Money laundering is a practice used to disguise the origin of illegally obtained money. It consists of schemes to make it appear that resources obtained through illegal means have been obtained in legal ways. Money laundering is carried out for the reason that money obtained illegally, such as through theft, corruption or drug trafficking, cannot simply be used by the “owner”, as irregularities would be noticed by the Internal Revenue Service.
Illegal money is then “laundered”, that is, it has a legal origin attributed to it, even if it is not real. This is a method often used by politicians involved in corruption scandals. An example of this act is people who buy works of art with dirty money, and resell them. The money, in this case, ends up appearing to be part of a legalized and common commercial transaction, but in fact it is only being “laundered”.
With cryptocurrencies, the process can be even more difficult to identify without regulating their market. As transactions are made via blockchain, they can use ways to remain anonymous in the block of information, which makes it difficult to identify the records. In addition, because of the high variation in values that cryptocurrencies spend throughout the year, it becomes easy for criminals to forge a justification for the origin of the money, such as speaking of a “significant increase in the value of the cryptocurrency” in a given time course.
Hong Kong dismantles money laundering network with cryptocurrencies
The Hong Kong Customs Service announced on Thursday, July 15, that it has dismantled, for the first time, a network that used cryptocurrencies to “launder” up to 1.2 billion Hong Kong dollars, equivalent to about $155 million
“This is the first time in Hong Kong that a network that uses cryptocurrencies to launder money and hide the source of criminal assets has been dismantled,” Mark Woo Wai-kwan, a local police official, told reporters.
Four people, including the brains of the network, were arrested, and 20 million Hong Kong dollars (about $2.5 million) were frozen.
The network had opened several bank accounts in the name of shell companies, to which it made transfers via a cryptocurrency exchange platform to convert them into cash for its customers.
About 60% of the total amount was handled in the last 15 months, through accounts based in Singapore. The network used the cryptocurrency Tether, (USDT), which was launched in 2014 and has as its main objective to be a bridge between the traditional financial sector and the cryptomarket. It is widely used to facilitate transactions between large companies, in addition to making it easier for retailers to buy the dollar.
Regulatory agencies often criticize cryptocurrencies. Due to their anonymity, they can be used for illegal purposes.
Cryptocurrency money laundering: UK makes record bust
London police announced this Tuesday, 13 July, the largest seizure of cryptocurrencies in the UK, carried out as part of a money laundering investigation. Agents seized cryptocurrencies valued at nearly 180 million pounds, which equates to approximately $250 million, classifying it as “one of the largest seizures in the world.”
This trumps a record 114 million pound seizure by the London Metropolitan Police last June and is part of an ongoing investigation into international money laundering, Scotland Yard reported.
A 39-year-old woman was arrested on June 24 on suspicion of money laundering and later released on bail. She was subsequently questioned about the discovery of nearly 180 million in virtual currencies on July 10th.
“Less than a month ago, we managed to seize 114 million pounds of cryptocurrencies. Since then, our investigation has been complex and far-reaching (…) Today’s arrest is another important step in this investigation that will continue for the next few months as we look for the people at the center of this alleged money laundering operation,” explained the detective Joe Ryan, in a statement.
Cryptocurrencies, such as bitcoin, are often criticized by regulatory agencies for their illegal employment, the anonymity they allow, as well as their ease of use.
According to a report by Chainalysis released in February, transactions in virtual currencies for illegal purposes reached $10 billion in 2020. This represents 1% of total cryptocurrency activity last year. That’s half the amount of the previous year, when such activity hit a record $21.4 billion.
Money laundering with cryptocurrencies: European Union plans to create agency to fight
The European Union (EU) will propose the creation of a new body to combat money laundering and the constitution of new transparency rules for cryptocurrency transfers. For the European Commission, an entity that globally represents the interests of the EU, organized crime and the financing of terrorism must be treated in a centralized manner.
“Money laundering, terrorist financing and organized crime remain significant problems which should be addressed at Union level,” the documents seen by Reuters said.
The new body devised by the Commission will be composed of authorities and should be named ‘Anti-Money Laundering Authority’ (AMLA). According to the agency, the entity will focus on becoming the centerpiece of an integrated supervisory system.
“By directly supervising and taking decisions towards some of the riskiest cross-border financial sector entities, the Authority will contribute directly to avoiding incidents of money laundering/terrorist financing in the Union,” the documents added.
