Cryptocurrency Transaction Monitoring

Cryptocurrency exchanges and companies are becoming more and more popular and preferable. As a result, many countries are trying to prepare the regulatory environment for cryptocurrency. While this environment is imprecise or far from certain in the US, institutions that transact in cryptocurrency are required to monitor these transactions and file Suspicious Activity Reports ("SARs") if suspicious activity is detected.


Businesses can minimize the risks associated with cryptocurrency transactions through the compliance program prepared with powerful Transaction Monitoring Software. While cryptocurrencies have unique compatibility challenges, innovative regtech solutions can meet these challenges. The biggest risk in the crypto industry is not able to control and constrain how blockchains move.


Cryptocurrency businesses should fully understand and implement existing transaction monitoring regulations specific to cryptocurrencies and be alert to proposed new regulations so that compliance is not painful for them.


Cryptocurrency Transaction Monitoring Regulations

A transaction monitoring system should be able to instantly identify suspicious transactions, create alarms for these transactions, and forward the alarms to the compliance team instantly. After checking these alarms, the compliance team should report any transactions it deems really suspicious and report them to a regulatory agency. With a powerful process monitoring system application, you can;


  • Get customized payment fraud intelligence
  • Be instantly notified of suspicious transactions and stop transactions automatically
  • Get instant alarms according to risk levels, don't wait for the end of the day for alarms
  • Help the compliance team save time
  • Reduce costs and false positives with automated risk scoring
  • Maintain full audit trail
  • Get accurate and actionable SARs
  • Share information easily
  • Monitor transactions instantly
  • Test and simulate your rules in an advanced sandbox environment
  • Analyze accounts that trade with each other


With cryptocurrency being a viable transaction option for individuals, cryptocurrency-related businesses should develop themselves and invest in new transaction monitoring systems to help monitor these new types of transactions.


With the increasing institutionalization and use of cryptocurrencies, the Financial Crimes Enforcement Network ("FinCEN") initially updated its guidance for fiat currency only. The Travel Rule, introduced in 1996, requires financial institutions to forward certain information to the next financial institution during money transfers. In 2013, FinCEN published guidance for individuals who manage, exchange or use virtual currencies, stating that administrators and virtual currency exchanges will be considered money transmitters and therefore will be subject to the Bank Secrecy Act if they agree to the two actions; (1) accept and transmit a convertible virtual currency ("CVC") and (2) buy or sell convertible virtual currency.


Despite initially promoting the cryptocurrency as completely anonymous, in reality, FinCEN has forced cryptocurrency exchanges to comply with record-keeping requirements and the Travel Rule by sharing information about the creators and beneficiaries of cryptocurrency transactions.


Some Factors That Cryptocurrency Businesses Need To Do

To mitigate the unique risks of trading in cryptocurrency, cryptocurrency-related businesses will need to employ the best cryptocurrency-focused AML software tools that meet the needs of their institutions. It is a fact that the value and benefit of such software increase with the development of technology. Not using this software and being late in the creation of the AML compliance program may result in some penalties.


For example, in late 2020, BitMEX, a P2P crypto products trading platform, received criminal and civil charges from the US Department of Justice BitMEX allegedly failed to maintain a proper AML compliance program under CFTC rules. The CFTC seeks payment of unfair advantage, monetary fines, and compensation. In addition, in October 2020, FinCEN fined a New Jersey-based business $60 million for violating reporting and registration requirements under the Bank Secrecy Act. The person owned two bitcoin businesses and was able to launder more than $300 million in cryptocurrencies by exchanging bitcoins on behalf of customers hundreds of times, running an unlicensed money transfer business, and transferring money without a license.


It can help reduce the risks of trading in cryptocurrency through certain processes, for example;


Staying Up-to-Date on Policies and Procedures

Policies, procedures, and laws on both cryptocurrency and AML are constantly being updated and changed. The nature of these regulations is dynamic, and institutions dealing with cryptocurrencies need to be vigilant for these regulations. Thus, by being aware of new laws and regulations, it can take action in a short time for compliance.


Providing Training

There should be educational guidance and employee workshops to include how to adequately review cryptocurrency transactions and properly identify illegal activities such as configuring. Cryptocurrency transactions differ from regular cash transactions as the information presented to a multi-transaction viewer is unique. Therefore, employees monitoring cryptocurrency transactions will need to be trained in reading and deciphering available information such as "TX Hash" and "Exit Address", how to identify illegal activities, and how to properly write and include the Suspicious Activity Report. In many regulations, the importance and necessity of these training are also emphasized.


Updating Transaction Monitoring Tools

Transaction Monitoring Software will need to have the ability to process and identify illegal cryptocurrency transactions that criminals will attempt and commit. Whether a firm wants to update its existing transaction monitoring tools or implement a new system, it is imperative that the tool/system be able to adequately identify and report suspicious transactions to avoid the firm's regulatory scrutiny and mitigate the risks associated with cryptocurrency transactions.



The Best Transaction Monitoring Software

The most important factor of a good process monitoring software is to automatically monitor the transactions without wasting time for the compliance team and to warn the compliance team by generating alarms in suspicious cases. Sanction Scanner AML Transaction Monitoring Software monitors customer transactions in real-time to detect high-risk and suspicious transactions. If it detects a suspicious transaction, it can instantly stop the transaction and allow cases to be recorded for investigation. Some unique features of Sanction Scanner AML Transaction Monitoring software are as follows;


  • Create the most appropriate rules and scenarios without writing any code with a dynamic rule writing feature.
  • Test your changes to your rules with your existing transactions with the advanced Sandbox Test Environment
  • Choose the best scenario for your business by simulating your rules
  • Depending on your customers' profession, age, income, etc. Set some criteria according to the criteria and assign risk scores according to these criteria
  • Analyze accounts that trade with each other with the Transaction Analysis feature
  • With our real-time alarm system, you can see the alarms of the transactions determined according to your scenario and rule set and the alarm levels of the transactions (1-5) without waiting for the end of the day.


For these features and much more, contact us and get to know the Transaction Monitoring software closely.

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