How Does Crypto Transaction Tracking Help Crypto Businesses?

Merkle Science Marketing
4 min readApr 6, 2023

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In this post, we will explain how crypto transaction monitoring can benefit crypto businesses and the tools available for monitoring them. We will also mention how blockchain technology can be leveraged by financial institutions — crypto exchange, private blockchains — for enhanced due diligence.

Compliance

Crypto transaction tracking is the process of monitoring cryptocurrency transactions on the blockchain network. It helps businesses track and monitor transactions in real-time, providing them with important insights into their operations. It assists law enforcement in tracking criminals. Continuous monitoring allows a compliance team to set customized alert thresholds for risky transactions, with different thresholds for different types of transactions. This helps institutions comply with cryptocurrency transaction monitoring standards and AML requirements.

Sanctions Screening

Sanctions screening is an important process in the crypto industry to prevent money laundering and other illicit activities. Sanctions are restrictions imposed by governments against certain countries, entities, or individuals that pose a risk to political and economic stability. Sanctions screening aims to identify and prevent transactions involving sanctioned entities or individuals. It is especially important when trading with companies or agencies that operate in territories containing multiple sanctions.

Implementing sanctions screening in the crypto industry faces several challenges. One of the challenges is the high level of anonymity associated with cryptocurrency transactions, which makes it difficult to identify the parties involved in a transaction.

Another challenge is the fast transaction speeds, which require real-time monitoring and analysis of transactions to detect and prevent illicit activities. Additionally, the regulatory landscape is complex and evolving rapidly, making it challenging for businesses to keep up with the latest sanctions and compliance requirements.

The use of blockchain analytics and KYT systems can help address some of these challenges by providing continuous data improvements and new asset coverage.

  • Blockchain analytics can help with sanctions screening in the crypto industry by providing comprehensive screening of transactions against the OFAC list and other sanctions lists. Blockchain analytics can also help identify clustering, direct/indirect exposure, and other risk factors associated with transactions.
  • By using blockchain analytics, businesses can monitor transactions in real-time and detect suspicious activities that may be indicative of money laundering or other illicit activities. Additionally, blockchain technology can facilitate the development of alert generation that advances cryptocurrency platforms one step closer to effective AML/CFT compliance programs.

However, legacy blockchain analytics solutions face a limitation in that they only enable compliance teams to screen against the OFAC list on a single-asset basis. Therefore, businesses must use comprehensive blockchain analytics solutions that provide a holistic screening approach to ensure compliance with sanctions regulations.

Regulations

Transaction monitoring helps institutions comply with regulations by aiding them in identifying unusual or suspicious activity that must be reported to regulatory authorities. The Monetary Authority of Singapore (MAS), the New York Department of Financial Services (NYDFS), and the UK Financial Conduct Authority (FCA) are examples of regulators enforcing transaction monitoring globally. The NYDFS has issued a final anti-terrorism transaction monitoring and filtering program rule. The FCA has also issued guidance on transaction monitoring and suspicious activity reporting . MAS has issued guidelines on anti-money laundering and countering the financing of terrorism, which includes transaction monitoring requirements .

It also helps institutions verify the incoming source, legitimate existence of the ultimate beneficial owner, and destination of the outgoing digital money. A good transaction monitoring system should be able to instantly identify suspicious transactions and create alarms.

By complying with cryptocurrency transaction monitoring standards, institutions can ensure they are well regulated and secure. Many institutions use traditional rules-based transaction monitoring systems to tackle emerging and more complex financial crime. They can develop a comprehensive suspicious activity report around cryptocurrency money laundering due to illicit activity and continuously track the illicit funds.

Fraud Detection

Another benefit of crypto transaction tracking is that it helps financial services providers identify potential fraud and money laundering activities. Monitoring tools can flag suspicious transactions, which can then be investigated further. This is especially important for businesses that are involved in crypto risk compliance and blockchain transaction monitoring. By identifying and reporting suspicious activity, businesses can help prevent fraudulent activities and comply with regulatory requirements. Another key element of compliance risk is to monitor visitor behavior that could potentially be a source or end point of a larger criminal activity.

There are several blockchain analytics tools which help in crypto monitoring and are available for businesses to track transactions. These tools use advanced algorithms to analyze blockchain data and identify suspicious activity around the use of virtual currency. They also provide businesses with detailed reports on their digital asset transactions, allowing them to make informed decisions about their operations.

In addition to fraud prevention, crypto transaction tracking can also help businesses improve their operations. By analyzing crypto asset transaction data, businesses can identify trends and patterns that can help them make better decisions. For example, they can identify which products or services are most popular among customers, allowing them to tailor their offerings accordingly.

In conclusion, crypto transaction tracking and transaction monitoring are native blockchain solutions for businesses in the crypto industry to tackle financial crime. It helps comply with regulatory requirements, prevent fraud and illegal activity around digital currency, and improve their operations. As a business involved in crypto risk compliance, transaction monitoring, and regulations, it’s important to ensure that your operations are secure and compliant. Using the right tools and strategies can help you achieve this goal.

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