3 Red Flags Accountants Should Watch in Cryptocurrency Transactions
The ratio of people owning and investing in cryptocurrency is definitely increasing, however, with the new rise, also comes new challenges.
Did you know that over 560 million people, or 6.8% of the world’s population, owned cryptocurrency by the start of 2024?
Plenty don’t you think?
This is why it’s only pivotal for accountants like you to be on the lookout for any issues of fraud or economic crime that might potentially arise.
In this blog, I’m going to shed light on three of the most common cryptocurrency transaction red flags that raise suspicion and you may want to investigate further.
So, get settled up for some informative journey!
Money Laundering
The expansion of cryptocurrencies is still “in progress”, and it appears as if there’s nothing that can slow it down.
However, that doesn’t mean that there aren’t several factors that may try to completely destroy the crypto landscape.
One of them is money laundering which (unfortunately) is growing too!
According to some reports, roughly $2.8 billion was laundered by criminals over the past few years, and this illegal activity keeps invading this market.
But is there anything that can be done about this? The answer is yes.
A lot of people rely on AML which stands for anti-tax evasion, as it encompasses a variety of measures that relate to crypto along with regulations to avoid any form of financial crime.
Although every country has its own set of rules and regulations, there’s always a common goal among them and that is to address this challenge effectively.
So how does AML work? Namely, AML processes usually interrupt activity concerning money laundering that is trying to enter illicit funds into the licit financial system.
Aside from that, many people resort to KYC (know your customer) as well, because it is also capable of detecting and preventing tax evasion activities.
This tool is often paired with AML because when together, they are even more efficient.
Take a look at the graph below to explore the Cryptocurrency Global Market Report 2024 and gain insights into the latest trends.
No Regulatory Compliance
Most businesses and investors involved in this do not actually follow the crypto laws, even though it isn’t a rare occurrence but unfortunately, this is another red flag present in the market.
What you need to remember is that every platform that defines itself as legit, professional, and fair must comply with every rule and law, and is obligated to leverage previously mentioned AML and KYC.
Some of them will try to justify the lack of adherence by saying that they are working in a decentralized way, or that they prioritize privacy, but these excuses aren’t simply going to cut it.
At some point, the financial authorities will spot this, and will most likely take legal action against that platform.
To put it simply, anyone who decides to “collaborate” with these types of platforms is at a huge risk that can result in various problems, such as financial losses, different penalties, and many other things.
Consequently, whenever you notice that there’s a fishy platform, you can either steer clear of it or report it.
Interesting Fact!!
Founded in 2009, Bitcoin was the first cryptocurrency and is still the most commonly traded.
“Promising” Investment Opportunities
Practically in every market, you can come across scammers who, at first glance, look like people who have good intentions but will do whatever is in their power to trick anyone they run into.
You’ll be contacted by a so-called investment manager who will promise you a phenomenal return on investment and then will ask you to send them a crypto.
These fraudsters typically have websites that seemingly look completely normal, and not suspicious in any way.
In order to be as convincing as possible, they will use any terms and jargon that are related to investing, to make you think as if they are real crypto proficients.
That’s precisely why you need to always be one step ahead and take different steps that will help you figure out if they are really legit or not.
Here’s what you can do:
Do your research to see if others have talked to this person before.
Check their credentials.
Demand any paperwork that’s related to the terms and conditions of the investment.
Do not fall for pressure methods, meaning they will try to rush you into making a decision concerning investing faster, and no real and professional manager will ever do something like that.
Lastly, bear in mind even though it is true that most people have made good money from cryptocurrency, it doesn’t mean that there is no fraud and scams involved.
And If that is the case you should be careful to watch out for these red flags, so you can certainly avoid loss of funds to your clients and other parties as well in the end.
