How to Prevent Cryptocurrency Account Takeover

by Bence Jendruszak
Cryptocurrency firms are under increasing pressure to meet AML regulations. Transaction monitoring is a key part of a good compliance strategy.
Let’s see how it works and how to implement it easily.
From exchanges to wallets, cryptocurrency companies have historically been operating with relative freedom. However, this has changed in recent years, as governments cracked down on crypto companies to enforce more regulatory checks.
New laws now target crypto firms to treat them more or less like financial institutions.
For instance, in June 2022, the European parliament announced new KYC and AML checks designed to trace the transfer of crypto assets. Meanwhile, in the US, cryptocurrency exchanges are legal, falling under the regulatory scope of the BSA (Bank Secrecy Act).
Failing to enforce these regulatory checks, however, may result in:
Anti-money laundering (AML) checks are particularly challenging for cryptocurrency platforms.
Transaction monitoring is a challenge for crypto businesses, as it may cover a handful of scenarios:
Still, when it comes to AML compliance, there are two key stages where transaction monitoring should be implemented:
Of course, the frequency and variety of crypto transactions tend to be much greater than for traditional fiat currencies. This adds a layer of complexity when logging deposits, exchanges, transfers, and payments.
Still, the key is to log, monitor – and in some cases, score – each transaction to ensure your crypto business remains compliant with everchanging AML regulations.
SEON’s anti-fraud tools are designed to detect suspicious usage and uncover hidden fraudsters with machine learning and real-time data enrichment.
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Transaction monitoring and transactional behavior tend to go hand in hand to improve crypto AML. Let’s see how.
A key part of transaction monitoring is to understand how people buy, sell and exchange crypto on your site. You should also look out for any anomalies.
In the example below, we’ve set up an AML rule designed to help us identify any 200% increase in transactions over a 24-hour period.
This rule will add 20 points to the transaction’s risk score. Depending on the total score, you can send the transaction for review or automatically decline it based on your risk appetite.
In the US, AML regulations dictate that you should monitor transactions above $3000. In the EU, customer due diligence measures must be applied for those above €10,000.
And while there is little consistency between thresholds worldwide, the good news is that monitoring large transactions is extremely easy with SEON.
You simply need to create a rule that flags every transaction above your desired threshold. This is what it looks like in the scoring engine dashboard:
In this scenario, we’ve decided to look at transactions above $3,000 and to send them for manual review by the risk team. You can also set your desired currency, even working with custom values depending on the token or cryptocurrency you’re monitoring.
Hopefully, by the time a new user finishes their digital onboarding on your crypto platform, you should have performed all the right KYC and due diligence checks.
But the early days of a new account are also the most important to monitor for inconsistencies. This is precisely why we recommend setting up the following risk rule, which flags accounts receiving more than 10 deposits within 24 hours of onboarding:
Of course, only you will be able to decide what counts as an average or suspicious amount of deposits.
But once you have, it is just as easy as editing one custom field in the SEON dashboard, and you can even set up multiple rules with different risk scores depending on the number of deposits you want to flag.
As a full end-to-end fraud tool, SEON lets you monitor user and transaction data. Such data can be logged, scored via fraud detection risk rules, and used to decide if you should flag the account as risky and automate next steps.
You can also use SEON’s transaction monitoring data as part of your SAR and AML checklist audits. And it’s all based on real-time data that doesn’t add friction or extra verification steps for your customers.
More importantly, we provide a one-stop-shop solution to remain compliant in the face of increasing regulations, reduce fraud rates as attacks show no signs of slowing down, and understand your crypto customer’s online behavior. You can find out more by signing up for a free, no-card-required trial or booking a demo with us.
Partner with SEON to reduce fraud rates in your business with real time data enrichment, granular reporting, and advanced APIs.
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Bence Jendruszák is the Chief Operating Officer and co-founder of SEON. Thanks to his leadership, the company received the biggest Series A in Hungarian history in 2021. Bence is passionate about cybersecurity and its overlap with business success. You can find him leading webinars with industry leaders on topics such as iGaming fraud, identity proofing or machine learning (when he’s not brewing questionable coffee for his colleagues).
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