Cryptocurrencies provide anonymity for cross-border transactions, making them an appealing choice for anyone who wants to hide their illegal activities. However, various red flags can aid in detecting money laundering, that we will describe in the article.

Frequent Transfers Across Wallets

One of the most common cryptocurrencies AML red flags is when there are numerous funds transfers between several wallets. Such transfers between cryptocurrency wallets suggest an attempt to conceal the transaction trail. 

This strategy may be used by money launderers to make it difficult for authorities to trace the origin and destination of funds. Accounts with a large volume of transfers should be monitored, especially if they involve several types of cryptocurrencies. 

A quality exchange must secure AML (anti-money laundering) procedures to prevent this from happening. But what is AML check? It’s a combination of measures that include requesting user identity, monitoring transactions, and asking for the sources of funds to prevent the red flag described above. 

Unusually Large Transaction Volumes

Having abnormally huge transactions is another common red flag. Money launderers often attempt to divide huge amounts of illicit funds into smaller, more manageable amounts to evade detection. 

Companies with crypto AML procedures that come across a string of huge cryptocurrency transactions always report such activity. Typically, they use auto-detection mechanisms to request data about the source of funds or report such users to authorities. 

Mixing Services

Another red flag many cryptocurrency AML mechanisms detect is when traders use mixing or tumbling services to combine and shuffle various cryptocurrency funds. They do so to conceal the transaction history and hide their real purposes. 

Typically, money launderers try to remove the link between the source and destination addresses. Thus, mixing services makes it harder to trace the payment history. Most exchanges use a combination of machine learning and artificial intelligence to spot such activity by analyzing huge volumes of data. 

Lack Of Proper Measures

It’s not recommended to use exchanges or trading platforms that don’t have proper AML and KYC procedures since that’s almost an invitation for criminals. There are quality services like crypto exchange WhiteBIT, Binance, Coinbase, and other similar platforms. 

These exchanges ensure user safety through AML for crypto procedures. It includes monitoring transactions, requesting information about the source of crypto funds, data about the user identity, etc. All these procedures ensure that if the platform spots potential criminal activity, it will contact the official authorities to report the issue.