A Guide to Anti-Money Laundering for Crypto Firms
On July 10, UK authorities confiscated nearly £180 million in cryptocurrency. It is reported to be the largest-ever seizure of cryptocurrency in the country — and one of the largest globally.
The seizure by the Metropolitan Police, which serves the Greater London area, comes just weeks after the police force’s previous record-setting seizure of £114 million worth of cryptocurrency on June 24. According to an official statement, both seizures were made after the Met’s Economic Crime Command received information concerning the transfer of criminal assets.
Details are sparse regarding the investigation. Authorities have declined to specify the currency or currencies seized and have merely stated that the seizures were the result of a large investigation into international money laundering that, according to Detective Constable Joe Ryan, is expected to “continue for months to come.” The Met Police also confirmed that an unnamed 39-year-old woman was arrested on June 24 after the first seizure, then released on bail. She was questioned again after the second seizure and released again on bail until late July.
The Met’s deputy assistant commissioner, Graham McNulty, stated that “while cash still remains king in the criminal world (sic), as digital platforms develop we’re increasingly seeing organized criminals using cryptocurrency to launder their dirty money. Whilst some years ago this was fairly unchartered territory, we now have highly trained officers and specialist units working hard in this space to remain one step ahead of those using it for illicit gain.”
Indeed, the perception of anonymity and the ease of cross-border transactions have helped to make cryptocurrencies a preferred method of payment for criminals and an efficient way to launder money — a fact that has many experts and government officials calling for stricter regulation of the space.
Yet, although reports have highlighted how criminals use crypto to finance illicit activities, at least one study suggests that this may be on the decline. Chainalysis found that illicit transactions represented 2.1% (about $21.4 billion) of all cryptocurrency transaction volume in 2019 and just 0.34% in 2020 (about $10 billion). Of course, a one-year drop doesn’t make it a trend, and there are several possible explanations — the blockchain analysis company mentions an increase in economic activity may help explain its finding — but it is worth keeping an eye on.
Moreover, authorities worldwide have started to chip away at the idea that crypto is untraceable. The seizures by the Met are cases in point. In addition, in early June, US authorities announced it had recovered most of the Bitcoins (nearly 64 Bitcoins, valued at $2.3 million) paid to cyber hackers during the Colonial Pipeline ransomware attack — which occurred just one month before, in May.
This illustrates that though difficult, it’s not impossible to trace crypto transactions. Additionally, as cryptocurrencies become more mainstream and regulators take steps to integrate virtual assets into current AML/CFT frameworks, this will likely further erode the anonymity of crypto transactions. Therefore, while criminals will undoubtedly continue to exploit cryptocurrencies, these virtual assets may soon lose much of their initial appeal.
Originally published July 21, 2021, updated May 6, 2022
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