Crypto Risk Indicators Issued by Joint Global Tax Group to Financial Institutions
An international consortium of tax leaders called J5 has advised financial institutions to be cautious of risk factors associated with cryptocurrencies, which are often involved in illegal activities.
The Joint Chiefs of Global Tax Enforcement (J5) has compiled a list of five risk indicators related to cryptocurrencies. These indicators were developed by a team of cyber experts from member countries.
J5 is a global collaboration between the taxation agencies of five major countries, aimed at combating financial crimes worldwide. The group consists of the US Internal Revenue Service (IRS), the UK’s HM Revenue and Customs (HMRC), the Canadian Revenue Agency (CRA), the 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 factors that play a crucial role in enabling financial institutions to identify 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 move is in response to the increasing threat that cryptocurrencies pose to financial institutions. He emphasized the importance of equipping staff with the necessary skills to analyze and investigate crypto assets, and believes that the release of these risk indicators will strengthen the joint efforts against tax crimes.
J5 has also issued a warning to financial institutions, urging them to prioritize the detection of crypto layering. This refers to intentionally obscuring the origin of illicit funds through transactions.
Furthermore, the group advises exercising caution when dealing with crypto transactions linked to geographical areas with lax regulatory frameworks.
The advisory also highlights the alarming increase in crypto payments to ransomware attackers, which amounted to $449.1 million in the first half of 2023 according to a report by Chainalysis. This figure represents a significant increase of $175.8 million compared to the same period the previous year.
Given the rising use of cryptocurrencies for fraudulent activities, J5 has called on banks to refrain from making ransomware payments. The group asserts that these payments are a critical point where criminals interact with the legitimate financial system.
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