Europol’s new report Cryptocurrencies: tracing the evolution of criminal finances offers insights into how criminals are using cryptocurrencies today.
Based on the latest operational information contributed to Europol, data collected for the EU Serious Organised Crime Threat Assessment (SOCTA) 2021 and open sources, this report debunks the following myths:
Myth #1 – Cryptocurrencies have become the payment method of choice for criminals
The use of cryptocurrency as part of criminal schemes is increasing, and the uptake of this payment medium accelerating. However, the overall number and value of cryptocurrency transactions related to criminal activities still represent only a limited share of the criminal economy when compared to cash and other forms of transactions. A range of constraints are related to the use of cryptocurrencies, with high volatility a major factor in criminals’ reluctance to use cryptocurrencies for long-term investments.
Myth #2 – The criminal use of cryptocurrency is limited to cybercrime
The criminal use of cryptocurrency is no longer primarily confined to cybercrime activities, but now relates to all types of crime that require the transmission of monetary value, including fraud and drug trafficking. However, the scale and share of the illicit use of cryptocurrencies as part of criminal activities is difficult to estimate. Criminal networks involved in serious and organised crime also continue to rely on traditional fiat money and transactions to a large degree, in addition to emerging value transfer opportunities.
Myth #3 – Illicit funds flow straight from wallet to wallet
Criminals have become more sophisticated in their use of cryptocurrencies. The illicit funds increasingly travel through a multi-step process involving financial entities, many of which are novel and are not yet part of standardised, regulated financial and payment markets. Obfuscation methods and other countermeasures continue to be developed and used by criminals.
Myth #4 – Cryptocurrencies provide anonymity
Cryptocurrencies are not anonymous. Every single transaction is logged onto the blockchain, which is a ledger of all transactions distributed to all users in the network. Most blockchains are publicly available, making transactions traceable. This gives law enforcement access to substantially more information than a case involving cash. While privacy coins and a number of services and techniques may hinder law enforcement investigations, it does by no means stop law enforcement from finding out who is hiding behind the crime.
Recent Europol examples are testimony to this:
- October 2020: 20 arrests in QQAAZZ multi-million money laundering case
- May 2021: Trading scheme resulting in €30 million in losses uncovered
- June 2021: Europol helps Belgian and Swiss authorities unravel Vitae Ponzi scheme
Headquartered in The Hague, the Netherlands, Europol supports the 27 EU Member States in their fight against terrorism, cybercrime and other serious and organised forms of crime. We also work with many non-EU partner countries and international organisations. From its various threat assessments to its intelligence-gathering and operational activities, Europol is doing its part in making Europe safer.
At LS Consultancy, our consultants are industry experts that interpret the rules, regulations and spirit of the industry guidelines by assisting you “the client” in implementing a compliance programme that you can be confident is mitigating the risk of financial crime. What we can do:
- We analyse the relevant jurisdictions legislation, regulation and industry guidance to ensure that your controls adopt the highest standard possible
- Analyse and/ or Enhance your Business Wide Risk Assessment to ensure we consider money laundering and relevant predicate crimes
- Assessment of your Customer Onboarding and/ or Periodic KYC reviews rely on independent documentation and supported by credible information from your customer – as this is key to your compliance programme.
- Robust Transaction Monitoring and Screening whilst utilising your up-to-date KYC documentation/ information are fundamental.
- Greater emphasis on training – why not go through live examples with your RM’s, Operational Teams and Compliance – discuss the areas of concern and come up with compliant solutions.
- Ensuring your Compliance Monitoring Programme is conducted on a regular basis
- Engagement with senior management through relevant committees
For further information please contact us where our industry experts will be happy to answer your questions.
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