Money Laundering Through Crypto
Main page Opinion, Cryptocurrency Exchanges, Cryptocurrency
Hot topic
Sept. 10, 2018

Financial crimes committed with the use of cryptocurrencies, have increasingly been cropping up in the news recently. European politicians are working to improve legislation in view of the emergence of new technologies, wherein Russia for example, they are buying a system to monitor bitcoin transactions, and the issue of money laundering through cryptocurrencies is the subject of a great number of studies.

Bitcoin and other digital assets is a really convenient tool to whitewash the revenues or hide money from the state, but the volume of the market, commissions, technological incompetence, make this process rather unattractive.

If ever someone wanted to "launder" money through cryptocurrencies, the most obvious, safe, but time-consuming way, would be to start buying up bitcoins on the open market. Small transactions do not require identification of a person, transactions or around $7,000 can be made through cash-in ATMs. So, in small portions through numerous exchangers or Localbitcoin, a substantial amount could be bought. On the one hand, running to an ATM and throwing money to an unknown person's account in hope of getting a bitcoin is a tedious task. But the chance to being caught are minimal unless turning the process into a conveyor belt. But to turn half a million dollars cash into bitcoins, 300-400 ATM runs will have to be made.

Another theoretical way is the OTC (over the counter) - exchange of large amounts between private individuals. Announcements about buying or selling bitcoins can be found not only in any social network - but also on the notice board of your local church. Any business community is teeming with cryptocurrency scammers. They look different: from decent office, with cashiers and machines for counting money, to banking premises, with ensures complete confidentiality and armed protection. It would seem that the process is well established - but given the uncertain legislative area, there are no assurances. The number of criminal cases relating to the theft of crypto during an exchange process is growing exponentially and their prospect is clear: chances of finding those armed people that the grieving buyer chose to trust are minimal. The human factor still plays a big role in our technological world, beware.

Bitcoin is a pseudo-anonymous cryptocurrency. Anyone can look inside the blocks and see all the transactions. And if it’s the machine looking and not a person, some interesting things can surface. Let’s also add all the existing amount of data that is being collected about us every single moment in time - and it would turn out that not only can we track the money, but relate it to a real person. It is on this principle that the legendary Palantir works. Any shadowing and its consequences are unpleasant, but thanks to technology - there’s always a solution.

In buying/selling listings for bitcoins, there is often a call or a suggestion that the coins are clean - the only way to get one is from the miners. It’s these bitcoins that presumably are supposed to be used for money laundering. They appeared from nowhere, were received for cash and sent to another country. All this happens through anonymous wallets, cold carriers and other ways that facilitate safe cryptocurrency transfers.

If buying a "pure" bitcoin for one reason or another is not possible - there are countless platforms that claim to know how to "clear" the assets. The easiest way to "wash" bitcoin is to cover your tracks. To do this, special "mixer" platforms exist which specialize in mixing various transactions. Tokens are manipulated in various ways, wherein the end, you get a similar amount, but in the other bitcoins. Naturally, services do not work for free and take a substantial commission, and naturally, as with everything, there is a risk. As will all other areas of an illegal field - no responsibility either.

It seems that under pressure from the state regulators, almost every service now requires a KYC (Know Your Customer) procedure. Sometimes a passport is enough, but the process becomes more complicated. Many ask for a selfie with a document, many, go for a second document - an apartment bill for example which can confirm your residence. Given that someone else's passport and documents can be easily found on the Internet it’s not a great problem and on many other sites, this procedure can be circumvented. This leads to the appearance of rather complex solutions. For example, during the identification process through the IDNow application, a user is connected to a live operator that asks to show documents and engages in a full on dialogue. The procedure, except that you do not need to get up off the couch - is no different to an offline one.

In practice, cryptocurrencies, by their very nature, leave islands of freedom, which is useless to fight against - and so there are a large number of unregulated exchanges, without any identification procedures. Although, traditional problems also arise - the risk is high, and the liquidity is not always great. If Binance churns through a million dollars without even noticing, then for a small stock exchange, it can take days.

No matter how much you want to "launder" money through cryptocurrencies - for now, it’s not the most popular instrument. The share of "black" money in cryptocurrencies is not great, today the market is divided by traders, big investors, and miners. The rest is held in private and not very large pockets. Even the drugs trafficking, its less than 5%. In order for cryptocurrencies to become an attractive way to launder money, the market should grow further. Alternative instruments, such as anonymous cryptocurrencies, need to go through a battle check and gain liquidity to become attractive for those who need to hide their money from the ubiquitous state. In any case, it’s worth knowing that when doing the laundry, a few pairs of socks can easily go missing, and a misplaced red shirt can corrupt the whole load.

Insider.Pro in no way supports or endorses money laundering or any other illegal activity.

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