Many of the things that bitcoiners often do could be suspicious. Each jurisdiction may vary the way it applies the FATF recommendations.
The Financial Action Task Force (FATF) considers many things that users can do with Bitcoin and other cryptocurrencies as “red flag indicators.” For this organization, “the public does not use digital assets widely, but their use has become popular among criminals.”
In this regard, the FATF recently issued new recommendations for the member countries of this group. The agency provides details on the actions of Bitcoin users that would trigger the alarms of regulators and those responsible for national security.
What Not to Do with Bitcoin
People who buy Bitcoin from an exchange in their country and immediately send one part to Binance, another to Blockfi, and another to Crypto.com, could be suspicious. The FATF identifies the “immediate transfer of funds to multiple virtual asset service providers” as a “red flag indicator.”
By conducting several high-value transactions in cryptocurrencies in less than 24 hours, the user leaves a record of the movements. Similarly, using a recently created account or one that has been inactive for a long time could also lead the FATF to consider a user a potential criminal.
It will not be possible to divide the transaction into small amounts so as not to raise suspicions. “Structuring transactions in small amounts and below recordkeeping or reporting thresholds” will also trigger the alarms of authorities.
With the application of the FATF recommendations, anyone who tries to convert a large amount of a given crypto asset into another one without a logical commercial explanation “will be a potential criminal.”
“Incoming transactions from many unrelated wallets in relatively small amounts, with subsequent transfer to another wallet or exchange for fiat currency,” will activate another “red flag indicator.”
The fact that users lie when identifying themselves with a crypto asset service provider will also suggest criminal activity. The same will happen to those who have any problem with the creation of their account.
Likewise, if a low-value digital asset in which the user puts all his savings has grown by 10,000%, he could be in trouble. The red flag indicator will also appear if “most of a customer’s wealth derives from investments in virtual assets, ICOs or fraudulent ICOs.” This would also happen when some people’s economy is bitcoinized.
Application of These Measures
It seems unlikely that big cryptocurrency exchanges and service providers will offer much resistance to these recommendations. For example, custodial company BitGo announced months ago that it would adapt to a recent FATF regulation, known as the “travel rule.” This establishes the obligation to cross customers’ data between exchanges if their transactions exceed USD 1,000.
Regulating and collecting agencies are likely to welcome the FATF recommendations. Alfredo Collosa, Consultant to the IMF and official of the Argentine tax authority AFIP, explained that “this report will help virtual asset service providers, financial institutions, designated non-financial businesses and professions, and other reporting entities to detect and report suspicious transactions.”
Not all jurisdictions have to apply the recommendations that the FATF provides. The Group itself recognizes that “countries have different legal and financial systems.” For that reason, “not everyone should take identical steps to achieve a common goal.”
By Alexander Salazar
