Financial expert Maxim Kurbangaleev tells about money laundering. He tells how to conduct a legal exchange business without making the mistakes that SUEX made in 2021, which was sanctioned by the US Treasury Department.
First, it is necessary to determine the jurisdiction where the company will operate. Next, it is necessary to find a licensed crypto exchange platform and sign contracts that meet AML requirements of European and American legislation.
Cryptocurrency is a means of money laundering
Cryptocurrencies like Bitcoin can make it easier for fraudsters to obscure the source of criminal proceeds. This is because they offer anonymity and ease of use, allowing crime syndicates to avoid detection by financial regulators, including the U.S. Drug Enforcement Agency (DEA) and the United Nations Office on Drugs and Crime (UNODC).
Money laundering is a process that tries to make illegally obtained funds appear legitimate. This is done by utilizing a variety of techniques to hide the source of ill-gotten funds.
In cryptocurrency, this can be achieved by using private coins that are designed to be hard to trace on their blockchains. These coins can be traded on centralized exchanges and also on peer-to-peer networks that don’t have strict compliance standards.
Another method is to use services that send funds through numerous addresses or businesses to obscure their origins. Once the funds are laundered, they are sent to an exchange where they can be liquidated.
Lastly, some crime groups are transferring their crypto funds through DeFi (decentralized finance), which does not have the same level of regulation as centralized services. This allows them to evade detection because they don’t have to interact with centralized exchanges or crypto lending sites.
According to the “Cryptocurrency Anti-Money Laundering Report” released by Chainalysis in 2021, more funds were laundered through DeFi protocols than ever before. The reason for this is that it is easier to launder cryptocurrency through these protocols than with centralized exchanges because they don’t have any visibility into the transactions.
The report also notes that money launderers are utilizing play-to-earn video games, which allow them to hide their assets. These video games allow them to buy gaming currency and then use that money to win virtual chips at online casinos, which can be used for gambling.
However, the most effective money-laundering method is to use a fiat off-ramp, which is an exchange that can convert cryptocurrencies into fiat. This ensures that the underlying blockchain analysis can’t be used to trace the funds and makes it impossible to track where they go next.
A cryptocurrency is a tool for money laundering
Cryptocurrencies are attractive to money launderers because of their anonymity and speed. Unlike fiat currencies, crypto wallets do not require customers to submit identifying information to use them – so it’s easy for criminals to create thousands of accounts without triggering anti-money laundering (AML) alerts.
For this reason, money launderers can move larger amounts of illegal funds into and out of the crypto market at a faster pace than they could with regulated fiat currencies – often outpacing AML measures. As a result, cryptocurrency exchanges are under increasing pressure to implement KYC measures and comply with AML laws.
AML measures for cryptocurrency include Know Your Customer (KYC) procedures to verify identities and risk assessments that assess the likelihood of money laundering activities. The Financial Action Task Force (FATF) requires crypto exchanges, stablecoin issuers, and some decentralized finance protocols to undertake these checks.
While these procedures are intended to mitigate the risk of cryptocurrencies being used for money laundering, they can also create friction for end-users who may be unfamiliar with AML regulations and their implications. In addition, cryptocurrency transactions are typically not recorded on codified paper records like those on bank statements – so they are harder to trace.
To combat the risks of crypto laundering, blockchain firms are developing AML tools that can monitor suspicious transactions and freeze suspect accounts. For example, Chainalysis offers to Know Your Transaction (KYT) software to identify and freeze suspicious crypto accounts on its platform.
In addition, exchanges that allow users to deposit and withdraw cryptocurrencies should have KYC on-ramps and off-ramps to detect suspicious behavior. These processes can help identify suspicious transactions and prevent them from being sent to other exchanges.
Ultimately, money laundering is an important issue that has to be addressed in all sectors of the financial industry. It is not a new problem and needs to be considered as part of an overall risk-based approach to regulatory compliance.