Just as our fiat currencies in traditional banks are susceptible to scammers, so also are our cryptocurrencies and digital assets. The gifts and curses of cryptocurrency are intertwined. Cryptocurrencies have no central regulating bodies or third party issuer. This gift helps to mitigate inflation as a result of government printing money recklessly, and third party charges for financial services. However, it becomes a curse because it facilitates scam easily especially in the absence of third party checks. Without a third party, cryptocurrencies sent to crypto wallets are untraceable and irreversible. Its disadvantages are found in its advantages. The challenge is how can one not get scammed of their crypto assets? How can I keep my digital coins, and non-fungible tokens (NFT) safe from scammers in the crypto marketplace, and how can I avoid financing illegalities such as money laundering, international narcotics trading, or terrorism through my crypto transactions? We shall answer these questions in this article. Your fears and worries are genuine and this article shows you ways you can stop your fears from happening. Lets dive in.
Financial crime activities have been in the limelight and have existed in different forms before cryptocurrency. Moving narcotics money, terrorism financing, and money laundering have happened successfully before blockchain technology was incorporated into money payments. Scammers have swindled people of their monies, money launderers have been in the “business”, and narcotics traders have sourced for money to do their trade long before crypto came into the discussion. This has always been a challenge for law enforcements worldwide. However, cryptocurrency poses a new challenge to law enforcements going after financial criminals and money racketeers. The use of the technology by these criminals is adding an extra layer on the already existing burden carried by law enforcements. Scammers now hide under crypto wallets and addresses while using aliases to successfully finesse people of their hard earned digital assets such as crypto coins and non-fungible tokens (NFT).
Recognising Crypto Scams
Cryptocurrency offers two distinct features that financial criminals exploit. First it offers speed and promptness. Crypto based transactions are easy, arrives on time, and not subject to authority checks as seen in the traditional banking system. The second feature is anonymity. Criminals are able to move large sums of monies under pseudonyms or completely hidden identities, unlike traditional banks where the Know-Your-Customer (KYC) process is important, herein anyone with Internet and a crypto trading app is able to conduct transactions on the open blockchain ledgers and still remain unknown. Scammers may even disguise as popular celebrities or crypto influencers to conduct fraudulent giveaways on social media. Similarly, scammers may create fraudulent initial coin offering (ICO) and non-fungible token (NFT) projects as a means to collect crypto assets from unsuspecting members of the public. To protect your digital assets, it is important to learn how to recognise these scams and avoid them.
How to Avoid Them
Be familiar with these facts:
Crypto is not a get-rich-quick scheme. Beware of celebrities and influencers that promise unreasonable high amount of returns if only you will invest some assets through their crypto wallet and address.
Work with sites that have a robust Know-Your-Customer (KYC) process. You can access one here
Always make sure you are conversant with the person behind a crypto address you are sending assets to. In order words, do a KYC on your own clients too.
In cases of new clients, conduct thorough background checks to know the client’s businesses, portfolio, website/office, and other trusted people who have worked with them in the past. This will help you not to fund illegalities and run into trouble with law enforcements.
Talk to crypto experts about investments opportunities before taking a decision. You can access free crypto advice with our Crypto Advisor .