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3 Unique Procedures to Counter Money Laundering in India

 

The main weapon used by money launders to launder cash is bitcoin and other cryptocurrencies alternatives. India’s cryptocurrency exchanges deployed their own KYC regulations and anti-money laundering protocols for users.

Nishal Shetty, CEO of India’s largest cryptocurrency exchange WazirX said we follow all the necessary protocols such as asking users for ID and address proof like Aadhar and PAN Card. Our platform also emphasizes that money must come from the concerned customers' bank account and not from the third party bank account.

Cryptocurrency exchanges use various procedures to conduct KYC, one such method is penny drop. Penny drop method helps in verifying the user’s personal information and bank details, for example, a token of 10 rupees is transferred to the user’s account to confirm bank account details. This method confirms the account holder’s name as registered with the bank, to the transferor.

Neeraj Khandelwal, co-founder of CoinDCX stated that “for corporate clients who are given higher trading limits, more documents like articles of association, board resolutions authorizing crypto investment, etc. are needed”.

Chainlink is one of the most familiar software among cryptocurrency exchanges which helps in identifying rogue addresses. Khandelwal further stated “we use a globally renowned crypto AML tool to check for blacklisted crypto addresses. If a legitimate user has got crypto from such an address, maybe through peer-to-peer and he or she wants to transact on our exchange, we ask for additional KYC such as source of funds and profession”.

Bitcoins and other cryptos are not held in bank or demat accounts contrary to other financial assets such as stocks, bonds, and FDs. The cold wallet is the method that can be used for holding on to the bitcoins and other cryptos, it is the hardware device or even paper that is not linked to the internet. Therefore, cold wallets cannot be easily seized by law enforcement authorities.

In 2020, cybercriminals started laundering four times more money

According to the Kaspersky Fraud Prevention report, in 2020, attackers most often tried to make unauthorized money transfers by using a compromised account (in 36% of cases) or by infecting the device with malware (31%).

In 2019, malware attacks were the absolute leader, 63% of the total number was recorded. The share of incidents related to money laundering increased fourfold this year and amounted to 12%.

Hackers use complex and multi-stage money laundering schemes: they change accounts, companies, presentation, currency, and jurisdiction many times. In this regard, financial organizations need to build a cybersecurity system in such a way as to minimize the possibility of hacking, as well as to promptly monitor any illegitimate actions.

In e-commerce, the most common form of fraud is the abuse of welcome bonuses in loyalty programs. The scheme is quite simple: attackers massively register accounts in the marketplace, receive welcome bonus points, and buy products with a discount under the bonus program. For example, in one case, a fraudster bought diapers and candy and then sold the purchased goods at a profit on popular trading platforms. In the future, the created accounts were not used, their average life was 1-2 days.

"As before, one of the most common methods of fraud is the use of applications with remote access tools. Also, the attackers have mastered the scheme of spoofing numbers for incoming calls. Bank customers, unfortunately, are often deceived, because they are used to the fact that a real call from a financial institution can be made from different numbers. The Kaspersky Fraud Prevention platform, aimed specifically at banks and other financial institutions, allows tracking the activity of hackers by analyzing a variety of parameters, including user behavior, device parameters, and the presence of malicious or dangerous programs," said Ekaterina Danilova, Business Development Manager at Kaspersky Fraud Prevention.