The truth about money laundering with Cryptocurrency?

The truth about money laundering with Cryptocurrency?

Many people including congressional officials often say Bitcoin is the perfect tool for criminals to launder money but not many people know about the truth about money laundering with cryptocurrency. Crypto opens a new chapter for hackers who can easily make payments through the internet. These are the “quite attractive” headlines that the press often mentions when it comes to Crypto. Is Crypto Really the Perfect Tool for Money Laundering and Illegal Transactions?​


What is money laundering?

Money laundering is the act of turning an illegal amount of money into a clean and transparent currency to the law. Then put it into the mainstream banking system and can freely use them without any financial fraud.

Large amounts of money earned from illegal activities such as drug trafficking, terrorist financing, counterfeiting… will be considered “dirty” and they will be “laundered”. This process is intended to help this money be integrated into the legal financial system. Therefore, criminals can use this money for personal purposes without being suspected.

There are many ways to launder money. It is possible to launder money through commercial banks or through Crypto. It is also possible to launder money by creating a business and falsifying its revenue.

To convert cash into digital currency in a bank account is not easy. Because banks will always want to investigate where this money is coming from. Money laundering is the act of removing the stains of those coins and making them legal.


The truth about money laundering

In September 2020, a documents called “FinCEN files” were published. The document details how some of the largest banks in the world transfer trillions of dollars to suspected terrorists and drug lords. And the US government has failed to stop it.

Source: BuzzFeednews

In total, an analysis by ICIJ found that documents identify more than $2 trillion in transactions between 1999 and 2017 that were flagged by financial institutions as possibly money laundering or criminal activity. Including $514 billion at JPMorgan and $1.3 trillion at Deutsche Bank. FinCEN filings reveal an illegal flow of trillions of dollars through major banks. In the face of a lax enforcement system.

Anti-Money Laundering (AML) refers to the network of laws, regulations and procedures that uncover the concealment of illicit funds. As most laws are still based on detecting dirty money as it passes through financial institutions and traditional banks. So the fact that banks colluded and helped the dirty money to be laundered, it took a long time for governments to detect.

FinCEN documents reveal that five global banks – JPMorgan, HSBC, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon – bypassed the rules and assisted suspicious actors in transferring large amounts of money illegally in order to make a profit.

Why do major banks take risks to transfer suspicious money? Because it is extremely profitable. Major banks have paid $343 billion in fines since 2000 to the present time.


Is Crypto a Good Way to Launder Money?

Blockchain research firm Chainalysis found that around $8.7 billion worth of cryptocurrencies were laundered in 2021. A 30% increase from 2020 but still less than in 2019 with over $10.9 billion. In total, criminals laundered more than $33 billion between 2017 and 2021. This number is many times smaller than the major banks penalty for financial fraud.

Money laundered crypto

Money laundered crypto

Transactions in a blockchain environment are transparent, public, and immutable. So financial crime in the Crypto world can be considered relatively easy to control.

Because of the transparency and publicity, money laundering with Crypto also encounters countless difficulties. Currently, KYC is common when opening accounts at exchanges. You can’t simply move a large amount of money without people noticing and easily trackable. This allows law enforcement to detect and track money laundering much more easily than cash transactions.

How to launder money with Crypto?


OTC Trading

Over-the-counter (OTC) is a transaction that takes place between two counterparties. Not on a centralized exchange. OTC brokers allow traders to trade large amounts of cryptocurrencies easily, securely, and anonymously. OTC brokers facilitate direct cryptocurrency transactions between two parties without the need for intermediaries. These transactions can be made between different cryptocurrencies (e.g., Ethereum and Bitcoin) or between cryptocurrencies and fiat currencies.

Mixing cash flow

After hackers attack and take money from exchanges or DeFi protocols. Then traces of that money are still tracked on the blockchain. If the hacker transfers that amount to the exchange to sell cash and use it, they will be detected and blocked immediately. The hackers had to use the Tornado coin mixer to erase the input traces of the money flow.

Tornado is one of the important protocols for mixing coins. However, currently centralized exchanges apply the law to reject all cryptocurrencies originating from Tornado. This is intended to prevent money laundering, although this regulation is still controversial because the protocol can also meet many other needs of users that are not for money laundering.

Trading in high-risk or non-compliant exchanges

Currently, there are almost 400 cryptocurrency exchanges available globally. However, some exchanges have very lax regulations, such as no KYC requirements and due diligence regulations. These exchanges require little or no user identity verification in order to transfer crypto assets and are therefore very attractive to illegals.


Why are so many people talking about crypto being the perfect tool for money laundering?

The question is, before Bitcoin, how did people launder money?

You have also read through the information disclosed through the FinCEN document. It is the big banks who help the dirty money flow through their system and get a huge profits from it. They continue to do it.

Saying crypto is a tool to launder money is more appealing to readers. Anyway, it is much easier to attack a protocol that is derelict and has no organization behind it like Bitcoin and other coins in the crypto market than it is to attack giant financial institutions. and rich.

For those who are against Crypto with the argument that it is a tool for crime and money laundering, it is a fact. Most of the money laundered goes through the traditional banking system, not Crypto.