Securing your company against crypto-crime

Is your company ready to tackle malicious actors?

This is the only guide you need to secure your company

As a company dealing with crypto transactions and payments, security is naturally at the absolute forefront of professional priority, protecting both the assets of users and the reputation and faith in the company. 

This article serves as a short guide to navigate the various options available to a company to ensure the highest possible level of security infrastructure. This way, you can to focus on innovation and progress, knowing that users' assets and the company’s reputation is secure and taken care of. 

The importance (and bonus benefits) of a great security infrastructure

Protection of assets - this goes without saying, but it is absolutely essential for platforms dealing with large sums of digital assets to have a strong security infrastructure. The irreversible nature of crypto transactions makes securing assets even more critical, so it is certainly worth exerting that extra effort to ensure the security of the assets and sensitive data, ‘just in case’. 

Compliance with regulations - platforms operating within the cryptoverse should commit to the strict regulations and standards enforced by authorities, to ensure operators have adequate safety measures. Non-compliance can result in hefty fines, sanctions, and further consequences that can be utterly detrimental to business. 

User trust and reputation, and business resilience - a platform's reputation is directly linked to its security - platforms that experienced a single breach have suffered irreversible damage to their brand, leading to a loss of trust, customers and market share. Investing in your security also ensures you make every effort to retain your customers. 

Where some platforms have been unable to recover from security incidents, a strong security infrastructure can minimise these incidents allowing you to enjoy business continuity and resilience in the face of cyber incidents. This leads us directly onto… 

…A competitive advantage - in an ever-growing, already-crowded market, a strong reputation for security can set a platform apart from competitors. Demonstrating your commitment to security can attract more users, especially larger investors who are particularly looking for stringent security assurances. 

If you can’t tell, investment in a strong security infrastructure isn’t just about ensuring the safety of assets. It's also an investment in the marketing of your brand, your reputation, your customer retention and can give you that competitive edge to draw in new customers too. 

How to implement a robust security infrastructure: 

Real time monitoring and Fraud detection: 

Platforms can use real-time monitoring to track user behavior patterns. Smart algorithms can identify deviations from typical user behavior, which could indicate a security compromise. 

Monitoring can sound invasive but takes into account usual behaviors and patterns to gain an understanding of usual transaction patterns. 

If unusual trading patterns such as pump-and-dump schemes, wash trading, or flash attacks are flagged, platform administrators can receive early warning signs of potential bad actors performing on their platform. 

The monitoring software can assign risk scores to transactions or user activities,  based on various factors. This can include country of origin, transaction amount, or time of day the transaction is performed.

 Then, transactions or accounts with high-risk scores can be flagged for further review, or held for verification, preventing fraud before it even takes place. If a transaction or user is flagged up the software could freeze the funds, or block the address in real-time, to prevent transactions involving known compromised addresses. 

Further, it can identify fake accounts, fraudulent sign-ups, or bot-driven activities using identity verification systems combined with the behavior analysis previously gathered. The software can then automatically detect and block fraudulent accounts or enforce additional authentication steps to preserve the safety of the platform. 

For platforms that use smart contracts, real-time monitoring can also track the execution of contracts to ensure they behave as expected. The software can detect unauthorized modifications to the smart contracts, a sign of attempted exploitation of the platform. This is essential for DeFi platforms where we have seen numerous hacks based on smart contract exploitation. 

Monitoring network traffic in real time can also help to prevent and thwart potential threats, such as unauthorised API access. Intrusion Detection Systems (IDS) can detect breach attempts such as a sudden surge in network requests, suspicious or unusual packets, or unauthorised access attempts. The System can then block IP addresses or activate other defences to protect the platform from malicious attacks. 

Real-time monitoring software has plenty of methods at its disposal to ensure the security of your crypto platform. The variety of methods available means that the most appropriate solution can be offered according to the particular types of risks or vulnerabilities that a platform is most likely to encounter, ensuring a virtually tailor-made solution to a platform’s needs. 

A cycle of security; an example of real-time monitoring software, in action:

The Crypto compliance trifecta: 

Crypto compliance is crucial for cryptocurrency trading platforms, for the reasons we discussed earlier - the security, legality and reputation of the business. 

Crypto compliance first and foremost assists in the prevention of illegal activities such as money laundering, terrorist financing, and fraud. Frameworks such as Anti-Money Laundering (AML), Counter-Terrorist Financing (CTF), and Know Your Customer (KYC) ensure that transactions and users are carefully screened. Non-compliance with these regulatory frameworks, which are required in many countries, can result in fines, penalties and sanctions. 

Partnering with key regulatory authorities is another key aspect of crypto compliance. This collaboration can help platforms operate legally, build trust and foster a safe and transparent environment for crypto transactions to securely take place. It also ensures compliance with regulations as they evolve, as platforms remain proactively engaged with the authorities and can stay informed about new or updated regulations. It would also allow a platform to play a role in industry-wide standardization, promoting a level playing field for operators within the crypto industry. 

Suspicious Activity reporting (SAR) is the final element of the crypto compliance trifecta (although there are further elements to crypto compliance, but this document would become TL:DR) . SAR is a core requirement of AML regulations, existing to prevent illegal activities such as tax evasion, fraudulent transactions, all the way to terrorist financing. By identifying and reporting suspicious transactions early, platforms can prevent criminals from abusing their systems and the crypto industry as a whole.

Real-time monitoring abilities:

Employee education and KYE 

Employee education is a crucial strategy for platforms to prevent fraud and protect against a variety of risks, especially given the increasing sophistication of cyber threats and financial crimes targeting the crypto industry. Well-informed employees can be a strong first line of defense, but also play a critical role given the sensitive data they are privy to. 

Employees can often be the target of phishing attacks, posing an enormous risk to the security of the platform - proper education can empower employees to accurately recognise these attacks and report them rather than falling victim. Employee education also minimises human error, encourages adoption of best practice, and ensures they are aware of compliance obligations. 

Know Your Employee (KYE)

 is another important framework to ensure the security of a platform. While KYC focuses on the customers of a company, KYE focuses on internal staff, contractors and partners to ensure they meet necessary security and integrity standards, to mitigate insider threats. Employees have access to sensitive systems, financial data and private customer information, meaning they have the ability to pose a risk to crypto platforms, should they have malicious intent. Therefore, KYE ensures that an employee is fit to have access to this sensitive data by conductions thorough background checks.. KYE also encourages the limiting of access to sensitive systems to those who require it, and applying internal controls. 

User education

Educating users of your platform is crucial in protecting them from falling victim to crypto crime. By equipping users with knowledge about potential risks and how to identify them, a platform can foster a safer environment with fewer vulnerable clients, becoming a less likely target for malicious actors. 

Key strategies for the education of users can include awareness campaigns and resources to encourage an understanding of the existing threats in the crypto verse and how to recognise them, or the encouragement of security best practice to ensure their assets are safely protected. Best practice methods such as enforcing use of strong passwords, or encouraging users with sizable assets to utilize cold wallets, can protect their finances more securely.

By empowering users to understand and recognise the potential threats of malicious actors attempting crypto crime, the potential for malicious actors to successfully attack on a platform would be mitigated. 

Five tier security system, visualised:

Integrating threat Intelligence Platforms: 

Leveraging threat intelligence platforms to detect phishing schemes, malware and other malicious activities that may target a crypto trading platform can be a critical step in ensuring that threats are not just thwarted, but predicted and mitigated proactively.

 With the increasing sophistication of cyber threats targeting the crypto industry, TIPs can gather, analyse and share actionable threat data to mitigate risks through a variety of tools, such as dark web monitoring, which can search for mentions of a company, executives or wallet addresses. This can assist in detecting potential threats or data breaches as early as possible and offer actionable next steps to secure the trading platform. 

To summarise: 

Ensuring your company is ready to tackle crypto crime may seem convoluted and involve many steps. This short report exists to ease this experience to ensure that as many companies as possible are properly-equipped with the tools and knowledge to adequately fight crypto crime, therefore ensuring as few users as possible will be exposed to crypto crime attempts. 

Our visual aids throughout this guide can help you navigate the seemingly complex, several-step methods discussed, to expertly ensure the security of your platform and your users, equipping you with the ability not only to tackle crypto-related crimes, but ensure that malicious actors struggle to attack in the first place.

An overall summary of NOMINIS.io 's guide:

While we strive for accuracy in our content, we acknowledge that errors may occur. If you find any mistakes, please reach out to us at pr@nominis.io. Your feedback is appreciated!