Financial institutions do not understand the nature of cryptocurrency transactions, and may miss up to 90% of suspicious operations. CipherTrace analysts have reached this conclusion.
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Over the past two years banks reported 134,500 suspicious transactions involving convertible virtual currencies (CVC). CipherTrace analysts regard this figure as understated. In their view, many banks do not understand how to track such operations, or turn a blind eye.
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To identify, financial institutions rely on their own databases of sender and recipient accounts. CipherTrace contends that the system is bypassed by large flows where data cannot be reconciled. Additionally, the name of the legal entity of an exchange may differ from its brand.
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“A typical name-based system can completely miss up to 70% of cryptocurrency exchanges and up to 90% of transaction volume,” the report says.
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Analysts urged banks to deploy systems that would enable them to identify transactions of peer-to-peer cryptocurrency exchanges and smaller service providers. A solution could lie in correlating contact information with user data.
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Earlier, criminals invented a new way to launder money through cryptocurrency. The “exclusive mining” mechanism allows bypassing analytics systems and presenting a transaction confirmation through private channels as a reward for mining cryptocurrency.
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