An Unseen Practice of P2P and OTC Trading Platforms


While crypto has always been scrutinized for potentially driving illicit transactions, the limelight has been intensified recently, especially on leading exchanges with accusations of being used by criminal and terrorist groups. Binance’s recent historic settlement with the US Department of Justice over criminal changes has come as a warning sign for all platforms. To stay in regulators’ good books, crypto exchanges are monitoring funds tied to illicit activities even more actively than ever.

This is why crypto hygiene has become more important than ever. Particularly in peer-to-peer (P2P) and over-the-counter (OTC) trading, the significance of this factor cannot be overstated. It’s a frequent yet underreported occurrence that crypto exchange platforms freeze client accounts due to suspected illicit activities or exposure to sanctions. While such measures are essential for maintaining the integrity and legality of trading platforms, they often catch users off guard, highlighting a gap in general awareness and understanding.

Due to the media almost always focusing on the sensational aspects of crypto, these concerns often receive less attention, and the users end up suffering the most. However, such outcomes can be easily avoided by maintaining the foundational practices of crypto hygiene in P2P and OTC transactions.

The Recent Case Considerations: AMLBot’s Insightful Intervention

Centralized exchanges and custodian wallets have a key responsibility to ensure strict regulatory adherence. So, it’s not uncommon for them to take overreaching actions when suspecting even the smallest of misconduct in a chain of transactions. A prime example of this can be drawn from a recent case handled by our AMLBot team.

In this case, a client engaged in a fiat-to-stablecoin exchange, converting USD 200k to USDT, encountered an unexpected hurdle when the exchange flagged his transactions as suspicious. The platform took prompt action to freeze his assets, based on a suspected connection to sanctions.

The client, seeking to prove his innocence and the legitimacy of his funds, turned to AMLBot for assistance. AMLBot’s investigation process involved a meticulous risk assessment of the client’s wallet and his transaction history. We found that while there was a minor exposure to sanctioned assets after receiving the exchanged USDT, the client himself was not directly associated with any sanctions nor engaged in laundering illicit funds. This subtle distinction was crucial, as the client’s unfortunate situation was a result of inadvertently receiving crypto assets with sanction exposure, rather than any direct violation or malicious intent.

Fortunately, the exchange recognized the validity of AMLBot’s analysis and also conducted its internal investigation, which reached the same conclusions. The client was ultimately able to reclaim his assets. This case underscores the complex nature of crypto transactions and the potential for misinterpretation or overzealous compliance measures by platforms. So, how can users mitigate the risks of P2P and OTC transactions and ensure this doesn’t happen to them?

Ensuring Crypto Hygiene in P2P and OTC Trading

Cryptocurrencies are not just mere investment tools today, they have evolved into a much greater asset class. From taking salaries in stablecoins to making international business transactions, the use case of digital assets has and will continue to increase rapidly. And, with most regions still far from regulatory clarity, P2P and OTC trading will remain a core medium of transactions. So, with this growing adoption, users need to adopt certain measures to ensure that their priced possessions are not restricted or frozen by their custodian platforms, just like the case mentioned.

Instances like the one AMLBot handled are not isolated; rather, they reflect a broader pattern of challenges within the crypto community. This underscores the necessity for traders to be vigilant and proactive in their security measures. Often, individuals are unaware of where to start in protecting themselves and their transactions, making it imperative to understand and implement the following rules:

  1. Escrow services: Utilize reputable escrow services for P2P and OTC transactions Escrow services act as a neutral third party, ensuring that both sides of a transaction fulfill their obligations before any funds or assets change hands. In P2P and OTC trading, where transactions are typically larger and involve a degree of trust between parties, using a reputable escrow service is crucial. These services provide a layer of security, preventing instances of fraud and ensuring that the terms of the trade are met by both parties. They hold the assets until both parties have verified that the transaction conditions are satisfied. When selecting an escrow service, traders should look for established providers with a proven track record of integrity and reliability.
  2. Identity verification: Verify the identity and reputation of trading counterparties. Knowing who you are trading with is fundamental in the crypto world. Thorough verification of a counterparty’s identity and reputation can significantly reduce the risk of fraudulent activities. This involves checking the counterparty’s transaction history, reading reviews from other users, and confirming their identity through multiple sources. In some cases, it might involve background checks or using services that provide ratings or trust scores for individuals in the crypto space. This verification process helps ensure that you are dealing with a legitimate party and not inadvertently engaging in a transaction that could expose you to financial loss or legal complications.
  3. Secure communication: Communicate through encrypted and secure channels protecting sensitive information during communication is as vital as securing the transaction itself. Utilizing encrypted and secure communication channels helps safeguard personal and transactional details from being intercepted or accessed by unauthorized parties. This includes avoiding unsecured public Wi-Fi networks for transaction-related communications and using encrypted messaging apps or secure email services. Maintaining operational security in communications prevents sensitive information from falling into the wrong hands, which could lead to targeted phishing attacks or identity theft.

To Sum It Up

Given the complexity and evolving nature of the cryptocurrency market, staying informed and being proactive in maintaining crypto hygiene is not just advisable but critical. Traders should not only rely on platforms and services to safeguard their interests but must also take personal responsibility for the security of their transactions. This proactive approach in P2P and OTC trading environments ensures a safer trading experience, protecting one’s assets and contributing to the overall integrity of the cryptocurrency ecosystem.

While crypto has always been scrutinized for potentially driving illicit transactions, the limelight has been intensified recently, especially on leading exchanges with accusations of being used by criminal and terrorist groups. Binance’s recent historic settlement with the US Department of Justice over criminal changes has come as a warning sign for all platforms. To stay in regulators’ good books, crypto exchanges are monitoring funds tied to illicit activities even more actively than ever.

This is why crypto hygiene has become more important than ever. Particularly in peer-to-peer (P2P) and over-the-counter (OTC) trading, the significance of this factor cannot be overstated. It’s a frequent yet underreported occurrence that crypto exchange platforms freeze client accounts due to suspected illicit activities or exposure to sanctions. While such measures are essential for maintaining the integrity and legality of trading platforms, they often catch users off guard, highlighting a gap in general awareness and understanding.

Due to the media almost always focusing on the sensational aspects of crypto, these concerns often receive less attention, and the users end up suffering the most. However, such outcomes can be easily avoided by maintaining the foundational practices of crypto hygiene in P2P and OTC transactions.

The Recent Case Considerations: AMLBot’s Insightful Intervention

Centralized exchanges and custodian wallets have a key responsibility to ensure strict regulatory adherence. So, it’s not uncommon for them to take overreaching actions when suspecting even the smallest of misconduct in a chain of transactions. A prime example of this can be drawn from a recent case handled by our AMLBot team.

In this case, a client engaged in a fiat-to-stablecoin exchange, converting USD 200k to USDT, encountered an unexpected hurdle when the exchange flagged his transactions as suspicious. The platform took prompt action to freeze his assets, based on a suspected connection to sanctions.

The client, seeking to prove his innocence and the legitimacy of his funds, turned to AMLBot for assistance. AMLBot’s investigation process involved a meticulous risk assessment of the client’s wallet and his transaction history. We found that while there was a minor exposure to sanctioned assets after receiving the exchanged USDT, the client himself was not directly associated with any sanctions nor engaged in laundering illicit funds. This subtle distinction was crucial, as the client’s unfortunate situation was a result of inadvertently receiving crypto assets with sanction exposure, rather than any direct violation or malicious intent.

Fortunately, the exchange recognized the validity of AMLBot’s analysis and also conducted its internal investigation, which reached the same conclusions. The client was ultimately able to reclaim his assets. This case underscores the complex nature of crypto transactions and the potential for misinterpretation or overzealous compliance measures by platforms. So, how can users mitigate the risks of P2P and OTC transactions and ensure this doesn’t happen to them?

Ensuring Crypto Hygiene in P2P and OTC Trading

Cryptocurrencies are not just mere investment tools today, they have evolved into a much greater asset class. From taking salaries in stablecoins to making international business transactions, the use case of digital assets has and will continue to increase rapidly. And, with most regions still far from regulatory clarity, P2P and OTC trading will remain a core medium of transactions. So, with this growing adoption, users need to adopt certain measures to ensure that their priced possessions are not restricted or frozen by their custodian platforms, just like the case mentioned.

Instances like the one AMLBot handled are not isolated; rather, they reflect a broader pattern of challenges within the crypto community. This underscores the necessity for traders to be vigilant and proactive in their security measures. Often, individuals are unaware of where to start in protecting themselves and their transactions, making it imperative to understand and implement the following rules:

  1. Escrow services: Utilize reputable escrow services for P2P and OTC transactions Escrow services act as a neutral third party, ensuring that both sides of a transaction fulfill their obligations before any funds or assets change hands. In P2P and OTC trading, where transactions are typically larger and involve a degree of trust between parties, using a reputable escrow service is crucial. These services provide a layer of security, preventing instances of fraud and ensuring that the terms of the trade are met by both parties. They hold the assets until both parties have verified that the transaction conditions are satisfied. When selecting an escrow service, traders should look for established providers with a proven track record of integrity and reliability.
  2. Identity verification: Verify the identity and reputation of trading counterparties. Knowing who you are trading with is fundamental in the crypto world. Thorough verification of a counterparty’s identity and reputation can significantly reduce the risk of fraudulent activities. This involves checking the counterparty’s transaction history, reading reviews from other users, and confirming their identity through multiple sources. In some cases, it might involve background checks or using services that provide ratings or trust scores for individuals in the crypto space. This verification process helps ensure that you are dealing with a legitimate party and not inadvertently engaging in a transaction that could expose you to financial loss or legal complications.
  3. Secure communication: Communicate through encrypted and secure channels protecting sensitive information during communication is as vital as securing the transaction itself. Utilizing encrypted and secure communication channels helps safeguard personal and transactional details from being intercepted or accessed by unauthorized parties. This includes avoiding unsecured public Wi-Fi networks for transaction-related communications and using encrypted messaging apps or secure email services. Maintaining operational security in communications prevents sensitive information from falling into the wrong hands, which could lead to targeted phishing attacks or identity theft.

To Sum It Up

Given the complexity and evolving nature of the cryptocurrency market, staying informed and being proactive in maintaining crypto hygiene is not just advisable but critical. Traders should not only rely on platforms and services to safeguard their interests but must also take personal responsibility for the security of their transactions. This proactive approach in P2P and OTC trading environments ensures a safer trading experience, protecting one’s assets and contributing to the overall integrity of the cryptocurrency ecosystem.





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