The advent of the internet has led to major revolutions in the world. Things have started to become digitized. With this proliferation of advanced technology, digital currency is gaining pace. Cryptocurrency is emerging as a viable currency platform to trade.
Many blogs and websites have emerged as guides for all beginners looking to gain experience in this field. It is not impossible to become a pro, especially with the rise of these seasoned blogs consisting of all the valuable advice and tips.
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Unsurprisingly, cryptocurrency’s fame has led to many businesses starting their own trading platforms. With the increase in these platforms, online trading has become seamless and streamlined.
These sites are highly secure and ensure that all your transactions and trading details are not hacked or leaked. If you are looking for a credible platform to trade, the best option can be sites like bitcoineranew.com/tr/login.
What is Money Laundering?
Money Laundering is an illicit way of making money. Large amounts of illegal money are generated by criminal activities and are considered a grave financial crime. Cryptocurrency is a viable and attractive platform for criminals to transfer funds securely due to the stringent privacy policies that prevent disclosure of personal information.
Since the origin of the transactions is obscured, it is easy for anyone to cash the money, whether legal or illegal. These funds are often transferred in clusters and are narrowed to a few online services only in most cases.
Risks Involved in Money Laundering
It is essential to understand the risks in order to gear up and prevent money laundering. The risks involved with money laundering can be classified into four broad categories as listed below.
1. Suspicious Transaction Patterns
In some cases, the risk is associated with the pattern of crypto transactions that take place. An example of a suspicious pattern that should raise a red flag is when multiple transfers occur without any good commercial explanation. This will raise the question of why unnecessary transactions are taking place.
Some other suspicious patterns that you should look out for include high-frequency transactions within a single period of a large amount of money from multiple wallets into one account. Another suspicious pattern used by criminals is using crypto wallets that do not match user profiles.
2. Risks Within Jurisdictions
Some rules that dictate cryptocurrency trading vary by geographical location. Instances when the AML or KYC regulations are insufficient or when there is a dearth of regulatory bodies, or preventative measures create the perfect opportunity for criminal groups.
In these high-risk jurisdictions, suspicious trading patterns or fraudulent sources will increase, and hence should be avoided by legitimate traders.
3. Fund Sources
The very source of crypto assets can be susceptible to criminal activity. If funds are transferred from any platform with minimal or no AML or KYC regulations, it should raise an alert for further investigation.
Similarly, a single wallet can be associated with multiple bank accounts or credit cards. This is also a cause for concern as it usually means that a group of people is using the wallet as a dummy to move funds.
4. Size and Frequency of Transactions
This category provides a clear-cut picture of illegal activities. Clearing transactions below reporting thresholds, several large transactions within a short time frame, and the transfer of funds from regulated to unregulated accounts is often an indicator of criminal activities disguised as legitimate accounts.
How to Prevent Money laundering in Cryptocurrency Trading?
1. Utilizing Blockchain Technology
Blockchain is coined as an immutable ledger because the records, once noted, cannot be altered in any circumstances. Every block encompasses all the transaction chain details. Comparing these chains with each other will help us in identifying the presence of any kind of anomalies.
Once these illicit transactions are detected, they can be tied back to the wallet through which these transactions took place. Once the wallet is detected, it is seamless to identify the owner in possession of this wallet. In this way, a criminal can be caught red-handed through legal investigations.
2. Collaborating with Blockchain Analytics Providers
Some blockchain technologies employ automated AML fraud detection that is designed to flag the transactions that seem suspicious. Joining hands with these organizations helps in securing the routes and discovering illicit transactions that take place.
There are a plethora of companies, such as Elliptic, that are efficient at assisting financial institutions and companies involved in the field of cryptocurrencies. These organizations are particularly adept at tracking and analyzing transaction patterns and detecting traces of money laundering in blockchain networks.
The provision of viable and efficient solutions like crypto-asset risk management and AML compliance effectively detect anomalies taking place over the transactions. This ensures that the institutions involved in these cryptocurrencies do not end up getting scammed or defrauded by criminal activity. Besides, these tie-ups also aid in preserving the reputation that can otherwise be tarnished by criminal activity.
3. Initiation of reliable identification protocols
To convert a blockchain network into an anti-money-laundering platform, identity verification becomes the cornerstone. Virtual Asset Service Providers can be teamed up with MSBs to keep track of essential details.
These details usually should include the sender and recipient of these funds. These tools can also be used to deploy risk-based programs curated to the personal requirements of the businesses involved in these streams.
Periodic diligence can be conducted as well to ensure that customers do not walk along illegal roads. These stringent policies would inculcate a sense of security among the authentic customers and create a fear amidst the people thinking of unlawful ways and money laundering.
The global financial crypto market is not an exception to criminal activity. Criminals and fraudsters always lurk around platforms and sources from which they can extract illicit sources of money.
These can pose a severe threat to financial threat and compliance. Therefore, utilizing these strategies becomes even more essential to prevent money laundering from happening in these blockchains.
Initially, employing these tools might seem like an arduous process; however, their implementation is necessary considering the rise in criminal activity levels worldwide in any sector of the economy.