16th September 2020

The FIAU would like to bring to your attention the latest publication issued by the FATF on the 14^th September entitled: ‘Virtual Assets Red Flag Indicators of Money Laundering and Terrorist Financing’.

Virtual assets (VA) and related services have the potential to spur financial innovation and efficiency, but their distinct features also create new opportunities for money launderers, terrorist financiers, and other criminals to launder their proceeds or finance their illicit activities. The ability to transact across borders rapidly not only allows criminals to acquire, move, and store assets digitally often outside the regulated financial system, but also to obfuscate the origin or destination of the funds and make it harder for reporting entities to identify suspicious activity in a timely manner.

As a result, the FATF issued this report to help virtual asset service providers, financial institutions, and designated non-financial businesses and professions, and other reporting entities detect and report suspicious transactions.

Based on more than 100 case studies collected by members of the FATF Global Network, it highlights the most important red flag indicators that could suggest criminal behaviour. Key indicators in this report focus on:

• Technological features that increase anonymity – such as the use of peer-to-peer exchanges websites, mixing or tumbling services or anonymity-enhanced cryptocurrencies
• Geographical risks – criminals can exploit countries with weak, or absent, national measures for virtual assets
• Transaction patterns – that are irregular, unusual or uncommon which can suggest criminal activity
• Transaction size – if the amount and frequency has no logical business explanation
• Sender or recipient profiles – unusual behaviour can suggest criminal activity
• Source of funds or wealth – which can relate to criminal activity

The FIAU urges subject persons to consider such red flags in their ongoing monitoring and transaction scrutiny procedures.