Corruption, money laundering, terrorist financing all together are the traditional agenda of regulators from around the world. At the same time, they and the financial institutions avidly accuse the cryptocurrencies to become the key tool for “black” transactions and “gray” schemes, and insist on the strict regulation of this sector which is the only means of change for the situation.
Surprisingly, all of the above-mentioned problems existed even before cryptocurrencies and tokens entered the financial market. These problems continue to flourish to this day. Every year, at least $800 billion is laundered in the whole world, and most of the suspicious operations go through the traditional banking sector. Recent events connected with Danske Bank, Nordea Bank and other financial institutions have confirmed this fact. Unfortunately, the existing AML measures have demonstrated complete disability.
However, regulators seem to be unaware of the fundamental problem, and still focus on “tying” the hands of new financial technologies — the pressure is being put on the ICO, decentralized exchanges, cryptocurrency emitents, the coders. Strict measures are announced by FATF, SEC, and a number of other regulators. There seem to be a certain engagement on the part of officials, and it’s quite a pity that it exists.
TOON by Maxim Smagin
Decentralized exchanges, or DEXes, were called the true route of “cryptonomics” development by the enthusiasts. These entities operate without a central authority acting as a third party. “One of the core features of blockchain was the removal of the need for centralized control, trading on a centralized exchange goes against that,” says Adam FUNNELL, Investor and blockchain consultant from the UK. DEXes provide increased privacy to traders, lower trading fees, etc — we described the benefits in our analysis. It is also about protecting the users, says Pier TUPIER, an investor from France: “Many people lost funds due to the exchanges getting hacked, owners running away with funds. So over time, as more people encounter bad experience, they will move to decentralized exchange.” For some traders and investors, the main appeal was the reduced risk of government regulation. Well, here is the “risk”, running full speed. Robert COHEN, chief of the SEC’s new cyber unit, stated that if an exchange doesn’t employ central HQ or governing body, it still cannot avoid the responsibility. “The focus is not on the label you put on something or the technology you’re using. The focus is on the function and what the platform is doing. Whether it’s decentralized or not, whether it’s on a smart contract or not, what matters is it’s an exchange,” he stressed.
The branch of Danske Bank in Estonia appeared in the spotlights of the whole newsworld for the last couple of months. The reason for attention to the small bank within the small country is money laundering of unprecedented volume. Curiously, but for the last years the theme of money laundering was raised in context of cryptocurrencies involved. Now it is about the corruption in the traditional sector — the time to say ‘many happy returns’.
The scandal is picking up traction. It seems that with this strings pulled, a great web is being untangled: last week Deutsche Bank AG and Bank of America Corp. have been contacted by U.S. criminal investigators for information about transactions they handled for Danske Bank Estonia, according to Bloomberg. It also says that the Justice Department investigators have asked questions about JPMorgan Chase & Co.’s work with the mentioned entity. It may be only a tip of an iceberg, the people just started to talk. Let’s take a closer look on the current AML situation, and decide what kind of conclusions can be made in light of recent developments (read more)
Let’s refer to CipherTrace, the Q3 2018 report claims that 97% of all direct bitcoin payments from identifiable criminal sources were received by unregulated cryptocurrency exchanges, while 95% of outgoing payments that were traceable to criminals were made from them as well. Cryptocurrency money laundering on exchanges involves a significant amount of bitcoin — some 380,000 bitcoins or approximately $2.5 billion. The key takeaway from the report can be that 36 times more criminal bitcoin is received by cryptocurrency exchanges in countries where AML is either weak or not enforced. Sounds a good reason for Task Forces to haste with the regulations and impose AML, KYC, CTF and other strict abbreviations on all entities connected to cryptocurrencies.But if we take the volume of $2.5 bln of crypto-laundered funds and compare them to the total of $800 bln — it’s not even a half-percent. The fact of proportions of suspected money laundering cases involving cryptocurrency can be reaffirmed by Nikkei in Japan. According to their study, the large majority of “washing” cases in 2017 came from banks and other financial institutions, totaling approximately 347,000 cases. Crypto laundering cases? 669 counted. No comments (read more)