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Five Nations' Tax Authorities Warn Financial Institutions of Crypto Asset Risk Indicators

S.J. Steinhardt
Published Date:
Jun 3, 2024

The Joint Chiefs of Global Tax Enforcement (J5) have warned financial institutions about risk indicators tied to crypto assets, Accounting Today reported. These indicators include money laundering, cybercrime, tax evasion and other illicit activities.

The J5 is a collaborative partnership among tax authorities and law enforcement from five countries (the Australian Taxation Office, the Canada Revenue Agency, the Dutch Fiscal Information and Investigation Service, His Majesty's Revenue and Customs from the United Kingdom, and the IRS's Criminal Investigation Division from the United States).

The advisory note, "Crypto Assets Risk Indicators for Financial Institutions," highlights how cryptocurrency asset layering, geographic locations, high-risk counterparties, unknown or obscured transaction recipients and certain online behaviors may indicate criminal activity. It named 42 specific risk factors pertaining to these areas, Accounting Today reported.

"Identification and detection play a crucial role in combating cybercrime on a global level," said Guy Ficco, chief of IRS Criminal Investigation, in a statement reported by Accounting Today. "Anytime we can pool the resources of our J5 partners to issue pertinent information to financial institutions about cybercrime indicators, we will seize the opportunity."

Overall, the J5 advised financial institutions to do the following:

● Prioritize the detection of layering involving crypto assets, the phase in money laundering where transactions are intentionally made intricate to conceal illicit origin of funds, throughout their relationship with their customers;

● Exercise vigilance when dealing with cryptocurrency transactions tied to jurisdictions known for weak regulatory frameworks, inadequate anti-money laundering controls, or heightened levels of corruption;

● Monitor unusual counterparties, particularly if they have exposure to darknet marketplaces or mixing services;

● Practice "know your customer" techniques in order to identify potential risks associated with cryptocurrency asset transactions and ensure compliance with regulatory measures; and

● Detect and report financial flows related to ransomware and stop ransomware payments because they are a key point where criminals interact with the legitimate financial system.

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