CipherTrace: About 90% suspicious crypto transactions are slipping banks’ radar

Blockchain forensics company, CipherTrace said in a recent report that financial institutions around the world were able to report 134,500 suspicious crypto transactions over the last two years. However, the reported cases may not entirely cover for the whole illicit transactions made with virtual currencies. CipherTrace asserts that a significant percentage of suspicious crypto transactions still bypass banks’ radar. 

Banks’ ought to regulate suspicious crypto transactions

In the report published on Wednesday, CipherTrace began by citing Financial Crimes Enforcement Network (FinCEN) regulation saying that it is the core duty of financial institutions to detect and report suspicious activity that relates to bad actors. Virtual assets service providers (VASPs) are also not left out in the regulation task. However, all these entities are using inadequate tracking tools.

Several financial institutions have deployed home-grown systems in order to detect accounts related to cryptocurrencies and suspicious crypto transactions. Majority of the systems do so by trying to name-match certain digital currencies, crypto exchanges, and other VASPs, starting from the point where funds are being sent or received between customers and crypto companies. 

Banks’ are doing it wrongly

According to the blockchain forensics company, this approach most likely returns false positives, thereby letting huge suspicious crypto transactions to continuously pass. This is largely because there are cases where a cryptocurrency-related name might be mistaken by those name-matching machines as a non-crypto related name, and vice versa. 

“This becomes obvious if you take an exchange like “Gemini,” which is not only associated with the famous exchange run by the Winkelvoss twins, but also with everything from Gemini Middle School in Maine to Gemini the ‘elite interior and exterior wood coating manufacturer.'”

On this note, CipherTrace said that up to 90 percent of suspicious transactions are passing through the banks unnoticed due to inefficiency of tracking machines. The company noted precisely: 

“A typical name-based system may entirely miss up to 70% or more of the crypto exchanges out there, and up to 90% of the actual transaction volume.”