Dirty money is pouring into the crypto industry at an alarming rate, according to a new study. Over the past six months, 28% of crypto firms have reported a rise in the number of Suspicious Activity Reports (SARs), signaling a growing concern over potential cases of money laundering and terrorist financing.
Financial professionals, including solicitors, accountants, and estate agents, utilize Suspicious Activity Reports (SARs) to alert law enforcement about suspicious transactions involving potential economic crimes in the private sector. However, these reports should not be mistaken for official criminal complaints or fraud reports.
The study, conducted by SmartSearch, surveyed 500 compliance decision-makers across various sectors, including crypto platforms, gambling firms, property developers, and banks. The findings highlight the ongoing struggle faced by compliance professionals in combating the increasing scourge of crypto-related money laundering.
These revelations coincide with recent surveys that reveal widespread concerns among crypto firms about anti-money laundering (AML) violations. Two-thirds of crypto firms expressed worries about such violations, while 53% of respondents in another survey believe that current practices only partially address the risks of money laundering through cryptocurrencies.
Furthermore, the study found that 41% of the respondents have identified cases of money laundering involving cryptocurrencies, with 51% facing fines or penalties for failing to comply with anti-money laundering regulations.
Criminals are increasingly drawn to cryptocurrency as an attractive alternative to traditional money laundering methods due to several factors. Cryptocurrencies like Bitcoin offer pseudonymity, making them harder to track compared to fiat currency bank transfers. Additionally, crypto transactions can be conducted quickly and in large sums, providing convenient access to funds from anywhere in the world. Moreover, many Virtual Asset Service Providers (VASPs) lack the necessary resources and structures to effectively monitor and prevent illegal activities.
In a report by Chainalysis, it was revealed that in 2022, a record-breaking $23.8 billion USD worth of funds were “cleaned” using cryptocurrency, representing a significant 68% increase from the previous year. However, it is important to note that less than 1% of all crypto transactions are linked to illicit activities, indicating that the majority of crypto use is legitimate.
To address these growing concerns, the AML/CFT Industry Partnership (ACIP) in Singapore recently published a comprehensive best practice guide aimed at helping financial institutions (FIs) and crypto businesses effectively manage money laundering, terrorism financing, and sanctions risks associated with customer relationships involving digital assets. The guide provides valuable insights, risk considerations, recommended measures, and practical case studies, contributing to better risk management objectives and processes for digital asset players.
These findings highlight the urgent need for heightened vigilance and improved anti-money laundering practices within the crypto industry. Collaboration between regulatory bodies and industry participants is crucial in implementing robust measures and frameworks to combat illicit activities effectively. By doing so, the industry can create a safer and more secure environment for cryptocurrency transactions while maintaining its integrity.