Virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing

Virtual Assets - Red Flag Indicators

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Paris, 14 September 2020 - Virtual assets use innovative technology to swiftly transfer value around the world and have many potential benefits, including making payments faster and cheaper. But the anonymity associated with them also attracts criminals, who have used virtual assets to launder proceeds from a range of offences such as the drugs trade, illegal arms smuggling, fraud, tax evasion, cyber attacks, sanctions evasion, child exploitation and human trafficking.

In response, the FATF Report Virtual Assets - Red Flag Indiciators of Money Laundering and Terrorist Financing will help national authorities detect whether virtual assets are being used for criminal activity. Based on more than 100 case studies collected by members of the FATF Global Network, it highlights the most important red flag indicators that could suggest criminal behaviour. Key indicators in this report focus on:

  • 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 virtual assets
  • Transaction patterns - that are irregular, unusual or uncommon which can suggest criminal activity
  • Transaction size – if the amount and frequency has no logical business explanation
  • Sender or recipient profiles - unusual behaviour can suggest criminal activity
  • Source of funds or wealth - which can relate to criminal activity

This report will help virtual asset service providers, financial institutions, and designated non-financial businesses and professions, and other reporting entities detect and report suspicious transactions. It will also provide useful information for financial intelligence units, law enforcement agencies, prosecutors and regulators to analyse suspicious transaction reports or monitor compliance with anti-money laundering and counter-terrorist financing controls.

This report complements the FATF guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (June 2019) which explains how to understand the money laundering and terrorist financing risks of virtual assets, how to license and register the sector, actions sectors need to take to know information about their customers, how to store this information securely, and how to detect and report suspicious transactions.  

In brief 

Virtual Assets Red Flag Indicators for Financial & Non-Financial Sectors

Virtual Assets Red Flag Indicators for Virtual Asset Service Providers

Virtual Assets Red Flag Indicators for the Public Sector

     

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