• L Xu and M Bacina

Project Participate; the secret indicators of suspicion

With the maturing of the digital asset industry, digital asset companies globally have taken a proactive stand against criminal activity through establishing Project Participate.


Project Participate is a collaboration of the world's leading digital asset companies to discuss, on a strictly confidential basis, indicators of suspicious transactions. Companies involved include Scotiabank, Binance, Bitfinex, Tether and Chainanlysis.


The confidential document titled "Indicators of Suspicion for Virtual Asset Service Providers" has been described by Forbes as the digital assets industry's very own Valachi papers . The document was formed in March 2019 and formally announced in June of the same year at Europol’s 6th Cryptocurrency Conference. The document goes to how the Virtual Asset Service Providers (VASP's) can better detect and deter the potential criminal use of their platforms.


Peter Warrack, Chief Compliance Officer of Bitfinex has stated that:


Effective SAR reporting cannot occur without transaction monitoring systems informed by identified indicators of suspicion... Understanding these indicators is important for effective compliance not only for virtual asset-to-virtual asset transactions, but also for the ‘on/off ramps’ between virtual assets and fiat currency.

The Financial Action Task Force (FATF) released guidance for governments, financial institutions and other relevant entities last year for a risk-based approach to virtual assets and VASP's. However the FATF guidance did not specify in detail what constitutes suspicious activity or how to identify such activity in the context of traditional financial service "red flags". The Project Participate report is aimed at addressing the limitations of the FATF guidance for the large industry players.


However, the effectiveness of the confidential document is that it does not come into the hands of criminals or is widely circulated so that the information becomes redundant. The result of limited publication of the documentation is that smaller industry players in the digital asset industry are disadvantaged due to information asymmetry and become targeted by criminals due to their lack of awareness of the "red flags".

© Michael Bacina. All rights reserved

  • White LinkedIn Icon