5 steps to identifying potentially suspicious entities on blockchains

by the Crystal communications team

Apr 21, 2021

Due to rapid and innovative progress in the cryptocurrency industry, it’s even more important to learn to track and monitor blockchain transactions. Data analytics companies are actively working on collecting databases of crypto accounts and transactions to monitor suspicious activities. Identification of dubious entities on blockchains helps fight against scams and avoid money laundering. Here are five steps you need to follow to eliminate risky transactions.

1. Blockchain Address Identification

Each transaction has a unique transaction identifier, which is assigned when the transaction is started. Identify the cryptocurrency address in question. It can be done through different online resources Blockchain.com (free explorer) and Crystal Blockchain (via subscription). Specify the transaction ID (TXID, TxHash), address, hash or block height in the search bar of the block explorer, and instantly find out their status.

2. Cryptocurrency Entity Analysis

Via compliance software, analyze whether or not this address is a known entity. With analytics companies, high-risk addresses can be immediately tagged. This will facilitate tracking the entity. However, it might be complicated to find relevant information about an address hash. In such cases, it is transaction and date filtering which will help you to understand more about the cryptocurrency address and whether it is reliable or not.

3. Known Transaction Connections

If the address entity is unknown, analyze if it is connected to known entities which may be considered high risk. Check if known entities were using other crypto exchanges, mixing services or darknet entities.

It might take a great deal of time to define scammers unless they perform transactions immediately after taking crypto. For this reason, with analytics tools, you can get notifications when suspicious funds flow to or from an address. Data visualization tools can also play a role in illustrating how misappropriated assets are distributed — and show the addresses that may be directly or indirectly connected to criminal activity.

4. Money Laundering Risk Assessment

See what level of risk is assigned for these connected known entities based on transaction patterns and fund sources. Analytics platforms offer FATF (Financial Action Task Force) Red Flag Indicators which may show a connection with money laundering (ML) and other illegal activities. The focus of monitoring potential ML is on the patterns of deposits and withdrawals, as well as on the use of IP and other data to assess risk.

5. Ongoing Risky Activity Monitoring

After taking the above steps, you can decide if this address then poses a low or high level of liability or risk. Please note though, that since a broad target audience is covered by FATF Red Flag Indicators, the indicators should be taken within context, and businesses should work to understand transaction patterns. The guidelines should be taken seriously, however, as implementation will eventually be compulsory. Analytics companies offer guidance and regulatory compliance tools to help your business.


Digital money laundering schemes are becoming even more widespread. The viability of the cryptocurrency industry depends on investing. Increased investment does inevitably mean (as with any financial industry) an increase in illicit activity. Analytics software companies are trying to define bad actors and promote the safety of transactions. Yet, it’s highly recommended that businesses in the cryptocurrency sphere follow safety recommendations and adhere to existing regulations to protect themselves from being involved in illegal activities. Awareness of the risks that exist with crypto, and what you can do to prevent them, will help you feel more secure.

Crystal Blockchain follows a risk-based approach to cryptocurrencies that are recommended by the FATF (Financial Action Task Force) and 6AMLD (the 6th Anti Money Laundering Directive). We can provide you with demo access to all of Crystal’s features for two weeks. We can also schedule an online product demo session and answer your questions about Crystal analytics.

Contact Crystal Blockchain today to find out about our risk-based approach to virtual assets.

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