How To Detect Crypto-Related Laundering? | CoinsCapture

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How To Detect Crypto-Related Laundering?
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• Technological advancements are creating great
  potential and opportunities in the Crypto
  industry. However, it is also becoming a gateway
  for criminals to wash their ill-gotten money. It
  is crucial to note that Money laundering is more
  than a Financial crime, as it has a motivation
  behind legitimizing funds that are obtained for
  various serious crimes such as terrorism
  financing, drug trafficking, political crimes,
  and so forth. Money laundering through fiat
  currency may not really have a competitor when it
  comes to volume. But the growing popularity and
  use of Cryptocurrency is further becoming
  susceptible to illicit activities due to its
  unregulated nature in jurisdictions.
• Cryptocurrencies, without question, are a
  valuable Financial and Technological breakthrough
  that enables individuals and institutions to
  access financial products and services in a
  cost-efficient manner along with speed.
  Cryptocurrency is seen with the potential to
  replace fiat and create a stature into the
  mainstream medium of exchange in the digital era.
  Many large Corporations, Banks, and Financial
  institutions are adopting Blockchain and
  Cryptocurrency. Nevertheless, its
  very P2P decentralized system, anonymity, and
  hassle-free cross-border transactions are a
  matter of concern in the Financial sector.

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• In 2019, the G20 Finance Ministers and Central
  Bank Governors meeting in Japan, shared their
  very sentiment, While crypto-assets do not pose
  a threat to global financial stability at this
  point, we remain vigilant to risks, including
  those related to consumer and investor
  protection, anti-money laundering and countering
  the financing of terrorism.
• On the other hand, Crypto advisors suggest that
  money laundering with Cryptocurrencies is an
  ineffective strategy as they are more complex and
  risky than traditional approaches. In terms of
  fiat currency, digital currency transactions are
  transparent, and the crime is comparatively
  minor. Despite this, the media is more focused on
  the Blockchain and Cryptos negatives than the
  positives.
• It's worth noting that the Cryptocurrency
  market is relatively new and in its infancy
  stage, making the shortcomings vulnerable to
  money laundering and other illicit activities. As
  a result, it's even more essential to analyze the
  digital currencies flaws and take the necessary
  measures to address them.

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• In this blog, we are going to discuss the Crypto
  money laundering loopholes and various
  countermeasures to eliminate the crime.
• As per the UN estimation, around 800 billion to
  2 trillion money is laundered annually across
  the world, out of which 90 stays undetected. The
  estimation of money laundering through
  Cryptocurrency is still ascertaining however,
  some statistics on the Internet state that at the
  beginning of 2020, the Crypto hacks, scams, and
  thefts reached 1.36 billion. In 2019, criminals
  laundered money at an estimated 2.8 billion
  via Cryptocurrency exchange, from 1 billion in
  2018.
• In October 2020, Europol announced that an
  unprecedented international law enforcement
  operation comprising 16 countries had succeeded
  in arresting 20 individuals who endeavored to
  launder tens of millions of euros since 2016 on
  behalf of the worlds foremost cybercriminals.
  The operation, which was run by the notorious
  QQAAZZ network, entailed converting stolen cash
  into Bitcoin using tumbling services to conceal
  the source of funds.
• Also Read, How Cryptocurrency Can Revolutionize
  The Banking Industry

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• Stages of Money Laundering Through Cryptocurrency
• 1. Placement
• In Placement, the dirty money is converted into
  Cryptocurrency through intermediaries such as
  financial institutions, exchanges, casinos, and
  stores. They are used to disguise illicit funds
  as legitimate in the financial system. Cash or
  other Cryptocurrencies are used to purchase one
  type of Cryptocurrency. For this purpose,
  criminals frequently use Crypto exchanges that do
  not comply with AML requirements.
• 2. Layering
• In Layering, criminals obscure the illegal origin
  of funds through structured transactions, making
  the funds trail crafty to decode. They obfuscate
  the origin of the currency with the use of Crypto
  exchanges and convert one Cryptocurrency to
  another, or they participate in ICOs, in which
  one form of digital currency is exchanged for
  another. Criminals can also transfer their Crypto
  assets to a different country.

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• 3. Integration
• The final phase is Integration, wherein illegal
  funds are reintroduced or legitimize to the
  economy with a clean record. One of the most
  common prevalent strategies is the use of OTC -
  over-the-counter brokers, who function as
  intermediaries between Crypto sellers and buyers.
  Many OTC brokers specialize in money-laundering
  services and are compensated handsomely for their
  role in the process.
• Sources of Money Laundering Through
  Cryptocurrency
• 1. Peer-to-peer Crypto networks are used to
  transmit funds to a location, usually in a
  jurisdiction where the Crypto exchange has
  lenient AML regulations. These exchanges assist
  in converting Cryptocurrency into fiat currency
  to purchase high-end items.
• 2. Crypto ATMs enable users to buy Crypto through
  credit or debit cards and cash deposits in some
  cases. In many jurisdictions, the KYC
  requirements for Crypto ATMs are not strictly
  enforced.

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• 3. Online Gambling accepts Cryptocurrency
  payments. Criminals can launder money by using
  Cryptocurrency to buy chips and then cash them
  out after a few transactions.
• 4. Cryptocurrency Exchanges are subject to
  fraudulent activities and are vulnerable to money
  laundering involving Crypto. The cause of these
  is the lack of AML regulations practices and the
  risks by the technology itself, such as
  anonymity, malicious software, lack of security,
  and regulation.
• 5. Mixers, also known as tumblers, is the
  technique used to effectively break the dirty
  money. The process involves sending funds in a
  split manner with a series of multiple addresses
  and then recombining them, resulting in a clean
  total.
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