How are Cryptocurrencies being used for Money Laundering?


How are Cryptocurrencies being used for Money Laundering?

In this Bitcoin Era, technology is achieving us all the comforts and assurances that we expect from our surroundings, and TheNewsSpy is one of those head-turning technologies to confirm us with such promises. When the real-world finance system is falling on many occasions, blockchain offers us the cryptocurrencies to invest with safer, faster, and more efficient cues. The system works without any third parties and that archives the user’s privacy. But this, as well as certain setbacks and one of those, has been bothering the cryptos consultants and enthusiasts for a long time- money laundering.

What is Cryptocurrency?

In short, Cryptocurrencies are digital tokens that are protected by encryptions, and each of these is unique. The technology behind these currencies is known as the blockchain, which is a distributed ledger technology that is webbed by different blocks, each of which is under different networks and is used for secure and peer-to-peer transactions. The system is anonymous and protects the users from third parties. But in the meantime, many frauds are using this as an opportunity to whitewash their illegally-inherited Money.

Money Laundering in Crypto

The cryptos may have many advantages but are sure of their unregulated nature, which makes the system quite unstable. At this moment, the cryptos are the gateway to avoid real-world financial disruption while it is taking the whole system towards blunderous financial jeopardy. The scammers can use this as an opportunity to invade the eyes of regulatory bodies and invest in cryptos. This way, by using anonymity, they can vanish in the system and whitewash their black Money in no time.

Crypto Bans in Certain Countries

When there are more than five-thousand cryptocurrencies around the globe, and despite the rapid speed it is growing, many are not on board with this technology for its nature of maintaining anonymity. Countries such as Russia, Bangladesh, Morocco, Egypt, and many others are tightening their system by declaring cryptos as an illegal medium of exchange and doing everything in their proximity to let it enter their territories.

How do frauds use Cryptos for laundering Money?

1. Placement 

By online mediums, cryptos can be bought with cash or other altcoins. The frauds often use a lesser level of compliance with AML to buy the cryptos. In other ways, they contribute their funds to buy illicit wallets through other intermediate sources.

2. Layering 

Here, they whitewash these illicit funds by making clean transactions. They either buy assets or different cryptos to make their funds valid.

3. Hiding

By taking part in coin exchange operations or initial coin offerings, these criminals can break the links between the transactions and hide their fund sources.

4. Tumblers 

This is a very clever process for invading specialists. The criminals buy coins on different platforms and mix them. This activity is known as tumbling. They practically split their cryptos, send them via various addresses, and recombine those by buying different coins from the same sources. This way, they can make their currencies ‘new’ and ‘clean’ at the same time.

5. Integration 

This can be put on the system’s inadequacy as the money launderers use the system’s volatility to completely wash their records from the tracks. It is considered the final stage of whitewashing the dirty tokens. When the records are only kept in the system and cannot be traced back to the users, they can put it in their records that they have achieved a small fortune from a peak point while they invested a little amount only. This way, they are off the cryptosystem and can get back with their high profits.

6. Gambling Platforms 

Many crypto platforms offer gambling that accepts cryptos, and this way also, the criminals can get away with their money-laundering schemes.

7. Peer-to-Peer

The peer-to-peer feature allows these criminals to deal with international entities. This way, their transactions can go a long way and cannot be traced back to them.

8. Crypto ATMs

Crypto ATMs offer many features to the user. As much of the cryptos can be bought by credit or debit cards, one can even buy the currencies through cash. Most often, the KYC measures in these machines are poorly maintained, and these criminals need to track down such facilities.

In this Bitcoin Era, when the transparent transactions for the users are bringing crypto more investments, it is also a responsibility for them to look out for the criminal activities. If the disruption in this space becomes more pressing, it will take no time to shut the whole system down.