A Guide to Anti-Money Laundering for Crypto Firms
Explore global crypto AML regulations, crypto firms’ biggest challenges, and best practices for a sound AML/CFT program.
Get your copyEuropol has issued its first European financial and economic crime threat assessment, exploring the intertwined and evolving threats of money laundering, corruption, and organized crime in Europe. The insights are drawn from collaborative intelligence across EU member states and Europol-partnered authorities. The report highlights the role of technological progress in enabling criminal actors and recommends a path forward to undermine their networks.
“In our globalised world, trade, technology and transport bring us closer together and create economic opportunities and prosperity,” wrote Executive Director of Europol Catherine De Bolle. “However, there is another side to the coin; our interconnected world is misused and abused by criminal actors involved in economic and financial crimes. … The ability to launder illicit proceeds on an industrial scale, to move them through a web of criminal financial brokers, and to corrupt the relevant actors, has become indispensable for modern organised crime.”
The report highlighted the role of organized crime in driving illicit financial activities. Almost 70 percent of European criminal networks were found to use money laundering techniques, while 60 percent relied on corruption to further their aims. Criminal activities were not confined to illegal businesses, either: over 80 percent of these networks were found to use legal businesses in their schemes.
Europol also pointed out that geopolitical changes provide new opportunities for criminal activity. Particularly, the authority discussed the use of EU sanctions evasion methods to further enable organized crime by:
According to the authority, asset recovery is a crucial weapon against organized crime, serving as an economic deterrent by depriving criminal networks of their profits. Yet the report suggested the need for increased focus on this tactic, estimating that at present, less than two percent of annual criminal proceeds in the EU are recovered by European authorities.
Per Europol’s analysis, criminals are exploiting digital advances to enable their activities. These include virtual banking, buy now pay later (BNPL), decentralized finance, encrypted messaging platforms, and dark web markets. These services offer various advantages, from speed to anonymity, and often lack robust protection against financial crime.
Digital assets are increasingly used to enable organized and financial crime. For example, in a 2023 case, authorities dismantled a crypto conversion service because analysis linked around 46 percent (about EUR 1 billion) of the assets it exchanged to criminal activities. Virtual assets’ attraction stems from their pseudo-anonymity and fast-moving nature, which can be difficult for authorities to trace or freeze. Criminals use various crypto services and assets to further their aims, including:
The EU authority highlighted several key money laundering typologies in the crypto world. They include:
Firms can study the full report for an in-depth analysis of money laundering’s complex connection to organized crime, corruption, and sanctions evasion in Europe. Understanding currently-trending typologies in light of each business and its unique operational risks is crucial. In this way, firms can ensure risk-based AML/CFT processes.
Firms in especially vulnerable spaces, such as digital assets service providers and neobanks, should take a comprehensive look at their current financial crime risk management framework in light of Europol’s priorities.
Explore global crypto AML regulations, crypto firms’ biggest challenges, and best practices for a sound AML/CFT program.
Get your copyOriginally published 14 September 2023, updated 22 August 2024
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