Cameron Nakashima, Better Business Bureau Media Engagement and Digital Campaigns Manager joins producer/host Coralie Chun Matayoshi to discuss how to protect yourself from getting scammed,
Q. Cryptocurrency is no longer a fleeting trend. It’s gone mainstream – even appearing in Superbowl ads. A whopping 40% of adult Americans and almost 30% of millennials own cryptocurrency. What is cryptocurrency? What is BBB’s stance on cryptocurrency?
Cryptocurrency is virtual currency that uses decentralized shared databases that store, transfer, and verify information in a cryptographically secure way. The system allows for the direct transfer of cryptocurrency from one party to another through a worldwide payment system, without the need for a central third-party intermediary like a bank or app. The digital currency is not issued by the government and is not insured by the government like U.S. dollars that are deposited into an FDIC insured bank account. The value of a cryptocurrency is constantly changing and can change significantly in a short period of time. Cryptocurrency tends to be more volatile than other investments like stocks and bonds so an investment worth thousands of dollars today could be worth only hundreds tomorrow. Cryptocurrency is innovative – it’s still new. And with that it is a lot of opportunity for good and a lot of opportunity for scammers to use it to exploit people. Unfortunately, cryptocurrency scams are one of the most reported scams people report to BBB with some of the highest losses of any scam type.
Q. How can you protect yourself from getting scammed?
Scammers are always finding new ways to steal your money using cryptocurrency. To steer clear of a crypto con, here are some things to watch out for:
- Only scammers demand payment in cryptocurrency. No legitimate business is going to demand you send cryptocurrency in advance – not to buy something, and not to protect your money. That’s always a scam.
- Only scammers will guarantee profits or big returns. Don’t trust people who promise you can quickly and easily make money in the crypto markets.
- Never mix online dating and investment advice. If you meet someone on a dating site or app, and they want to show you how to invest in crypto, or ask you to send them crypto, that’s a scam.
- No legitimate business or government will ever email, text, or message you on social media to ask for money. And they will never demand that you buy or pay with cryptocurrency.
- Never click on a link or download files from an unexpected or unsolicited text, email, or social media message or attachment, even if it seems to come from a company you know.
- Don’t pay anyone who contacts you unexpectedly, demanding payment with cryptocurrency.
- Never pay a fee to get a job. If someone asks you to pay upfront for a job or says to buy cryptocurrency as part of your job, it’s a scam.
Source: https://consumer.ftc.gov/articles/what-know-about-cryptocurrency-and-scams
- If you receive a call or text message about some kind of account problem or breach, don’t respond, even if it appears official and indicates that you must act immediately. Hang up and call the cryptocurrency exchange’s official phone number to verify whether there is a problem. Do not use any phone number the caller provides. Don’t go to any websites or click on links the caller sends you. Go to the official cryptocurrency exchange website separately.
- Be cautious of services that claim they can recover any lost cryptocurrency funds.
Q. There are things called crypto kiosks where people can buy cryptocurrency. Are there particular risks in using these kiosks?
Cryptocurrency kiosks, or crypto ATMs, are increasingly popular, but they come with their own set of risks for consumers, which have drawn attention from regulatory bodies like the Federal Trade Commission (FTC), Hawaii’s Department of Commerce and Consumer Affairs (DCCA), and consumer protection organizations such as the Better Business Bureau (BBB).
- Scams Facilitated by Crypto Kiosks: The FTC has issued warnings about scams involving cryptocurrency kiosks, where fraudsters instruct victims to use these machines to transfer money. Common scams include romance scams, lottery scams, and impersonation fraud (where scammers pretend to be government officials or law enforcement). Victims are often told to deposit cash into a crypto kiosk to purchase cryptocurrency and send it to the scammer’s wallet address. Once the transaction is completed, it’s nearly impossible to trace or recover the funds due to the anonymous nature of the blockchain. In fact, the FTC just recently released a new report calling BitCoin ATMs a payment portal for scammers.
- Anonymity Concerns: Many cryptocurrency kiosks allow for anonymous transactions, which can be a double-edged sword. While some consumers may appreciate the privacy, this anonymity can also facilitate illegal activities, including money laundering and fraud. Both the FTC and BBB have raised concerns that the lack of identity verification at many kiosks makes it easier for criminals to exploit unsuspecting consumers.
- Lack of Regulation and Oversight: One of the main concerns expressed by the FTC and BBB is the limited regulatory oversight surrounding cryptocurrency kiosks. These machines are often operated by private companies, and consumers may have little recourse if something goes wrong. Unlike traditional bank ATMs, crypto kiosks are not bound by the same consumer protection regulations, which leaves users vulnerable to fraud and misuse.
Q. Speaking of regulations, do crypto companies in Hawaii still have regulatory requirements?
Yes, they do. Although cryptocurrency companies in Hawaii are no longer required to hold a state-issued Money Transmitter License (MTL), they must adhere to any applicable federal licensing or registration requirements and federal regulations like Anti-Money Laundering (AML) and consumer protection regulations. Hawaii authorities emphasize that while the MTL exemption reduces the regulatory burden at the state level, firms are still accountable to federal laws.
Q. What are some of the federal laws that are helping to make cryptocurrency kiosks safer for people and businesses?
Several federal regulations are in place to help protect consumers and businesses when using cryptocurrency kiosks. These regulations primarily focus on preventing fraud, ensuring transparency, and curbing illegal activities like money laundering. Here are some key federal regulations that apply:
Financial Crimes Enforcement Network (FinCEN) Compliance
- Registration as a Money Services Business (MSB): Cryptocurrency kiosk operators must register with FinCEN as Money Services Businesses. This requires them to comply with anti-money laundering (AML) and counter-terrorism financing (CTF) rules, helping to prevent illicit financial activities through the kiosk.
- Reporting Suspicious Activity: Kiosk operators must report suspicious transactions that could indicate money laundering or other illegal activities. This includes filing Suspicious Activity Reports (SARs) for transactions above a certain threshold or if any unusual behavior is detected.
Know Your Customer (KYC) Requirements
- Kiosk operators are required to implement KYC protocols, which ensure that the identity of users is verified before completing large transactions. This often includes collecting and verifying government-issued identification, such as a driver’s license or passport, to prevent anonymity in potentially criminal transactions.
- KYC also helps protect consumers by ensuring that only legitimate users can access the kiosks, reducing the likelihood of fraud and scams.
Securities and Exchange Commission (SEC) Regulations – if a cryptocurrency meets the criteria of an investment contract, then it must be registered with the SEC and falls under SEC regulation.
Bank Secrecy Act (BSA) Compliance - under the Bank Secrecy Act, cryptocurrency kiosks must implement programs that prevent the use of digital currencies for illegal activities like drug trafficking or terrorism financing. This includes maintaining records of large transactions (over $10,000) and filing Currency Transaction Reports (CTRs).
Q. Even with those policies in place, we know that cryptocurrency scams are a big issue. What can you do to stay safe when using cryptocurrency kiosks?
Here are key steps you can take to stay safe when using cryptocurrency kiosks:
- Verify the Legitimacy of the Kiosk Provider: Before using a cryptocurrency kiosk, research the company operating it to ensure they are reputable and trustworthy. Look for reviews, official websites, or endorsements from reliable sources like the Better Business Bureau (BBB). Avoid kiosks that do not clearly display the operator’s name, fees, and contact information, as these may be signs of unregulated or fraudulent services.
- Check Fees and Exchange Rates: Cryptocurrency kiosks often charge high fees, sometimes between 10-20%, which can be hidden or not clearly disclosed. Make sure to check the fee structure and exchange rate before completing any transactions. If the fees seem too high or unclear, consider using an alternative method like a trusted exchange platform with lower costs.
- Use Kiosks with Strong Security Features: Ensure the cryptocurrency kiosk you’re using has proper security measures in place, such as encryption and identity verification. Avoid kiosks that allow completely anonymous transactions, as these can be more easily exploited by criminals. Opt for machines that require ID verification or follow Know Your Customer (KYC) protocols to protect against fraud and enhance transaction safety.
- Resolve or report issues. If you ever do encounter an issue with cryptocurrency, contact the kiosk company to try to resolve it first. You can also report it to the BBB’s scam tracker.
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Disclaimer: this material is intended for informational purposes only and does not constitute legal advice. The law varies by jurisdiction and is constantly changing. For legal advice, you should consult a lawyer that can apply the appropriate law to the facts in your case.