9. SIM-Swap Scams: SIM-swap scams occur when someone obtains a copy of your cellphone’s SIM card to access your phone data. With a user’s data in hand, scammers can steal two-step authentication codes required to open their crypto wallet, allowing the scammer access to account funds and information. 10. Fake Crypto Exchanges and Crypto Wallets: Inexperienced crypto users may be lured into investing in a new high-value cryptocurrency exchange opportunity or a “cheap” Bitcoin that doesn’t exist. Scammers advertise the investment at a price under market value, and the victim is unaware that the exchange is fake until their investment is lost. A fake crypto wallet is a malware scam that infects a computer and eventually steals the user’s private key. Recognizing Cryptocurrency AML/CFT Red Flags Consumers must be vigilant and conduct thorough research before engaging with any cryptocurrency platforms or investments. Crypto schemes vary in sophistication and complexity, and anyone can fall victim. Financial institutions can help their clients avoid falling prey by understanding and communicating the red flags offered by the FTC: • Scammers will guarantee profits or significant returns. No crypto investment is guaranteed to make money, let alone big money. No legitimate entity will require you to buy crypto. Not to solve a problem, not to protect your money. That’s a scam. • Never mix online dating and investment advice. If a new love interest wants to show you how to invest in crypto or asks you to send them crypto, be wary of a scam. • No legitimate business or government will ever email, text or message you on social media to ask for crypto. Legitimate fundraisers will never demand that you buy or pay with crypto. • Never click on a link from a random text, email or social media message, even if it seems to come from a company you know. • Don’t pay anyone who contacts you unexpectedly and demands payment with crypto. Urgency is a red flag. • Never pay a fee to get a job. If someone asks you to pay upfront for a job or says you should buy crypto as part of your job, it’s a scam. • Use reputable crypto wallets and platforms with solid security measures, such as multi-factor authentication. • Beware of “too good to be true” investments — if it seems off, it probably is. • Educate yourself and vulnerable loved ones about common scams, especially seniors and individuals with diminished capacity, especially romance schemes that evolve into crypto cons. In a Joint Statement on Crypto-Asset Risks to Banking Organizations, the regulatory agencies stated that their examiners will focus on risk assessments relating to crypto custody services and other distributed-ledger technology products and services. Your AML risk assessment must be enhanced to include a thorough analysis of crypto risk within your financial institutions, along with all mitigating factors. How To Avoid Crypto Fraud: Protecting Your Clients The good news? Financial institutions aren’t powerless. They can help protect consumers and fight back against fraud. Here’s what financial institutions can do: • Invest in fraud detection software like Abrigo’s AML software solutions, which flag suspicious activity and alert the client of potential fraud. • Monitor unusual transactions, such as large transfers to high-risk regions or activity on less reputable digital currency exchanges. • Conduct regular staff training to recognize red flags and respond quickly. • Engage your customers with educational resources to empower them against scams. • Employ customizable rules that are tailored to your institution’s specific risk profile, including monitoring senior accounts or transactions involving privacy coins. Conclusion: The Future of Crypto Fraud The threat of crypto scams underscores the need for constant vigilance. Whether it’s investment opportunities that seem too good to be true or the peculiar urgency of a stranger’s request for crypto, recognizing the red flags can help prevent falling victim to crypto fraud. With the right tools and proactive strategies, you can protect your clients — and your reputation — from these emerging threats. Crypto is most likely here to stay, and so is the fight against fraud. Fraud detection can be resource-intensive, but with Abrigo’s “human-in-the-loop” approach, the technology works alongside investigators, streamlining efforts and ensuring critical cases get the attention they deserve. Together, financial institutions and consumers can navigate this threat and build a safer investment future for everyone. Terri Luttrell is a seasoned AML professional, former director and AML/OFAC officer with over 20 years in the banking industry, working in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size. Colorado Banker 26
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