The nature of cryptocurrency fraud is shifting abroad from exchange hacks, and toward Ponzi-fashion frauds, pyramid schemes and exit scams. A massive 533% rising in the value of such crimes ways that every bit misappropriated funds are laundered, the traditional banking arrangement is increasingly exposed to risk under upcoming Fiscal Action Task Force (FATF) rules. That'south the conclusion reached past CipherTrace, a cryptocurrency intelligence firm, in a report released today.

The Travel Rule requires virtual currency businesses to "obtain, hold and transmit required originator and beneficiary information in guild to identify and report suspicious transactions, monitor the availability of data, have freezing actions and prohibit transactions with designated persons and entities."

The rule will apply to the 37 members of the FATF, including the Us, Communist china, Japan, South korea, and many European countries. It is slated for implementation in June 2022.

Banks at risk?

Despite a significant 160% year-on-yr escalation of losses suffered by cryptocurrency users, exchanges, and investors — from $1.74 billion in 2022 to over $4.5 billion in 2022 — information technology's not only the crypto manufacture that stands to lose every bit a direct result of increased criminal activity. According to CipherTrace'due south enquiry, the typical acme 10 U.S. bank unknowingly facilitates approximately $two billion in illicit cryptocurrency transactions each yr. While banks paid a total of over $six.2 billion in Anti-Money Laundering (AML) fines in 2022, that number could increase as the Travel Rule is introduced.

"Every bit crypto-assets become increasingly entangled in traditional financial services, AML and CTF [Counter-Terror Financing] compliance risks are on the rise," said Stephen Ryan, COO of CipherTrace. "Virtual assets are at present pervasive in bank accounts and payment networks, and banks must find ways to deal with the risks. Finer mitigating cryptocurrency risks requires equipping compliance officers with the best tools and intelligence to gain visibility into this new nugget class."

CipherTrace CEO David Jevans continued:

"Similar them or not, banks have a lot more virtual assets lurking in their accounts and payment networks than most in the industry had previously idea. Banks need new capabilities to ferret out illicit MSBs [Money Service Businesses], terrorist financing, and other major sources of take chances."

Scams on the rise

Although the total value of thefts and hacks decreased by 66% over 2022, losses suffered by straight cryptocurrency industry participants rose to $4.5 billion, driven past the increase in the amount misappropriated through scams.

CipherTrace dubbed 2022 the year of the "Malicious Insider," explaining that the trend of events such every bit the disappearance of funds from the QuadrigaCX and IDAX exchanges are count as "insider" jobs.

While the decrease in security hacks is encouraging, the "logarithmic rise" in losses to insider-perpetrated scams means that cryptocurrency industry participants demand to continue to exercise farthermost caution in their investment research.