Updated Red Flags for Improved Crypto Transaction Monitoring in 2023

July 18, 2023
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Navigating the shifting trends in crypto transaction monitoring is tough. These fresh red flags will help streamline your protocols to match the crypto market’s constant evolution.


Keeping up with ever-changing trends in transaction surveillance is no small feat, but it’s essential to maintain robust AML compliance. In our previous red flags article, we primed you on trends to look for in crypto transaction monitoring. In this follow-up piece, we focus on new and current intel, pinpointing not only emerging scam trends like pig butchering and transaction structuring but also how they intertwine with elder abuse, a sensitive domain we need to address.

A key aspect of your AML compliance is Customer Due Diligence (CDD). It regulates how you interact with or address red flags concerning your customers. Proactivity remains our watchword – it’s vital to keep the connection with customers active and responsive if we hope to curb the menace of financial crime in the cryptocurrency space. Nowhere is this more crucial than in managing the sensitive area of elder abuse.

The core tenets of strong surveillance and monitoring are the series of “red flags” that an institution uses to help identify both traditional and emerging forms of potential money laundering, fraud, or other illicit activities. 

The strength of an institution’s surveillance and monitoring capability is entirely dependent on the quality and relevance of these red flags.

While red flags may vary depending on the business model, a comprehensive and constantly-updated set that leaves no stone unturned is essential whether you’re monitoring millions of transactions a day at a major crypto exchange or a handful each week when you’re just starting out as a kiosk operator with a single machine.

Evolving customer due diligence and new scams on the rise in 2023

Pig Butchering

Pig butchering scams have picked up momentum recently. In these ploys, scammers ‘fatten’ their victims by building trust over time, often through romantic pretenses, before abruptly ‘slaughtering’ their finances. 

New red flags to help identify this scam could include irregular transaction patterns, marked changes in customer activity, or frequent interactions with accounts from high-risk jurisdictions. Discovering such anomalies should trigger enhanced due diligence, and involve a closer scrutiny of transactions and customer details.

Relevant: Pig Butchering Scams on the Rise: How to Protect Your Customer’s Assets

Structuring: Attempting to Circumvent Transactional Thresholds

Transaction monitoring red flags in cryptoTransaction structuring is another alarming trend to watch. It involves making multiple lower-value transactions to circumvent oversight from financial institutions or regulatory authorities. Designed with ill intent to stay below regulatory radar, structured transactions  have long been a thorn in the side of financial institutions. In the crypto world, it’s no different. A well-established practice in currency transactions, structuring attempts to fly under regulatory thresholds to hide suspicious activity. 

Instrumental to combating this is an understanding of how these structuring schemes play out in the crypto environment. Keep an eye out for red flags like multiple lower-value transactions conducted over a short period, irregular transactional patterns, or transactions occurring at odd timings. More frequent reviews of accounts along with the implementation of stricter monitoring tools can help better detect transaction structuring.

Elder Abuse

The intersection of emerging scams and elder abuse presents a rising challenge. Fraudulent practices targeting the elderly are concerning, as they exploit those who might not be entirely familiar with new technologies like cryptocurrencies.

Red flags denoting potential elder abuse may include sudden changes in spending patterns, decreased account activity, or transactions with entities in high-risk jurisdictions. It’s imperative here not to shy away from reaching out to customers we suspect may be at risk. Elderly customers often appreciate the personal outreach, providing not only a valuable opportunity to protect them but also to gather more KYC data, while strengthening your consumer protection efforts..

Proactive Protection against Elder Abuse

Elder abuse, as we’ve noted, extends into various forms of exploitation. Identifying these red flags is only the first step. Next, we must employ compassionate and respectful strategies to protect our vulnerable customers. 

In this light, proactive communication isn’t merely a suggested approach – it’s an ethical obligation. Never fret about offending anyone by reaching out. In fact, you’ll find that your older customers generally appreciate the care and concern. Moreover, chances are, they will feel safer transacting with your business, enhancing their overall customer experience. Through these conversations, you can gather more extensive KYC data, serving them better while simultaneously building a more thorough customer profile.

Also check out: Preventing Elder Financial Exploitation in the Cryptocurrency Space

In Conclusion

We are in a continuous battle against financial crime, particularly in the burgeoning cryptocurrency market. Our focus must remain on cultivating robust and relevant surveillance practices. Reactively responding to identified red flags is becoming a thing of the past. Today, we must engage in proactive approaches, seeking out these signs before they manifest in a flurry of negative consequences. In navigating this constantly evolving landscape, remember the importance of kindness and respect, especially when dealing with your elderly customers. Their appreciation and trust in return will surely give your business a solid foundation of customer loyalty and integrity.

Should you feel the need to fortify your surveillance and monitoring protocols, revise your AML strategies, schedule your annual independent review, or gain assurance that your institution’s red flags are relevant and effective based on your unique business model, we’re just a call away. Don’t hesitate to tap into our expert guidance at BitAML for a free consultation. Together, we can contribute to constructing a safer, more secure crypto world.

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