Scorechain, the leading provider of blockchain analytics, added support for cross-chain transactions for enhanced crypto transaction monitoring.
What are crypto cross-chain transactions?
Cross-chain transactions occur when a user exchanges one crypto asset on one blockchain for another crypto asset on another blockchain. Cross-chain transactions are possible thanks to blockchain interoperability which allows different blockchains to exchange information between them.
Bridges are the medium of communication between two blockchains and come in two types:
- Trust-based bridges, which are centralized, and
- Trustless bridges, which are decentralized.
Cross-chain transfers differ from DEX transactions which occur on the same blockchain network. (Read more: Scorechain is the first crypto AML provider to read through DEX transactions to prevent ML/TF)
Why identifying cross-chain transactions is crucial?
In 2020, the Financial Action Task Force (FATF) issued the “Virtual Assets Red Flag Indicators of Money Laundering and Terrorism Financing” report. In this report, FATF considers as a red flag the action of “Depositing VAs at an exchange and then often immediately
- withdrawing the VAs without additional exchange activity to other VAs, which is an unnecessary step and incurs transaction fees;
- converting the VAs to multiple types of VAs, again incurring additional transaction fees, but without logical business explanation (e.g., portfolio diversification); or
- withdrawing the VAs from a VASP immediately to a private wallet. This effectively turns the exchange/VASP into an ML mixer.”
Cross-chain transfers make it harder to follow the flow of funds. This is why malevolent actors use cross-chain bridges to launder illicit crypto funds from hacks and scams, the most recent example being the FTX hack. It's, therefore, essential to integrate cross-chain transaction analysis into AML/CFT policies for robust transaction monitoring and risk management.
Read more: Scorechain investigates the FTX hack.
How to use Scorechain to identify cross-chain transactions?
Scorechain's blockchain analytics platform is able to identify cross-chain transactions using the WBTC protocol in real time. Support for additional protocols is coming soon.
The identification of cross-chain transfers in the platform allows users to effortlessly follow the funds across blockchains, all from one single interface.
The platform provides valuable data regarding cross-chain transfers, including the sending and receiving address, the crypto assets involved, the amount, and the twin transaction. It’s with the twin transaction that users can seamlessly follow the funds across blockchains.
Users can use Scorechain’s Investigation Tool to easily follow cross-chain transactions across both blockchains while visualizing the counterparties involved.
The support of cross-chain transactions in Scorechain’s blockchain analytics tools allows users to add another layer of monitoring to their AML/CFT screening processes. Would you like to learn how Scorechain can help you implement comprehensive crypto compliance policies? Request a free demo now.
About Scorechain
Scorechain provides a blockchain analytics and transaction monitoring platform for crypto assets. As a leader in crypto compliance, the Luxembourgish company has helped over 200 customers in 45 countries since 2015, ranging from cryptocurrency businesses to financial institutions with crypto trading, custody branch, digital assets, customers onboarding, audit and law firms, and some LEAs.
Scorechain’s platform supports 23 blockchains and over 10,000 crypto assets. It can de-anonymize blockchain data and connect with sanction lists to provide risk scoring on crypto assets, transactions, addresses, and entities. The risk assessment methodology applied by Scorechain has been verified and can be fully customizable to fit all jurisdictions. 300+ risk-AML scenarios are provided to customers with a wide range of risk indicators so businesses under the scope of the crypto regulation can report suspicious activity to authorities with enhanced due diligence.
