- William Kanaan
FATF report on red flag indicators of money laundering and terrorist financing
The Financial Action Task Force (FATF) published a report entitled Virtual Assets (VAs): Red Flag Indicators of Money Laundering and Terrorist Financing.
The report is based on more than 100 case studies contributed by FATF global network members, together with information contained in certain FATF reports and publicly available information.
The key indicators identified in the report include:
Technological features that increase anonymity, such as the use of peer-to-peer exchanges websites, mixing or tumbling services or anonymity-enhanced cryptocurrencies.
Geographical risks: criminals can exploit countries with weak, or absent, national measures for VAs.
Transaction patterns: if irregular, unusual or uncommon, this can suggest criminal activity.
Transaction size, for example, where the amount and frequency have no logical business explanation.
Sender or recipient profiles: unusual behaviour can suggest criminal activity.
Source of funds or wealth that can relate to criminal activity.
The red flag indicators of suspicious VA (also known as cryptoasset) activities or possible attempts to avoid law enforcement detection that are set out in the report are based on the misuse of VAs.
The existence of a single indicator does not necessarily indicate criminal activity though the presence of multiple indicators in a transaction with no logical business explanation should raise suspicion of potential criminal activity.
The presence of indicators should lead to monitoring, examination and reporting, where necessary.
The report aims to help VA service providers (VASPs), financial institutions, designated non-financial businesses and professions, and other reporting entities, detect and report suspicious transactions and facilitate a risk-based approach to customer due diligence (CDD) requirements.