML/CTF regulations. Ensure compliance officers and key staff are well-trained and certified.
The Cambridge Centre for Alternative Finance’s Global Cryptoasset Regulatory Landscape Study (2020)Inconsistent regulatory frameworks across jurisdictionsEngage with regulators and industry stakeholders to promote harmonization of regulations and cooperation among jurisdictionsThe Electronic Money Regulations 2011Defines regulatory requirements for electronic money institutions, which can apply to certain activities in the cryptoasset sector. Promote a consistent regulatory framework in alignment with these regulations.
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