One of the risks associated with cryptocurrencies, is their
\npotential in being used as a tool for money laundering. Only an insignificant percentage
\nof the market uses crypto for this purpose, yet there are growing concerns. With
\ntime, this has led to the creation of numerous regulatory frameworks meant to
\ndiscourage crypto use for illicit activities like this, including the appearance
\nof stricter AML\/KYC policies. Recently, there has been growing media coverage for stories involving
\ncryptocurrencies tied to money laundering activities. In this analysis, we are
\ngoing to cover two of these stories, alongside what certain countries are doing
\nto stop the trend. <\/p>\n
In a recent press statement, the National Police Agency of Japan
\nexplained how a total of 7,000 crypto-tied money laundering cases were reported
\nto the agency in 2018. At first, this figure doesn\u2019t seem significant granted
\nthe country\u2019s population, yet, it\u2019s considerably higher when compared to the
\n669 cases reported between April \u2013 December 2017. <\/p>\n
There\u2019s no data on money laundering cases before April 2017, since that\u2019s when digital currency exchanges were tasked with reporting any transactions that seemed suspicious.\u00a0To determine which transactions to report to authorities, cryptocurrency exchange operators relied on a series of indicators, including, but not limited to: suspicious transaction activity, exchange trends, and overseas logins for Japan-based account. Additionally, several money launderers used different names and email addresses, yet uploaded the same ID photos. <\/p>\n
It\u2019s important to point out that despite these concerning
\nnumbers, cryptocurrency-based money laundering is significantly lower when
\ncompared to other methods. As such, a total of 417,465 cases of suspected
\nillegal financial activity were reported to the Japanese authorities in 2018. A
\nlarge percentage of these transactions were processed by banks, credit card
\ncompanies and other financial institutions. <\/p>\n
In an effort to control the increasing number of suspicious
\ntransactions, Japan\u2019s police authority will reportedly carry out tests
\ninvolving artificial intelligence-based systems. Their purpose will be to
\nanalyse data and recognize patterns that usually indicate money laundering
\nactivity. <\/p>\n
Since its debut back in 2018, Venezuela\u2019s national cryptocurrency
\nhas been dealing with a wave of criticism and controversy. Before we cut to the
\nchase, it\u2019s important to note that Venezuela is dealing with political issues,
\nalongside hyperinflation. Reports state that inflation has increased by 1
\nmillion percent in the last year alone. The Petro coin was reportedly developed
\nto stimulate the national economy, while also enabling Venezuela to bypass economic
\nsanctions. <\/p>\n
Now, a Spanish media outlet, has written an article
\ndescribing why the Petro dollar is a fraud, and its involvement in money
\nlaundering activities. To put things better into perspective, suspicions are
\nlinked to the source of the Petro funds. The official story is that President
\nMaduro managed to raise approximately $735 million, alongside $3.34 million, as
\npart of an Initial Coin Offering. Following a technical audit, the Casa de Cambio Latin
\nAmerican Money, has stated that no actual funds were found. Additionally, the
\nblockchain ledger of the Petro shows no record concerning the reported funds. <\/p>\n
After this discovery, the Latin American exchange accused Venezuela\u2019s government of fraud. The accusation is backed by the technical audit, alongside several irregularities that were found in the government report concerning the creation of the Petro. Further detail on how the money laundering activity was organized and financed is given in a report by Verifikado, the media outlet that broke the news.<\/p>\n
Before combating crypto money laundering, governments first
\nhave to clarify what types of activities are classed as money laundering, under
\nnational legislation. <\/p>\n
While its cryptocurrency regulations are not ready, the Russian Supreme Court has officially classified the illicit use of digital currencies as a money laundering-related offense. The amendments were necessary to ensure compliance with the recommendations issued by the Financial Action Task Force on Money Laundering, known as the FATF. As an international task force, it issues recommendations to all countries that accept its jurisdiction. Several other nations are taking similar approaches. Most cryptocurrency exchanges have already implemented AML and Know-Your-Customer policies, in an effort to learn more about their users. <\/p>\n