Bitcoin is one of the most used currencies commonly used to trade on an exchange and over its counter. It is common in places where exchanges or the trades cannot operate for more than $50,000 which is so-called “block trades.” There is a barrier for the people who want to become the OTC (over the counter) trader because capital is required to be an OTC trader.
There work on the size of the operation; the OTC traders use many platforms like Cocola, Local bitcoins, their websites, a physical store or simply a telegram handle with the email address to run their business.
Managing the Legal Risk
The individual who manages to become an OTC trader has to face a variety of risk. The first risk that can be a problem for them is they can be lured in the money laundering. As the exchange of bitcoins is unauthorized in some of the places including Hong Kong. The existing rules and regulation mandate the traders to perform their trade with due diligence on their counterparts.
You should guard against the ML/TF risks […] by increased vigilance in assessing the ML/TF risks of customers as well as monitoring and detecting unusual or suspicious transactions,” a circular from the Hong Kong Customs and Excise Department reads.
The Scam and the Scheme
In spite following your client diligently as well as the money laundering procedures don’t save the traders from becoming a victim of scams as well as the schemes that target them daily. The phishing emails from different sources always attempt to obtain the email password and other cloud storage credentials. Fraudsters can use the old information from the inbox to contact the previous client and redirect the funds to the wallet of the fraudsters. They can pose as a trusted buyer and ask for the Bitcoin transfer upfront.
If the attacker can read your conversations, then the attacker can inject himself in between the conversation and direct the money in his account. In most of the schemes, the OTC traders have exchanged the income from other scams and converted them into bitcoins. The moving illicit money with bitcoin may attempt to convince the traders to complete the process of KYC. The scammers then contact the OTC as a victim and ask to buy the bitcoin in the same amount as mentioned on the ticket. The scammer will submit the victim’s document and will receive the trader’s information including the account number and other credentials.
The scammer will use the document to gain the trust of the victim and will encourage making a payment. The victim is under the impression that they have the personal information of the seller and it matches the information from the bank; they can later take the help of the police. Once the victim makes the deposit and releases the bitcoin, the scammer disappears.
Protecting yourself from the fraud
Verify the authenticity of the funds when it comes to bitcoin. As the system is open, it allows anyone and everyone to inspect it until the person gets satisfied. If anyone contacts to sell the bitcoin they go to ask the address of the bitcoin. The signed piece of data is the best proof that you can provide to the seller as a challenge. No doubt the bitcoins give huge profits, but they require a lot of skill and attention.