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How Cryptocurrencies Are Empowering Cybercriminals

4
Feb
2019
Vishal Marria
CEO

In recent years, cryptocurrency has become the favored detergent for criminals to launder money. Regulations must be put in place to prevent cybercriminals from laundering money through the crypto market.

From email scams to ransomware, cybercrime can take many forms. In recent years, cryptocurrency has become the favored detergent for criminals to launder money. Last year, it was reported that £4bn ($5.2bn) had been laundered through cryptocurrencies in Europe alone. As a result, there has been a call from governments around the globe to introduce anti-money laundering regulations for cryptocurrencies.

As money laundering cases continue to occur, investors are increasingly weary of investing their money into the crypto market. In recent months, the market valuation of cryptocurrencies has dropped an astonishing 75 per cent. For this to change, regulations must be put in place to prevent cybercriminals from laundering money through the crypto market.

Why are money launderers using cryptocurrencies?

Cryptocurrencies have inherently low levels of regulation and are not governed by a central authority, meaning the transactions can’t be closely monitored. This makes them a haven for criminal activity around the globe.

With the rise in globalization, cryptocurrencies also became attractive thanks to their ability to easily carry millions of pounds across borders without detection. Crypto transactions do not require real names, so it’s easy for a criminal to remain unidentified as they move and use crypto. The European Banking Authority (EBA) explained that crypto assets often fall outside the scope of the EU financial regulations, so it’s hard to build context around individual transactions.

With the ever-growing popularity of peer-to-peer markets like Silk Road and AlphaBay, cybercriminals have been buying and selling virtual currencies whilst remaining anonymousWithout being about to track the source to the ill-gotten gains, governments and law enforcement agencies cannot possibly prevent this activity. We have also seen peer-to-peer platforms such as Uber and Airbnb exploited by cybercriminals. Hidden amongst a wealth of honest transactions, innovative criminals are able to make a profit by creating fake riders and drivers, while real drivers can tap other technologies like fake GPS apps to bump up fares. The global adoption of sites means money launderers can easily hide their illicit profits amongst legitimate ones, as well as move these payments across borders discreetly.

What can crypto learn from traditional finance regulation?

Admittedly, traditional banking systems also struggle when it comes to stopping illicit transactions, especially with the rise in technologywhich has resulted in more complex money laundering processes.

However, technological developments have also increased the effectiveness of anti-money laundering systems, helping financial institutions to uncover criminal behavior within their networks. As financial institutions upgrade their existing transactional monitoring systems with more stringent detection technologies, progress is being made in catching the bad guys.

The European Union recently took steps to ensure that cryptocurrency exchanges will have to comply with the EU’s anti-money laundering regulations, like any other currency or transaction. Money laundering is an extremely complex issue that is hard to identify. As traditional banks are in the firing line for missing money laundering activity, it will be important to remember to focus on the crypto market and introduce stricter regulations within this space.

Although crypto has great potential, until financial institutions, marketplaces and governments have taken extensive and collaborative measures to tighten the reigns and enforce stricter regulations in the crypto space, crypto currencies will continue to be tainted by illegal activity, leaving its market value vulnerable.

 

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