How to be compliant and protect your crypto business from fraud

How to be compliant and protect your crypto business from fraud

Bureau Team
Bureau Team

March 31, 2023

Bureau Team

March 31, 2023

The rapid rise of cryptocurrencies has disrupted the global financial landscape, creating both opportunities and risks for investors. With the entry of new and credible players in the crypto space and the possibilities of blockchain technology, cryptocurrencies have become significant growth drivers. However, the rising number of scams in the crypto space has become a cause for concern for investors, with reports indicating that illicit addresses sent nearly $23.8 billion worth of cryptocurrency in 2022 alone. 

As the crypto industry continues to grow, it is imperative for businesses to prioritise security and regulatory compliance of their operations to prevent any potentially suspicious transactions. With the recent announcement by the Finance Ministry that crypto businesses will now come under the Prevention of Money-laundering Act, 2002, it is clear that regulatory compliance in the crypto space is increasingly important. In this blog post, we will explore the risks and opportunities associated with cryptocurrencies and the need for increased compliance from crypto exchanges to protect investors and prevent illegal activities.

Need for Compliance

Implementing Know Your Customer (KYC) procedures can provide numerous benefits for businesses and their customers alike. Some key advantages of KYC compliance include:

1. Reduced legal risk: By establishing strong KYC (Know Your Customer) protocols, the likelihood of encountering legal disputes or regulatory penalties can be minimised, thereby decreasing potential legal risks.

2. Increased customer trust: Proactive measures to safeguard customer accounts can power user confidence and enhance loyalty, resulting in increased numbers of users and transactions.

3. Reputational damage control: KYC-compliant businesses are better equipped to prevent fraud and defend their reputations in the event of a hack or data breach. In the event of a hack or data breach, KYC compliance can aid in mitigating the damage by providing necessary information to identify affected customers, track fraudulent activity, and improve overall security measures to prevent future incidents.

4. Reduced risk of scams and money laundering: Adding verifiable and authorised govt documents can prevent bad actors from onboarding and allow for freezing accounts linked to criminal activity.

Initiating KYC processes can cause legitimate consumers to become disengaged.  A Deloitte research reveals that at least 38 %  of customers drop out of the onboarding process, often due to frustration with the sheer volume of touchpoints. It is, therefore, essential to create reliable digital customer journeys for onboarding by gathering appropriate information with the least friction possible.

Bureau’s Solutions for Crypto Companies

Bureau offers various solutions for crypto companies to enhance their onboarding process and minimise fraud risk. These solutions include:

Account Opening and Onboarding Offerings

Bureau utilises user inputs, device information, behaviour patterns, digital footprints, and other data to create risk-gauged profiles for each user. This helps companies verify user identities and minimise fraud risk while providing customers with a seamless experience.

  1. Phone and Email Insights: Bureau assimilates data from multiple sources such as email, phone, IP address, and telcos to create risk-profiled identities and measure the likelihood of user inputs belonging to the same persona.
  1. Digital Footprint: Bureau establishes the user's digital footprint by checking the number of social media, e-commerce, and other accounts connected to their email and phone number.

  2. Identity Verification: Bureau verifies user details by cross-referencing them with government databases, utilising Optical Character Recognition (OCR), and performing liveness checks.
  1. AML and Other Checks: Bureau’s comprehensive screening across global sanction lists and watchlists can help identify designated individuals and entities. 

Bureau’s Advanced Risk Mitigation Solutions 

With the advancements in technology, companies and organisations now also have access to sophisticated tools such as device intelligence and behavioural biometrics to combat fraud.

Device Intelligence

Bureau's Device Intelligence solution uses advanced technology such as Device Fingerprinting to seamlessly identify a device based on multiple parameters, including flash data, IP address, operating system, screen resolution, user-agent, and more. Device intelligence can be used to tackle crypto fraud by analysing various data points. Here are some ways device intelligence can help tackle crypto fraud:

1. Fraudulent IP address detection: By analysing the IP address of a device, device intelligence can identify whether it's associated with fraudulent activity. If the IP address is linked to a known fraudster or has a history of fraudulent activity, it can raise a red flag and alert the relevant authorities.

2. Geolocation tracking: By tracking the geolocation of the device, device intelligence can identify whether a transaction is originating from a high-risk location. For example, if a transaction originates from a country known for high levels of crypto fraud, it can be flagged as potentially fraudulent.

3. Device fingerprinting: Device intelligence can create a unique fingerprint for each device based on a variety of factors such as browser type, screen resolution, and more. By comparing the device fingerprint with known fraudster fingerprints, device intelligence can identify whether the device is associated with fraudulent activity.

Device intelligence detects and prevents fraud by analysing device data for unusual patterns and suspicious activities


Various risks associated with using digital devices can be mitigated with the help of the Bureau's device intelligence solution. Some of the key ways in which Bureau can help manage risks are:

1. Managing Hacks in DeFi protocols: DeFi protocols are often targeted by malicious actors who use multiple accounts to perpetrate fraud, such as Flash Loan Attacks, which can drain liquidity from the protocol. Bureau's device fingerprinting technology can help identify each device uniquely, which can aid in managing such risks. By keeping track of the devices used to access the DeFi protocols, Bureau can help detect and prevent fraudulent activity before it can cause damage.

2. Risk Categorization: The presence of red flags on devices can be consumed as raw signals in risk models to categorise users effectively in various risk buckets. This can help businesses comply with regulatory requirements and manage risk effectively. Bureau's device intelligence solution helps businesses enhance their risk management strategies and minimise exposure to risks associated with fraudulent activity.

3. Countering Syndicated Crime: A large part of illicit activities are perpetrated by crime syndicates and features such as location Intelligence can help identify malicious behaviour of syndicated crypto crime rings, which usually are prevalent in specific high-risk geographies. Bureau's device intelligence solution can help identify patterns of fraudulent behaviour associated with particular devices or locations, which can aid in detecting and preventing fraud associated with syndicated crime rings.

4. Hybrid Models to Manage Risk: Bureau's signals on Device Intelligence can be coherently juxtaposed with on-chain risk management models to arrive at a holistic view of any digital persona, thus driving nuanced ways of combating financial crime. Combining on-chain risk management models with device intelligence data can help businesses understand the risks associated with a particular digital persona. This can help businesses to identify and prevent fraudulent activity more effectively.

Behavioral Biometrics

Bureau's Behavioral Biometric technology creates a unique user signature by analysing user behaviour on web or mobile devices. This signature can serve as a highly secure authentication mechanism for digital services, as another human or bot cannot replicate it. Machine learning models are used to learn patterns such as keystroke movements, navigational patterns, screen pressure, typing speed, mobile movements, and device orientation. Once trained, these models can detect behaviours and tag them to individuals.

The parameters analysed by Bureau's Behavioral Biometric solution include keystroke movements, typing speed, shortcut usage, advanced keys, copy-paste behaviour, touch screen behaviour, swiping patterns, pressure on the screen, touch area, device movement, gyroscopic orientations, device movements, and mouse movements whenever available and used in the browser.

Businesses can use Behavioral Biometrics to enhance their security posture and protect against fraud. The technology can identify and flag suspicious behaviour, such as an unusual typing speed or pressure on the touch screen, and alert businesses to potential security threats. This solution can also authenticate users, reducing the risk of account takeover and identity theft.

Know more about Behavorial Biometrics

Behavioral Biometric analyses parameters such as keystroke movements, typing speed

Bureau's Behavioral Biometric solution can address two crucial use cases in the cryptocurrency industry.

1. Securing Hot Wallets:
in the case of securing hot wallets, crypto businesses that offer custodial services or exchanges hosting users' hot wallets run the risk of Account Takeover. With the increasing number of scams and phishing attacks, users may unknowingly share their private keys with hackers, losing funds. By implementing Behavioral Biometrics, businesses can add an extra layer of security while authenticating access to crypto funds managed by any business. This solution can detect and verify a user's unique behavioral patterns, such as keystroke movements, typing speed, and touchscreen behaviour, to ensure that only authorised users can access their wallets.

2. Nudging Responsible User Behaviour: Many crypto asset users are first-time consumers and may not be tech-savvy enough to know best practices while dealing with crypto funds. Behavioral Biometrics can be used to detect if users diligently double-check whether the recipient's wallet address is correct during transfers. This solution can also detect impulsive behaviour and send out automated nudges to make users more cautious and avoid fraud. By nudging responsible user behaviour, businesses can create a safer environment for users to manage their crypto assets.

Key Takeaways

In the rapidly evolving crypto industry, regulatory bodies strive to provide clear guidelines for using crypto-assets. To ensure compliance and prevent fraudulent activities, crypto businesses adopt various risk management measures. At Bureau, we offer comprehensive solutions catering to businesses' compliance needs, from basic checks to advanced tools for mitigating financial crime risks. Our focus is to provide a secure and stable environment for growth while keeping malicious actors out. Contact us to learn more about how our solutions can benefit your business.

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