Tracking Online Identity Fraud to Combat Cryptocurrency Related Crimes

Tracking Online Identity Fraud to Combat Cryptocurrency Related Crimes

Ever since Bitcoin’s association with the notorious dark web marketplace known by the name of The Silk Road, cryptocurrencies have been plagued by the reputation of being used by criminals. The dark website was basically used for the trade of drugs, weapons and any other illicit thing one could think of. Now cryptocurrencies are not only associated with more grisly crimes but with financial crimes and online identity frauds as well.  

Moreover, with its entire presence online, it is also being purposefully used by cybercriminals and online identity thieves. There is, however, some truth to the rumours and allegations made. Some studies show that about half of Bitcoin’s transactions and a quarter of its users are associated with illegal activity.

The details of every transaction of crypto are stored on the blockchain, but those details are not associated with any names, addresses or any other identifying attributes. This anonymity rendered to users through cryptocurrencies automatically enables them to engage in illicit pursuits. Some of the common crimes associated with crypto include;

Money Laundering

Although cryptocurrencies themselves are not supposed to keep the identity of a person anonymous, there are certain illicit exchanges that will allow people to launder money. Fraudulent crypto exchanges in themselves are a huge crypto scam and are mostly made due to lack of regulatory bodies controlling the crypto industries. However, the history of where the money was obtained for trading in the crypto industry remains a glaring question.

However, with governmental bodies moving towards regulating the market, there is hope that such activities could be curbed.

Investment Scams

A lot of traditional methods used to lure investors into investing in the traditional financial sector are also in use in the crypto industry. A number of methods are used by scam crypto exchanges to attract people to invest in what are originally designed to be Ponzi schemes or fake ICOs. Large sums of money are invested by people under the guise of getting unprecedented returns. For a time some of the early investors may even get their promised returns. But such scams are bound to fall back and fraudsters running them will at one point or another runaway with the investors’ money.

Combating Crypto Related Crimes through Online Identity Verification

As easy as it may seem to pull of such scams, they are even easier to identify and therefore avoid. The best course of action in this scenario is to combat such crimes by tracking online fraud. There are ways for Bitcoin and other cryptocurrencies to regain their reputation. KYC and AML regulations may help crypto rebound from its undeserved infamy.

There are some identity verification solutions out there that provide user verification through multiple factor authentications. They also offer AML compliance checks for businesses thus enabling them to keep a check on money laundering activities and curb them as best as possible.

Tracing illegal activity through online identity verification can be just the thing required to restrict illicit activities that take place through cryptocurrencies. ID and document verifications are done by scanning an individual’s ID documents and verifies the individual’s credentials against it. They also offer face verification through facial recognition software that allows the companies to make sure their users are using authentic IDs.

Anti Money Laundering (AML) checks are a way for businesses to make sure their customers are not linked to any financial crimes or on any watchlists issued by international watchdogs. AML compliance by crypto will lead to cleaner business practices in the industry and may even revive the industry’s reputation as a whole.

Regulatory bodies in themselves are also working towards regulating crypto exchanges all over the world. In the US the SEC has set the requirement for exchanges to register as securities exchanges. Other countries are also working towards imposing regulations on the crypto industry in order to protect investor interests.

On the whole, battling crimes associated with cryptocurrencies through online identity verification can prove to be a swooping advantage for the industry as a whole. KYC verifications and AML compliance can end up transforming the way crypto has been dealt up until now.

Leave a Comment