Designed to break the audit trail

Virtual assets move value across borders in minutes, can be held pseudonymously, and sit outside the traditional banking rails — a combination regulators treat as a high money-laundering and terrorist-financing risk. Some of the sector's tooling — mixers, tumblers, privacy coins — is designed specifically to break the audit trail. Regulation has caught up: MiCA in the EU, CASP registration and CySEC supervision in Cyprus, and FATF's Travel Rule for transfers.

The red flags: wallets linked to darknet markets, ransomware or sanctioned entities; mixer or tumbler use; structuring below reporting thresholds; rapid movement across many wallets or unregulated exchanges; customers who cannot explain the origin of their holdings.

For CASPs and firms with crypto exposure the duties are concrete: customer due diligence, wallet-counterparty screening where feasible, Travel Rule compliance, and crypto exposure treated as an enhanced-risk factor in the client risk assessment.

The full sector assessment: firm.cy/aml-sector/crypto

Not legal advice. Verify against the primary source before acting.

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