The activities that dishonestly generate wealth for those engaged in financial misconduct is broadly termed as financial crime. For example, the exploitation of insider information about certain financial event is a financial crime.
Financial crimes are the most common crimes facing the financial sector are money laundering, terrorist financing, fraud, tax evasion.
Over the period, the nature of financial crimes has changed. Crypto currency related crimes have taken over the traditional frauds and crimes. This variant of the financial crime is yet evolving. There are quite a many companies accepting cryptocurrencies such as Bitcoin as payment.
In addition, there are multi-national companies accepting cryptocurrencies as payments. Microsoft Dell, AT&T, Overstock, Egifter, and Virgin are some of them.
In addition, there are even entire companies whose business model focus solely on cryptocurrencies. Some businesses engage in cryptocurrency exchanges whereas some are wallet providers. Some offer intermediary cryptocurrency services, which makes it possible to shop on Amazon and pay with cryptocurrencies.
The Rise of Financial Crimes in Cryptocurrencies
Rising acceptance of cryptocurrencies and the privacy benefits that cryptocurrencies are offering, are not hidden from criminals. They use cryptocurrencies such as Bitcoin for various purposes. Some of them include laundering dirty money, defrauding investors, monetizing ransomware, or buying illicit goods.
For years, reports have also suggested that well-known terrorist organizations were using cryptocurrencies to procure funding. In fact, the sale of illegal drugs and other types of lawbreaking on so-called dark markets and paying for them in cryptocurrencies, has skyrocketed over the last few years.
Essentially, this whole development around the rise of cryptocurrencies in legitimate and illegit businesses means that no matter where you currently sit in today’s business world, you’re impacted by the financial crime risks around cryptocurrencies in some way.
Bitcoin became most famous, when it came to crime alongside the emergence of dark web marketplaces like Silk Road and cybercrime activity like Ransomware. New types of crime required a new method of payment for operating over internet. Bitcoin filled this gap. In addition, the technology is evolving in favour of the customers. These technologies include anonymizing technologies, mixers and privacy coins that make it harder to trace the trail of cryptocurrency transactions.
Cryptocurrency Financial Crime Risk Mitigation
But, one very important point to always keep in mind, it is very much possible to mitigate and manage the financial crime risks of cryptocurrencies. One of the untold stories in the universe of cryptocurrencies is just how effective AML controls can be practically in mitigating and managing risks. Over the past few years there has been a dramatic decrease in the percentage of Bitcoin transactions involving illicit entities.
It is believed that the number one reason for that is the improved quality of AML controls and the increasing presence of regulations related to cryptocurrencies. So long story short, the use case of cryptocurrencies is inevitable in today’s world and the need for financial crime risk and compliance organizations to catch-up and overtake cryptocurrency criminals omnipresent.
The best and most apparent way to do this, is to educate the current generation of financial crime professionals and give them the skills they need to get a hold of this complex new universe to eventually develop incredibly sound AML compliance programs and to better fight cryptocurrency financial crimes.
