How can we keep crime out of cryptocurrencies?

November 28, 2018 3 minute read

Decrypting crypto risk – how can we keep crime out of cryptocurrencies?  

Europol recently released the fifth edition of its “Internet Organised Crime Threat Assessment”. The Assessment makes a statement that shouldn’t come as a surprise; criminals continue to use cryptocurrencies to facilitate illicit transactions online. The question is, despite being aware of this threat for some time, are we now any better equipped to tackle it? A BBC World Service program last week suggested not. Jonathan Benton, a former Detective Superintendent at Scotland Yard, stated that only one detective at his former employer has been sent on specialist training to understand cryptocurrencies and the threats they pose.

Is the private sector any better equipped? It would seem not. An article last week by Financial News revealed that big banks employ more chefs than experts in cryptocurrencies. Of course, this applies more widely across functions but it’s a strong indication that compliance functions are lacking expertise. What all of these stories highlight is the need for a reskilling of financial crime gatekeepers in both the private and public sectors. Without frontline professionals who understand both financial crime behaviors and the complex nature of new technologies such as cryptocurrencies, we will continue to find ourselves on the backfoot.

Protection money – the perks of being a bodyguard

What is the average salary of a bodyguard? If you’re working in the US it will range between $55,000-180,000 a year. If you’re working in Venezuela or Russia your salary can run into billions of dollars, as revealed by two separate reports last week. The first, by the OCCRP reveals how three of President Vladimir Putin’s former bodyguards; Viktor Zolotov, Oleg Klimentiev, and Alexei Dyumin have all become seriously wealthy individuals. All of them now occupy prominent political functions as well as some of the most desirable properties in Russia.

The second case, reported by The New York Times, involves the former bodyguard of Hugo Chavez, Alejandro Andrade. Andrade rose from humble bodyguard to become Venezuela’s National Treasurer between 2007-2010, siphoning off billions of dollars of state funds in the process. Now living in Florida, he has been charged by US authorities with taking bribes worth over $1bn and for facilitating a money laundering scheme. Both of these stories show the perks afforded to those who have unquestioning loyalty to autocratic regimes. And both show businesses that the closest associates of some the highest ranking PEPs can become just as risky to deal with as those they protect.

Can Danske learn anything from down under?

This time last year, financial crime headlines made no mention of Danske Bank. They were filled instead with the failings of the Commonwealth Bank of Australia (CBA). One year on, the bank finds itself in front of the country’s Royal Banking Commission. Last week, in her testimony to the commission, the bank’s new chairwoman, Catherine Livingstone admitted that there was knowledge at the bank that it wasn’t doing enough to comply with anti-money laundering regulations. As a reminder, these failings allowed 53,000 suspicious transactions connected to drug dealers and arms traffickers to go unchecked.

A year on from the scandal is there anything that the board members of Danske could learn from the actions of CBA? The first lesson should be that once investigations start, admit your failings quickly. Danske has already done this by releasing a detailed internal report which should work in its favor. Secondly, it is important to own up to cultural failings. Both banks have been slow to do this which will likely work against them. Thirdly, expect to be made an example of. CBA received a fine of A$700m, the largest fine in Australian corporate history. Danske Bank should brace itself. Not only is it likely to receive a fine from its domestic regulator but could also receive a hefty fine from the US. Lastly, Danske should learn from CBA that its punishment will extend past fines. It can expect its disgruntled shareholders to place a class action against it to compensate for losses. Unfortunately for Danske, most of the lessons learnt are proving bitter pills to swallow.