Cryptocurrency Companies Should Be On High Alert During Crisis In Ukraine
The Cryptocurrency Compliance Cooperative is exploring the emerging risks during this time of crisis in Ukraine and how nefarious actors may use cash-to-cryptocurrency locations. All cash-to-cryptocurrency companies need to be extremely diligent about protecting their customers from the following typologies.
We at the Cryptocurrency Compliance Cooperative are devastated by the events in Ukraine. In the coming weeks, we will be exploring the emerging risks during this time of crisis and how nefarious actors may use cash-to-cryptocurrency locations. As we better understand the red flags, we ask that all cash-to-cryptocurrency companies be extremely diligent about protecting their customers from the following typologies.
Cryptocurrency Donation Sites
Recently, Ukraine announced that the country will accept donations in bitcoin. Any time a situation like this has occurred (natural disasters, pandemic relief, etc.), nefarious actors have attempted to take advantage of the good nature of victims through fraudulent donation sites. Instead of contributing to legitimate assistance efforts, these sites use donations to fund criminal organizations. Remind your customers that if they wish to make donations through bitcoin or cryptocurrency, they should do so through validated channels, like the wallet addresses recently set up by the Ukrainian government. If a customer states they would like to purchase cryptocurrency for donation, it may be necessary to inquire which site they intend to use to ensure the donation ends up where the customer desires.
Whenever there is a significant event, romance scams increase in frequency. Scammers take advantage of the publicity around the event to convince victims that their situation is legitimate. For example, when Covid began, scammers posing as family members or significant others convinced victims that they needed a large amount of money before the lockdown occurred, so they could travel to the victim, or for medical supplies. As news networks talk about the thousands forced to flee their homes in Ukraine, we expect scammers to convince victims that they too are being forced to flee and need funding to do so. We have already observed numerous GoFundMe and Reddit posts about individuals needing cryptocurrency for car purchases in Ukraine.
All cash-to-cryptocurrency companies need to do enhanced due diligence related to large first-time transactions and drastic spikes in transactions. Unlike most romance scams, where the amount requested is small at first, with “ramp up” occurring after the initial remittance, the transaction volume is often quite large right away during a crisis. Additionally, the wallets associated with romance scams are usually affiliated with overseas exchanges that are not accessible by US customers.
As the Cryptocurrency Compliance Cooperative members gather more red flag data associated with these typologies, we will release additional official guidance and detection methods for these nefarious use cases. In the meantime, we urge all cash-to-cryptocurrency companies to remain diligent in protecting their customers.
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