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ARTICLE · 27 JUNE 2024

Crypto Red Flags For Financial Institutions

Hogan Lovells Cadwalader
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On May 23, 2024, the Joint Chiefs of Global Tax Enforcement (the "J5") published an advisory note for financial institutions, identifying red flags associated with crypto-related illicit activities.

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On May 23, 2024, the Joint Chiefs of Global Tax Enforcement (the "J5") published an advisory note for financial institutions, identifying red flags associated with crypto-related illicit activities. The J5 is a collaborative partnership of tax authorities from the U.S., UK, Canada, Australia and the Netherlands. The advisory note is not the first time the J5 has addressed crypto; in 2022, the J5 released a set of red flag indicators highlighting risks associated with non-fungible tokens.

In the advisory note, the J5 identifies risk indicators it believes play a pivotal role in enabling financial institutions to detect and report money laundering, tax evasion and other illicit activities involving crypto. The risk indicators are numerous and address crypto asset layering, geographical risk, high-risk counterparties, new client onboarding, ransomware and cybercriminal risk. One such risk indicator is that sending or receiving from crypto mixers may suggest money

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