Report Highlights Growing Money Laundering Problem in Crypto

Dirty money is pouring into the crypto industry at an alarming rate, according to a new study. More than a quarter (28 percent) of crypto firms have reported a rise in the number of Suspicious Activity Reports over the past six months.

Financial professionals, including solicitors, accountants, and estate agents, use Suspicious Activity Reports (SARs) to alert law enforcement about potential cases of money laundering or terrorist financing. They give law enforcement in the United Kingdom added perspective on economic crime in the private sector. However, they are not the same as a crime or a fraud report. Nor do they constitute an official criminal complaint. 

Crypto Is a Top Choice for Dirty Money

The new data come from SmartSearch, which surveyed 500 compliance decision-makers in various sectors. Including crypto platforms, gambling firms, property developers, and banks.

Recent numbers highlight compliance professionals’ ongoing struggle to combat the growing scourge of crypto-related money laundering. BeInCrypto recently reported on a survey revealing that two-thirds of crypto firms have worries 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 through cryptocurrencies.

Moreover, 41% have identified cases of money laundering involving cryptocurrencies. Furthermore, 51% have faced fines or penalties for failing to comply with anti-money laundering regulations.

Criminals see cryptocurrency as a lucrative alternative to traditional money laundering for several reasons. First, cryptocurrencies like Bitcoin are pseudonymous and harder to track than bank transfers in fiat currency.

Crypto is also easy and quick to transact in large sums and can be accessed anywhere worldwide. Also, many Virtual Asset Service Providers (VASPs) lack the structures or resources to monitor illegal activity effectively.

In Chainalysis’s most recent Crypto Crime Report, we learn that 2022 was a record year for crypto money laundering, with $23.8 billion USD worth of funds “cleaned” using cryptocurrency.

That marks a 68% increase from the year before. However, the same report also noted how less than 1% of all crypto bears any relationship to illicit activity.

Binance Investigated in France For “Aggravated Money Laundering”

Martin Cheek, managing director of SmartSearch, believes criminal gangs target crypto firms to exploit weaknesses in their compliance processes, especially when flawed manual customer checks are used.

“These common practices, such as requesting an ID document, are no longer sufficient,” he explained. “Not only do they not meet know-your-customer (KYC) and AML standards, but they can also leave the door open for identity theft.”

Cheek continued:

“The quality of forged documents has evolved to a level of sophistication that makes identification increasingly difficult. The Home Office’s own guidance on checking for forgeries of official documentation lists 24 potential failure points, many of which require expert knowledge to spot.”

The specter of money laundering has plagued the cryptocurrency industry as it tries to present a legitimate and compliant public face. On June 16, French authorities announced they are looking into Binance, the world’s largest exchange, for “aggravated money laundering.”

The EU is currently undergoing a consultation process on including VASPs in its anti-money laundering regulations.

Remember, SARs are not crime or fraud reports. To report a crime or a fraud in the UK, call 101 or Action Fraud on 0300 123 2040.