Why blocklists don't cut it

A common practice to combat laundering from scams or thefts is publishing and maintaining blocklists and sharing these lists of blocked accounts with virtual asset service providers to stop and withhold deposited funds. But it doesn't cut it.

Stopping illicit funds and returning them to their rightful owners is an effective means to combat financial crimes like scams, phishing, and thefts – and it is a method largely made possible because of the pseudo-anonymous nature of most blockchains: accounts and transactions are public.

In 2020 we have monitored more than 20,000,000 XRP being laundered, from regular thefts, phishing, and cryptocurrency scams, through legit virtual asset service providers. And most recently, another 18.5 million XRP has been reported stolen from KuCoin, still waiting to be laundered.

Caption: Chart showing the amount of XRP received from thefts and scams in 2020, by accounts controlled by VASPs.

Blocklists are meaningful but in large very circumventable: The accounts reported used in thefts and scams were only responsible for laundering less than 20% of the total amount, while the remaining was laundered by accounts created at the time of laundering to circumvent the blocklists. This is largely made possible by faster blockchains, where transactions happen in seconds – but there is a solution.

Real-time monitoring

We are publishing a blocklist, or in our terminology, an advisory list, but we are adding a second layer: real-time monitoring.

We extend the advisory list from user reports, law enforcement reports, social media scraping, and more like most other blocklist providers, but that is only the beginning, as the powerful algorithms take over and monitor all associated activity in real-time, adding any newly created or intermediary accounts as money is moved around to circumvent blocklists on it's way to laundering.

Caption: Graph showing the the journey stolen money have taken from a user's account to VASPs, through several intermediary accounts.

The XRP ledger has close to 1 million daily transactions on average, and our technology is monitoring all of them, providing live alerts as potential exploits are happening or illicit money is moving – and updating the advisory list for virtual asset service providers to be able to respond in real-time.

Sustainability and possibilities – special 2020 offer

Our technology is built for the XRP ledger, and on-boarding responsible blockchain ecosystem participants to our advisory list subscriptions are the only way to sustain our business. But it can make a difference:

1. Warn your users to help prevent your users to send money to scams.

2. Stop illicit deposits and request additional KYC or proof of origin of funds, or reach out to us for additional information on why the account has been flagged on our advisory list.

3. Connect with us to help trace the money, or get access to our compliance toolbox to unlock powerful XRP ledger tools for your own compliance staff.

In the light of the KuCoin security event, we are offering virtual asset service providers 50% off, for the rest of 2020, on new basic or sync advisory list subscriptions, as we wish to express our support for responsible participation in combating financial crimes on blockchain: https://xrplorer.com/products/advisorylist

Photo by Markus Spiske on Unsplash