As cryptocurrency gains traction with consumers quickly, financial institutions (FIs) and other regulatory institutions are vying for the opportunity to provide this service to their customers to keep up with the growing demand for quick and convenient banking at a low cost. As this market expands, so does a new frontier of cyber-fraud. The need for adapting BSA initiatives to identify and mitigate financial loss is already upon us.
Cybercriminals are stealing cryptocurrency and accepting the payment for goods to hide the origin of the funds. A third party, known as a Nested Service Provider (NSP) or an Exchange, is used to send cryptocurrency to a deposit address they own. The illicit funds are first sent to the NSP to “clean” the money, and then the NSP sends it to the criminal's deposit account on the other side. The cybercriminals are both the buyer and the seller.
Does this sound familiar? This is just another piece of money laundering that needs to be studied and understood by FIs to identify it quickly, and new procedures need to be considered. BSA departments at FIs are fervently creating programs and processes to combat this specific piece of money laundering.