EasyFinance.com Blog

Increasing Scrutiny for BitCoin Exchange for Hiding Criminal Activity

Posted January 9, 2020 by EasyFinance.com to Finance 1 0

It was once thought that Bitcoin could not be used to launder money. The thing about money launderers is, if there’s a will there is a way. In 2019, we know that this is a fallacy and criminals are using Bitcoin to make illegal transactions, causing regulatory firms such as, The Financial Action Task Force, to take action and implement stricter regulations on cryptocurrency which effect Money Service Businesses around the globe. 

Money Service Businesses provide currency exchanges and transactions and some specialise in cryptocurrency. Want to find out the best current exchanges, this UK comparison on cryptohead.io can give you some clue on the way to go. 


How are criminals laundering money?

There have already been many cases in which fraudsters have been found guilty of money laundering through Bitcoin, here are some of the ways in which this can happen: 


Unregulated Exchanges 

Unregulated exchanges are ones that are not AML compliant, by this the exchange fails to do its due diligence by performing identity checks leaving the cryptocurrency able to be traded repeatedly over various markets and deposited into further unregulated exchanges into other cryptocurrencies. In doing so the currency slowly but eventually becomes clean and launderers can withdraw their Bitcoin via an external wallet. 


Cryptocurrency ATMs

Around the world there are cryptocurrency ATMs that allow for anyone to purchase Bitcoin, they only need to have a debit or credit card. These machines also function as a trading point, in which users can trade Bitcoin for cash using a scannable wallet address.

It sounds normal so far, but these machines are exploited by criminals quite easily. The regulations set by financial institutions to obtain transactions and customer records vary from country to country, even so often these regulations rarely enforced. This lack of management leaves a nice open loophole for criminals and ensures that they can work around the risks of Bitcoin money laundering. 


Gambling & Gaming Sites 

Crypto money laundering can also be done via online gambling and gaming sites that accept cryptocurrencies like Bitcoin. Launderers may use Bitcoin to buy credit in small transactions which they then cash out. 


Prepaid Cards


Another method of money laundering is the use of prepaid debit cards which can be topped up with cryptocurrencies like Bitcoin. They are then used for all sorts of illicit activities, converted to other currencies, or passed over to third parties along with the relevant PIN. 


Peer-to-Peer Networks 

Peer-to-peer networks work by criminals using unsuspecting third parties to transfer the currency onto their next destination. Because of this P-2-P usually works on an international level and in countries with few AML regulations. By this method the laundering end product becomes clean Bitcoin, allowing launderers to convert their Bitcoin easily. 


What are the solutions? 


We’ve already mentioned that the FATF are involved in the investigation and changing regulation, this is something that the task force has to undertake on a global scale, working with Money Service Businesses to ensure they can comply with rules and regulations. Here are some of the proposed outlooks: 


Changing Regulations

Cryptocurrencies are so vast and ever-changing which means that MSBs need to keep up in accordance with new regulations that reflect the changes in cryptocurrency or face scrutiny. 


In-House Compliance Teams 

MSBs can establish in-house compliance teams to ensure that they are compliant with regulations. The problem with this solution is that for small MSBs, this can be costly since these teams rely on specialised platforms and tools that use data to root out potential money laundering. 


Integrating with Cryptocurrency Crime Platforms 

The good news is, if you are a small MSB and can’t afford to build your own compliance team, you can work with automated platforms like Elliptic that will: 

  • Automatically trace Blockchain transactions 

  • Identify illegal activities 

  • Provide MSBs with information that will keep them AML compliant. 


Identification Systems 

The first line of anti-money-laundering defence is identity verification. The FATF have reported that they aim to improve MSB identity verification requirements so that they are in line with those already in place with financial institutions. 


MSBs will be required to: 


  • Identify the recipient and sender of funds. 

  • Develop a system that will share this information when required to.

  • Ensure customers are not engaging with illicit activities.

  • Establish and enact risk-based systems related to their specific business type. 


AML Services and Tools 

MSBs that have access to anti-money laundering services and tools can implement ways to identify and verify people making cryptocurrency transactions. These tools are usually automated and can identify patterns that may indicate illicit behaviour.

About EasyFinance.com: ...

Leave a Reply:

Only registered users can post comments.

Find More Products & Services