Global Tax Group Issues Crypto Risk Indicators to Financial Institutions
The J5, an international group of tax chiefs, is advising financial institutions to be cautious of crypto risk-indicators that are susceptible to illicit activities.
The Joint Chiefs of Global Tax Enforcement (J5) has released a list of five risk-indicators associated with cryptocurrencies. These indicators have been developed by a team of cyber experts from member countries.
J5 is a global collaboration between the five largest taxation organizations in the world, aimed at combating financial crimes on a global scale. The group consists of the IRS from the US, UK’s HMRC, Canadian Revenue Agency (CRA), Australian Taxation Office (ATO), and the Fiscal Information and Investigation Service (FIOD) from the Netherlands.
The document, titled “Crypto Assets Risk Indicators,” highlights various risk indicators that play a crucial role in enabling financial institutions to detect and report money laundering and illicit activities involving crypto assets.
The red flags identified by J5 include crypto asset layering, geographical risk indicators, high-risk counterparties, unknown transaction recipients, and ransomware attacks.
According to John Ford, Deputy Commissioner of the Australian Taxation Office, this step is necessary due to the increasing threat that cryptocurrencies pose to financial institutions. He emphasized the importance of equipping staff with the necessary skills and knowledge to analyze and investigate crypto assets.
The recent advisory from J5 has prompted banks to prioritize the detection of crypto layering, a process used to hide the origin of illicit funds.
Furthermore, J5 advises financial institutions to exercise caution when dealing with crypto transactions in geographical locations with weak regulatory frameworks.
A Chainalysis report reveals that crypto payments to ransomware attackers reached $449.1 million in the first half of 2023, representing an increase of $175.8 million compared to the previous year.
Given the significant rise in the use of cryptocurrencies for fraudulent activities, J5 urges banks to refrain from making ransomware payments. The group emphasizes that stopping ransomware payments is crucial as it disrupts the interaction between criminals and the legitimate financial system.
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