The Joint Chiefs of Global Tax Enforcement (J5) have issued a warning to financial institutions regarding risk indicators that may suggest money laundering, cybercrime, tax evasion, and other illicit activities, particularly those involving crypto assets. The J5 emphasizes the importance of gathering, analyzing, and reporting financial data to detect and report suspicious activity, helping financial institutions stay informed about what to look for.
One major focus for financial institutions is detecting layering involving crypto assets, a form of money laundering in which transactions are intentionally complicated to hide the illicit origin of funds. This can involve high volumes of rapid fund movement between digital wallets across multiple jurisdictions, transactions to and from private wallet addresses, conversion across different crypto assets, involvement with crypto mixers, gambling platforms, or transactions on the darknet and fraud shops.
Geographical risk indicators also play a role in identifying potential illicit activities involving crypto assets, with specific attention to transactions tied to jurisdictions known for weak regulatory frameworks, inadequate AML controls, or corruption. Institutions should be cautious when dealing with exchanges operating out of high-risk jurisdictions or accounts accessed with IP addresses from such locations, as well as addresses that match those on recognized watch lists like the OFAC list.
Monitoring high-risk counterparties is essential for detecting money laundering and illicit activities involving crypto assets. Institutions should closely track customer transactions for signs of involvement with suspicious sources, such as darknet marketplaces, mixing or tumbling services, questionable gambling sites, illegal activities like ransomware, or individuals subject to sanctions or based in sanctioned states.
Effective know-your-customer (KYC) practices are crucial for identifying potential risks associated with crypto asset transactions and ensuring compliance. Financial institutions should watch for clients who provide incomplete identification, are difficult to contact, or use shared personal information. Additionally, monitoring any activity suggesting money mule operations, such as access to multiple bank accounts or shared addresses, can help detect potential illicit activities.
In their overarching efforts to combat cybercrime on a global scale, the J5 has issued this advisory to raise awareness of risk indicators associated with criminal activity involving cryptocurrency assets. By collaborating with financial institutions worldwide, the J5 aims to enhance detection and reporting of money laundering and illicit activities, ultimately contributing to a safer digital financial environment. The J5 was established in 2018 to unite efforts against international tax crime and money laundering, with members from Australia, Canada, the Netherlands, the United Kingdom, and the United States committed to sharing resources and intelligence to fight crime.
