Virtual currencies are swiftly becoming the currency of choice for fraudsters – the rate of Suspicious Activity Reports (SAR) filed including cryptocurrency is rapidly rising. According to the U.S. Government Accountability Office (GAO), from 2017-2020, the number of SARs referencing cryptocurrency quadrupled, increasing from 10,377 to 42,782. As the use of virtual currency by bad actors across the globe increases substantially, the importance of relaying valuable information to law enforcement has never been higher.
Filing a SAR is a challenging process. The current SAR form was not created for cryptocurrency reporting, creating further stress on the complicated process that leaves little room for error. Regulatory reporting requirements leave compliance officers asking many tough questions, including:
Should I include digital addresses?
How do I include transactional activity?
Ultimately, what does FinCEN need to know?
Answering these important questions can slow down the process of reporting necessary information to stop crypto-related financial crime in its tracks.
Filing SARs Following FinCEN Recommendations: Considerations for Crypto Companies
On May 9, 2019, FinCEN released an Advisory on Illicit Activity Involving Convertible Virtual Currency, providing a list of valuable information that can be useful to law enforcement when reporting suspicious activity related to virtual currencies. These are as follows:
- Virtual currency wallet addresses
- Account information
- Transaction details (including virtual currency transaction hash and information on the originator and the recipient)
- Relevant transaction history
- Available login information (including IP addresses)
- Mobile device information (such as device IMEI)
- Information obtained from analysis of the customer’s public online profile and communications.
This information can be the difference in whether a cybercriminal is caught or can continue their nefarious behavior.
Best Practices for SAR/STR Filing: Recommendations for Crypto Companies
Understanding the importance of reporting suspicious activity to law enforcement with accurate and actionable information in a SAR or Suspicious Transaction Reports (STRs), for those outside the U.S., is paramount to halting crypto-related crime. When filing a SAR/STR including virtual currency related activity, crypto companies should consider:
- Who is involved?
- Ensure that both the entities and the digital addresses involved in the activity are included.
- If attribution data for the digital wallet addresses are available from a blockchain analytics vendor or from open-source research, it should also be included.
- What happened?
- Inform regulators of the specifics of the suspicious activity. For example, transactions may involve the following:
- The digital assets involved and their associated blockchain.
- Any transaction hashes.
- Any fiat instruments.
- Inform regulators of the specifics of the suspicious activity. For example, transactions may involve the following:
- When did it happen?
- List all the relevant dates and times of transactions and events.
- Where did it happen?
- Provide a detailed view of the locations involved. Make sure to detail if the location is a contributing factor as to why you believe the activity is suspicious.
- Why is the activity suspicious?
- Provide a thorough description of the potentially suspicious activity, including supporting evidence.
- If your suspicion is derived from the entity’s on-chain activity, make sure to provide details such as the type of exposure (direct vs. indirect), and where the attribution data was sourced from (blockchain analytics vendor, open-source intelligence gathering, data vendor, etc.).
Why Verafin: The World’s Only All-In-One Anti-Financial Crime Platform for Crypto Companies
Verafin’s Anti-Financial Crime Platform for Crypto Companies is an all-in-one solution including blockchain forensics, fiat/crypto transaction monitoring, case management, and regulatory reporting. Verafin helps crypto companies streamline the SAR/STR filing process by automating the most time consuming and manual steps in a typical process. SAR/STR submission is completely automated and frictionless, SAR/STR review and re-filing is managed by an in-app workflow, and SAR/STR forms and narratives are pre-populated using demographic data, transaction data, and case investigation outcomes.
With deep domain expertise from over twenty years of financial crime management experience, including regulatory reporting, our purpose-built anti-financial crime investigation platform simplifies your data and presents you with a complete picture of customer risk, allowing investigators to focus on meaningful investigative work and quickly provide actionable intelligence to law enforcement.
See How Verafin Can Help Your Crypto Company Fight More Crime
Demo: Uncover the Full Picture of Crypto Compliance
Learn more about how Verafin streamlines AML compliance and fraud detection for crypto companies.
Crypto Site: The World’s Only All-In-One Anti-Financial Crime Platform for Crypto Companies
Verafin, a Nasdaq company, is the industry leader in Financial Crime Management providing a cloud-based platform for AML, Fraud Detection and investigative Case Management. An all-in-one crypto compliance offering, Verafin supports complex investigations, enables robust transaction monitoring and improves efficiency of compliance processes. Its multi-chain visual investigation tools help streamline case investigations and trace the flow of funds across both cryptocurrency and fiat networks.