In the digital era, cryptocurrencies are trending as some find cryptocurrencies as the digital money that helps in easy transfers while some use it for illegal activities. The cryptocurrencies like bitcoin have resulted in increased cases of money laundering and illegal trade of weapons and drugs. In comparison to fiat currencies, digital currencies are more used in illicit activities. Research has been done, and it has been found that around $829 million bitcoin transactions were carried out on the dark web in 2019. Blockchain is the technology on which the entire bitcoin network is dependent, and it records all the bitcoin transactions and makes the record available to each user.
Because cryptocurrencies are digital currencies, there has been a risk of cybercriminals always. Cybercriminals always attempt to exploit the blockchain of bitcoin, and fraudsters try to attack the customer data and manipulate the transactions. MSBs play a great role in preventing crimes and money laundering issues, and this will even help MSBs to identity the customers that are risky and will make Anti-Money Laundering processes complaint to avoid the cases of money laundering.
Now you might be thinking the blockchain is safe, then how criminals can use cryptocurrencies like bitcoin for money laundering. Let us discover more here at the official website through various stages.
How criminals use cryptocurrencies for money laundering?
Cybercriminals use cryptocurrency money laundering to hide the illegal origin of funds through various methods. One of the main reasons behind bitcoin money laundering issues is that the transactions made in bitcoins maintain user anonymity. This is the concept that is applied to bitcoin money laundering cryptocurrencies and money laundering through fiat currencies.
Cybercriminals are the masterminds who use three stages to carry out money laundering that include:
Placement
Exchanges are online marketplaces that allow users to purchase bitcoins or other cryptocurrencies using fiat currencies or altcoins. Exchanges have different levels of compliances that have specific regulations that must be taken into consideration while carrying out the financial transactions. From all the exchanges that are located across the world, there are only a few exchanges that are legitimate and follow the regulatory requirements and complete the AML and KYC procedures.
There are some exchanges that aren’t AML compliant, and this is the vulnerability where bitcoin money laundering cases take place. The exchanges that are regulated have to complete the KYC policies of the users and follow the protocols that are set. If users complete the KYC process, it breaks the very crucial feature of bitcoin that is the anonymity of users. Exchanges never store customer data, but they take customer IDs to match and verify the transaction data.
Hiding
Cryptocurrency transactions are anonymous, but the transaction history can be known through blockchain because it is a distributed ledger that is available to all the viewers. Criminals play dirty cryptocurrencies, and they tend to use anonymizing services to hide the real source of funds. The main reason or excuse to carry out illicit hiding activities is the main issue that utilizing anonymizing services providers safeguard the personal privacy of users. This can only be accomplished by engaging in ICO where users can utilize only a type of crypto tokens that can confuse the origin of digital currencies.
Integration
Integration is the point where no one can trace the dirty currencies back to the criminal activities, and this is the last phase of crypto money laundering. The currency is no longer tied to any crimes, but still, money launderers need a way to know about the possession of cryptocurrencies, and that explanation is integration.
The main and only method of legitimizing the illegal income is the result of the lucrative venture or appreciation of any currency. Also, it is hard to disprove that value of any altcoin can get changed in the market. Earlier fiat currencies were used to launder the money, and companies that have started accepting bitcoin payments are legalizing their income and are transforming their dirty funds into legal and clean bitcoin.
Users must be aware of bitcoin money laundering and must choose the right cryptocurrency exchange to buy bitcoin and carry out transactions.
