Dirty money is flowing into the crypto industry at an alarming rate, according to a new study. More than a quarter (28%) of crypto businesses reported an increase in the number of suspicious activity reports over the past six months.
Financial professionals, including lawyers, accountants, and real estate agents, use Suspicious Activity Reports (SARs) to alert law enforcement to potential cases of money laundering or terrorist financing. They give law enforcement in the UK an additional perspective on economic crime in the private sector. However, they are not the same as a crime or fraud report. They also do not constitute an official criminal complaint.
Crypto is a top choice for dirty money
The new data comes from SmartSearch, which surveyed 500 compliance decision makers across various industries. Including crypto platforms, gambling companies, real estate developers and banks.
Recent figures highlight the continued struggle of compliance professionals to combat the growing scourge of crypto-related money laundering. BeInCrypto recently reported on a survey finding that two-thirds of crypto businesses are concerned about anti-money laundering (AML) violations.
But that’s not the only data point. According to a First AML survey, 53% believe that current practices only partially address the risks of money laundering via cryptocurrencies.
Additionally, 41% identified money laundering cases involving cryptocurrencies. In addition, 51% were subject to fines or penalties for non-compliance with anti-money laundering regulations.
Criminals view cryptocurrency as a lucrative alternative to traditional money laundering for several reasons. First, cryptocurrencies like Bitcoin are pseudonymous and harder to track than fiat currency bank transfers.
Cryptography is also easy and quick to perform for large transactions and can be accessed anywhere in the world. Additionally, many Virtual Asset Service Providers (VASPs) lack the structures or resources to effectively monitor illegal activities.
In the latest Crypto Crime Report from Chainalysis, we learn that 2022 was a record year for crypto money laundering, with $23.8 billion in funds “cleaned” using cryptocurrency.
This represents a 68% increase over the previous year. However, the same report also noted that less than 1% of all crypto has any connection to illicit activity.
Binance indicted in France for “aggravated money laundering”
Martin Cheek, managing director of SmartSearch, believes that criminal gangs are targeting crypto firms to exploit weaknesses in their compliance processes, particularly when faulty manual customer checks are used.
“These common practices, like asking for ID, are no longer enough,” he explained. “Not only do they fail to meet Know Your Customer (KYC) and AML standards, but they can also leave the door open to identity theft.”
The cheek continued:
“The quality of false documents has evolved to a level of sophistication that makes identification increasingly difficult. The Home Office’s own guidelines on checking official document forgery list 24 potential points of failure, many of which require specialist knowledge to spot.
The specter of money laundering has plagued the cryptocurrency industry as it attempts to present a legitimate and compliant public face. On June 16, French authorities announced that they were investigating Binance, the world’s largest exchange, for “aggravated money laundering”.
The EU is currently conducting a consultation process on the inclusion of VASPs in its anti-money laundering regulations.
Remember that SARs are not crime or fraud reports. To report a crime or fraud in the UK, call 101 or Action Fraud on 0300 123 2040.
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