Data Sharing Gains Urgency in Crypto Crime Fight

Data sharing is becoming a crucial element in the global fight against financial crime in the cryptocurrency sector. As fraudulent activities continue to evolve and exploit the digital nature of crypto assets, the need for a more robust and collaborative compliance framework is becoming increasingly evident. In 2024, cryptocurrency scams reportedly accounted for $9.9 billion in losses, with projections for 2025 suggesting even higher figures [1]. These scams span both traditional fraud mechanisms repurposed for the digital space, such as Ponzi schemes and pump-and-dump tactics, and newer forms like address poisoning.

A growing concern is the use of the crypto sector as a laundering channel for illicit funds generated in traditional finance. The difficulty in detecting and preventing these activities is compounded by the current lack of comprehensive Anti-Money Laundering (AML) controls, with nearly 90% of crypto registration applications in the UK failing due to weak AML and fraud prevention measures [1]. This highlights the urgent need for improved safeguards.

Industry efforts to combat fraud, such as scam flagging tools and disruption operations, are commendable but insufficient when conducted in isolation. To effectively address the global fraud epidemic, there must be a bold shift toward cross-sector, public-private data sharing. In traditional finance, data sharing between financial services and telecoms in Singapore, and voluntary schemes in Australia and the UK, have become standard practice in combating fraud [1]. The digital assets community must now be integrated into these initiatives to create a more secure and resilient financial ecosystem.

Three key actions are necessary to move forward. First, the limited use of crypto as a mainstream payment method means that criminals still rely heavily on fiat on-ramping and off-ramping processes. Failing to share data across these points undermines the effectiveness of fraud prevention efforts [1]. Second, the use of crypto in laundering fraud proceeds presents a clear AML challenge. Effective defenses require data flows from upstream in the value chain to identify and block high-risk individuals [1]. Third, while the will to tackle fraud is growing in the digital asset sector, compliance remains a relatively new discipline. Leveraging data and experience from established fraud prevention experts in other sectors can help close this gap.

The UK offers a promising environment for advancing cross-industry data sharing. Recent statements by the UK’s Information Commissioner’s Office emphasize that data protection laws should not hinder fraud prevention efforts. Additionally, the Data (Use and Access) Act 2025 reinforces the legitimacy of sharing data for crime prevention [1]. The regulatory landscape is also shifting to include digital assets under the same consumer protection rules as traditional finance, with the Financial Conduct Authority identifying data sharing as a key tool in combating fraud proceeds laundering.

The UK already has a well-established financial crime data-sharing ecosystem, including initiatives like the Joint Money Laundering Intelligence Taskforce. Opening these to the digital assets industry could accelerate progress in fraud prevention. Given these favorable conditions, the UK is well-positioned to lead by example in this critical compliance frontier.

Source: [1] Data sharing is the next crypto compliance frontier (https://cointelegraph.com/news/data-sharing-compliance-frontier?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound)