A service enabling direct transactions in financial instruments between two parties outside formal exchanges. It includes trading in derivatives, stocks, bonds, and digital currencies and is typically facilitated by specialized brokers or OTC desks. These trades often involve large volumes, negotiated pricing, and greater confidentiality than exchange-based transactions, offering flexibility in terms and structures.
Main/
Over-the-Counter (OTC) Trading
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Code
PS0001
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Name
Over-the-Counter (OTC) Trading
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Version
1.0
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Category
Wealth & Investment
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Created
2025-03-14
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Modified
2025-04-02
Related Techniques
- Enable large-volume trades negotiated privately, reducing transparency and making it difficult to detect illicit currency exchanges.
- Allow criminals to move funds swiftly between fiat and crypto with minimal documentation, circumventing regulated exchange channels.
- Large-volume trades occur off-exchange, disguising how supply or demand shifts can affect public pricing.
- Limited regulatory scrutiny over OTC transactions enables criminals to distort perceived liquidity and asset value.
- Involve decentralized or less transparent trading environments, often used for penny stocks that can be manipulated with lower volumes.
- Allow high-volume or private trades off major exchanges, reducing visibility of excessive or circular trading patterns and hindering regulatory oversight.
- Enables large, negotiated trades with reduced public visibility, allowing colluding counterparties to conduct repeated round-trip transactions off-exchange.
- By using OTC desks that may not always enforce stringent due diligence, illicit actors can obscure beneficial ownership and inflate trading volumes without drawing immediate scrutiny.
- Enables direct matched trades between parties away from exchange monitoring, reducing regulatory scrutiny.
- Offers confidential trade negotiation, making it easier to conceal beneficial ownership and coordinate mirrored orders.
- OTC markets often rely on private negotiations rather than centralized order books, making it easier to orchestrate mirror trades.
- Criminals exploit the lower transparency of OTC trades to execute offsetting transactions, thereby layering illicit funds through minimal tracking.
- Facilitate private, large-volume trades outside of exchange order books, enabling criminals to bypass transparent reporting and standard AML monitoring.
- Allow physical delivery of bulk cash to OTC desks that perform minimal KYC, rapidly converting cash into cryptocurrency and obscuring the origin of funds.
- Repeated use of multiple OTC channels creates complex layering structures, complicating investigations and concealing beneficiaries.
- Large-volume privacy coin transactions are negotiated privately, bypassing the scrutiny of formal exchange order books.
- This private channel can obscure the true parties to a trade, further complicating any chain-of-custody analysis.