link441 link442 link443 link444 link445 link446 link447 link448 link449 link450 link451 link452 link453 link454 link455 link456 link457 link458 link459 link460 link461 link462 link463 link464 link465 link466 link467 link468 link469 link470 link471 link472 link473 link474 link475 link476 link477 link478 link479 link480 link481 link482 link483 link484 link485 link486 link487 link488 link489 link490 link491 link492 link493 link494 link495 link496 link497 link498 link499 link500 link501 link502 link503 link504 link505 link506 link507 link508 link509 link510 link511 link512 link513 link514 link515 link516 link517 link518 link519 link520 link521 link522 link523 link524 link525 link526 link527 link528 link529 link530 link531 link532 link533 link534 link535 link536 link537 link538 link539 link540 link541 link542 link543 link544 link545 link546 link547 link548 link549 link550 link551 link552 link553 link554 link555 link556 link557 link558 link559 link560 link561 link562 link563 link564 link565 link566 link567 link568 link569 link570 link571 link572 link573 link574 link575 link576 link577 link578 link579 link580 link581 link582 link583 link584 link585 link586 link587

CRYPTOCURRENCY FRAUD IS EVOLVING BITCOIN ATMS MITIGATE RISK

Cryptocurrency Fraud is Evolving; Bitcoin ATMs Mitigate Risk 

In one of the more overlooked aspects of the crypto ecosystem,

it appears that the bulk of illicit activities are shifting from hacks and thefts to cryptocurrency fraud and scams. CipherTrace, the crypto-surveillance, and analysis firm released a report at the end of Q4 2019 that revealed hacks and thefts had decreased by 66 percent in 2019 while fraud and misappropriation of funds surged by 533 percent. And beneath the COVID-19 hysteria of 2020, hacks in the crypto sector have been eerily isolated. Outside of a few exploited flaws in P2P exchanges and DeFi flash loan vulnerabilities, the headline-grabbing hacks of exchanges for hundreds of millions of dollars have been absent so far this year. Is the industry due for another massive hack, or are stringent KYC/AML processes, regulatory crackdowns, better security practices, and blockchain surveillance working? 

KYC/AML Improvements Are Reducing the Appeal of Crypto Exchange Laundering 

2020 is far removed from the no-KYC wild west days of the early-mid 2010s where anonymous altcoin casinos preponderated and the Dark Underbelly of Cryptocurrency Markets thrived. Today, bitcoin and the crypto ecosystem is becoming institutionalized with a surfeit of derivatives (e.g., options, futures, perp swaps, etc.) available on regulated exchanges. 

Most of the leading exchanges adhere to the demands of the regulatory regimes in their locales, whether they be in the US or some more obscure locations like Seychelles. Conventional wisdom would indicate that the growing adherence to stricter KYC/AML enforcement has reduced the appeal of major crypto exchanges for money laundering — a sentiment mirrored by CipherTrace’s most recent report. Many exchange venues are also embedding self-regulatory procedures into their business models. For example, exchanges are increasingly tapping blockchain surveillance companies to avoid regulatory ire when it comes to money laundering, regulators are dealing out enforcement dictates for AML compliance, and regulatory arbitrage is becoming harder for exchanges to manage. Even more grassroots access venues to crypto assets, like Bitcoin ATMs, are fully regulated under US KYC/AML laws. For example, Bitcoin ATM provider, Bitcoin of America (BOA), with more than 250 locations in 17 states, is a registered Money Services Business (MSB) with the Treasury Department. And the company’s compliance standards have already proved fruitful in mitigating fraud at a high level.  

For instance, in one case in September 2019, a BOA customer placed an online order for $500k in BTC. The transaction size raised the compliance level (e.g., identification requirements, etc.) along with increased scrutiny on the transaction by the team. Upon closer examination, the BOA team discovered that the customer had a restitution order against him in the state of California for a previous fraud scheme. BOA personnel subsequently notified the corresponding FBI office and alerted the agency that the transaction may be used to circumvent the restitution order. The FBI issued a seizure warrant for the funds, distributing to the victims of the previous scam. Bitcoin of America and other alternative fiat-to-crypto exchange services have strict command over fraud prevention. Wires and online transfers require ID And other personal info that increases in tiers in lockstep with the transaction amount increases. As the avalanche of KYC/AML processes continues to take the exchange market by storm, exchanges become less appealing for hackers. 

Gone are the days of absconding with $500 million anonymously. Exchanges thoroughly identify users withdrawing sizeable amounts, and blockchain surveillance companies like CipherTrace can trace and blacklist stolen assets on public blockchains. As a result, crypto hackers have turned into crypto fraudsters, or maybe fraudsters simply have their moment to shine. For example, debacles like QuadrigaCX, where roughly $200 million was “misplaced” by the founder, count as fraud. With reduced incentives for third-parties to maliciously steal funds from an exchange due to surveillance risks, inside jobs are becoming more commonplace. Inside jobs may be the new normal, especially when you consider the vastly improved security practices of most industry exchange venues. 

Better Security Practices are Forcing Hackers to Get Creative 

Unsurprisingly, many of the biggest crypto exchange hacks are inextricably linked to poor security standards of exchanges. Lousy security practices ranged from storing significant sums of customer deposits in hot wallets to a lack of multi-signature authorization for large withdrawals. Times are different now. Regulated custodians like BitGo are widely tapped by many of the leading exchanges, and self-custody digital asset management platforms like Ledger Vault are rapidly becoming the new standard. These services offer secure multi-signature authorization mechanisms, deep cold storage, and other conditional flows required to mitigate any potential exogenous threats to pilfer customer funds. Hackers are acutely aware of this dilemma. Naturally, they have shifted focus to DeFi hacks like the BZx attack. Flash loan attacks are likely to become the new normal as they essentially allow hackers to capitalize with massive sums at little cost. However, zooming out, DeFi liquidity pools and protocols contain vastly fewer aggregates of assets than their centralized exchange counterparts. 

Hackers will have to get creative probing DeFi KYC protocols, but the days of repetitive strings of high-profile centralized exchange hacks may be waning. That’s a net positive for the industry. Inside jobs are likely to continue in popularity, however, but that’s no different than the legacy financial world. Fraud is much more commonplace in banking that overt hacks on banking security layers, which may end up reflecting the new standard in the crypto ecosystem. Either the lack of headline-snatching hacks in 2020 is portending that we’re due for another big one, or KYC/AML processes and better security practices are working well. If that’s the case, look for more QuadrigaCX scandals than CoinCheck-style hacks. 

Article Produced By
Danielle Sabrina

Named by CIO as a female entrepreneur to follow, and member of the Forbes Agency Council, Danielle Sabrina started her career on Wall Street at just 19 years old, going to become one of the youngest equity traders in the industry. After a successful corporate career, she went on to found her media company Tribe Builder Media, a hybrid agency that connects the worlds of digital marketing, public relations and experiential marketing. Her experience with a diverse client base — which includes Tech, FinTech, Influencers, NBA/NFL players and celebrities has garnered Danielle the reputation of being one of the most sought-after publicists and strategists in media. Her thought leadership has been featured in Forbes, Entrepreneur Magazine, Inc., Huffington Post and many others.

 

https://globalcoinreport.com/cryptocurrency-fraud-is-evolving-bitcoin-atms-mitigate-risk/

Markethive is creating a “Universal Income for Entrepreneurs” and is changing totally the way people think about making money online or growing their businesses. Markethive is the game changer in social Marketing network, the first of its kind in the industry, built on the block chain and made available 100% free to everyone.

MarketHive is a social marketing platform for entrepreneurs that has the combined power of Facebook, LinkedIn, Marketo and Amazon.

100% Free to everyone

Info : Click here to join for free