TheCryptoUpdates
Press Release

Coalition of Major Stakeholders in Cryptocurrency Industry Issues Report on Indicators of Suspicious Activity

“Project Participate” Works to Enhance Detection of Suspicious Activity Involving Cryptocurrencies

December 4, 2019:  Project Participate, a broad coalition of some of the world’s leading virtual asset companies, has issued its first report on the detection of suspicious activity involving virtual assets.  Through Project Participate, which was created in March 2019 and formally announced in June 2019 at Europol’s 6th Cryptocurrency Conference, virtual asset companies have joined forces to improve industry’s ability to identify suspicious transactions and to report that activity to regulators.

The report, “Indicators of Suspicion for Virtual Asset Service Providers,” comes on the heels of new guidance relating to virtual assets and Virtual Asset Service Providers (“VASPs”) published by the Financial Action Task Force (“FATF”) in June 2019.  Among other things, the FATF guidance indicated that VASPs, which includes virtual asset exchanges, are expected to report suspicious transactions within the regulatory framework of the jurisdiction where the VASP is registered, licensed and regulated.  However, the new FATF guidance did not specify in detail what constitutes suspicious activity or how to identify such activity in the context of traditional “red flags” as applied to the financial services industry, and little information exists from other sources to guide VASPs, law enforcement, regulators, supervisory authorities or other interested parties in identifying such activity.

The Project Participate report helps fill those gaps by identifying typologies of potential criminal activity and related indicators of suspicion, as well as recommended measures to better detect and deter such activity.  Drawing on the collective experience of the participating companies, the report will assist VASPs and critical partners such as blockchain analytics companies to develop industry-wide compliance solutions. The report has been shared with the FATF and is available to vetted parties, including VASPs, software providers, and government officials.

Project Participate reflects a proactive effort by virtual asset companies to promote compliance and share best practices for preventing, detecting, and reporting potential money laundering, terrorist financing, and other criminal activity involving virtual assets.  Current participants include, in alphabetical order, Binance, Bitfinex, Bitpay, Blockchain Alliance, Blockchain Intelligence Group, Blockgeeks, Chainalysis, CipherTrace, Crypto Defenders Alliance, Crystal, Elliptic, Global Digital Finance, Outlier, Paxful, Tether, and a number of thought leaders in the virtual asset space.

Peter Warrack, Chief Compliance Officer of Bitfinex, explained: “Project Participate is a coalition of responsible industry members for sharing best practices.  The participating companies recognize that effective measures to address money laundering, terrorist financing, and other crimes should not be seen as a competitive advantage, but rather as a collective imperative for good corporate citizens in order to maintain the integrity of both the virtual asset and traditional financial spaces. The combined knowledge and experience gathered and shared through this initiative will most effectively equip law enforcement to practically address risks associated with virtual assets by ensuring that SAR submissions are accurate, complete, and timely, and that VASPs can keep pace with changing behaviors of bad actors.  Effective SAR reporting cannot occur without transaction monitoring systems informed by identified indicators of suspicion, as well as training of compliance personnel on how to use those indicators so as to more accurately detect potential suspicious activity. Understanding these indicators is important for effective compliance not only for virtual asset-to-virtual asset transactions, but also for the ‘on/off ramps’ between virtual assets and fiat currency. For that reason, the information in the report is valuable both for VASPs and for traditional financial institutions.”

Shone Anstey of Blockchain Intelligence Group said: “As virtual assets continue to go mainstream at an ever-quickening pace, CIOS (cryptocurrency indicators of suspicion) provides analytics service providers the ability to rally together under an umbrella of cooperation strengthening AML for the industry.”

Jesse Spiro, Global Head of Policy for Chainalysis, said: “Effective communication between law enforcement and virtual asset businesses is important not just to detect and prevent financial crime and illicit activity, but also for the health of the industry overall. We are happy to contribute our expertise in blockchain analysis and crypto crime to Project Participate in order to better define how suspicious activity should be reported, an important step in building trust in blockchains.”

Noam Eppel, Managing Director of the Crypto Defenders Alliance and Co-Founder of Morpheus.Network says: “The detection and prevention of theft on the blockchain requires new tools and forms of collaboration between industry stakeholders. While decentralization holds the promise of new social and business frontiers, security setbacks will prevent the entire industry from moving forward. Initiatives such as the Crypto Defenders Alliance and Project Participate demonstrate that thoughtful and innovative industry coordination and collaboration has the potential to make cryptocurrency the safest financial system on earth – through the use of technology, agile governance and education.”

Dave Jevans, CEO of CipherTrace, said: “VASPs face highly concentrated security risks, and these Indicators of Suspicion offer practical, hard-won advice about highlighting behaviors that service providers should guard against going forward. Importantly the collective knowledge from Project Participate provides specific guidance in the form of controls that VASPs can implement to protect themselves from these advanced threats.”

David Carlisle, Head of Community for Elliptic, said: “Project Participate demonstrates that crypto industry stakeholders can collaborate to provide regulators with the insight they need to make informed decisions. By proactively sharing information on money laundering behaviours and risks, and making that information available to key stakeholders, the crypto industry will enable the FATF and regulators around the world to devise more effective regulatory responses.”

Teana Baker-Taylor, Executive Director of Global Digital Finance, added: “Global Digital Finance’s mission is to promote the adoption of market standards for the use of global crypto and digital assets through the development of industry-led best practices, sound governance policies and conduct standards in collaboration with industry participants and policy makers. Preventing the use of virtual assets for financial crime is a key area of attention for the GDF community, which is reflected in our Code of Conduct. We are proud to have convened our community members to contribute to this industry effort and fully support the objectives of Project Participate to educate and inform law enforcement and regulators to help them identify and prevent vbirtual assets being used for illicit and nefarious activities.

Lana Schwartzman, Chief Compliance Officer of Paxful, said: “It is of utmost importance that there is industry collaboration and sharing of information to help us all come to common terms and ‘red-flags’ as they pertain to VASPs and not the traditional financial institutions. We (crypto industry) have our own set of rules and indicators of suspicious to look out for. We want nothing more than to use this commonality to get rid of even more bad actors.”

Jason Weinstein, Director of the Blockchain Alliance, added: “The Blockchain Alliance was founded in 2015 as a proactive effort by industry to help government agencies improve their capacity to fight crime involving cryptocurrencies and blockchain technology.  Through Project Participate, cryptocurrency companies are teaming up to improve their own capacity to prevent and detect potentially criminal activity and to report such activity to law enforcement and regulators.  Both of these initiatives reflect that good corporate citizens in this industry want to do things the right way and want to help regulators and law enforcement do their jobs more effectively.”

The mission statement of Project Participate is:

  • Take ownership of risk and shaping of participants’ destiny in the space

  • To promote responsible conduct that deters and detects crime to inform law enforcement and other authorities

  • To collaborate with industry experts across the spectrum in order to determine and share virtual asset indicators of suspicion related to money laundering, terrorist financing, and other crimes

  • To foster growth, create trust, and accelerate the adoption of virtual assets

Further information can be obtained at cios@cryptoaml.info.

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Bitfinex press contact press@bitfinex.com

About Bitfinex Founded in 2012, Bitfinex is a digital asset trading platform offering state-of-the-art services for digital currency traders and global liquidity providers. In addition to a suite of advanced trading features and charting tools, Bitfinex provides access to peer-to-peer financing, an OTC market and financed trading for a wide selection of digital assets. Bitfinex’s strategy focuses on providing unparalleled support, tools, and innovation for professional traders and liquidity providers around the world. Visit www.bitfinex.com to learn more.

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