CipherTrace’s New Crypto Tracing Tool Is Meant for Banks

CipherTrace is rolling out a toolkit to help banks flag accounts and crypto-related transactions that may be suspicious.

AccessTimeIconApr 28, 2020 at 1:00 p.m. UTC
Updated Sep 14, 2021 at 8:34 a.m. UTC
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Crypto investigations firm CipherTrace has developed a bank transaction monitoring tool, CipherTrace Armada, that flags payments to high-risk virtual asset service providers (VASPs). 

Announced Tuesday, Armada sifts through banking indicators such as routing and account numbers in search of transactions that may present institutional risk including payments to crypto ATMs, which have been tied to money laundering. 

Armada differs from many investigations programs in its focus on payments across established financial infrastructure. Many other crypto analytics tools – including those from CipherTrace – trace payments between wallet addresses as they scout out potential troublespots, bypassing the banks. Such programs often appeal to exchanges and law enforcement investigators.

In contrast, Armada is a tool for the banks. It “plugs into” their existing transaction monitoring systems, said John Jefferies, chief financial analyst for CipherTrace. There, it monitors illicit activity via machine learning, clustering algorithms and CipherTrace’s database of high-risk entities.

This “enables Armada to catch money services businesses (MSB) that may be obscuring their true nature through different names or hidden accounts,” said Vice President of Product Management Catherine Woneis.

CipherTrace offered the case of unlicensed bitcoin seller Kunal Kalra as an example of how Armada could be used. Kalra pled guilty last August to running an unlicensed crypto MSB for darknet drug dealers, using fake names, bank transfers to a Gemini account and an anonymous bitcoin ATM to exchange up to $25 million in cash and crypto total.

Kalra’s three-year campaign was ultimately busted by federal investigators. Armada would have flagged Kalra’s activity with the banks, CipherTrace said.

Jefferies said Armada will also help improve ties between legitimate VASPs and their bankers,

“Armada helps VASPs open and keep bank accounts, which is critically important because they typically have problems maintaining banker relationships that can lead to risky behaviour,” he said.


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