🇬🇧Finance Intelligence: Cryptocurrency and Recycling Models
Archive, February 22, 2018, cryptocurrencies recycling
In financial intelligence dealing with recycling in a context of cryptocurrency using traditional methodologies is a chimera. As much as the cryptoeconomy is a paradigm to itself compared to what existed before and under the different viewpoints, so the related developments, of which one is recycling, is different with what was first tackled.
The prevalent approach with which still today is confronting the theme, which is reachable on the writings of many, even authoritative, needs to be reviewed by get their hands dirty and starting from below. A good and basic method, useful for purpose, is to see if there are any confirmative models for how much you plead.
This helps a study published at the beginning of the year by Center on Sanctions & Illecit Finance, of Fundation for Defence of Democracies, in collaboration with Elliptic, with the end ‘…to identify where individuals turn in order to cash out or transmit bitcoins (BTC) acquired from illicit entities and to discover typologies for criminals “laundering” bitcoins’.
Remembering how money laundering is the process for which money from illegal activities is ‘cleaned’, and that is entered into the financial system as it was derived from licit activities (it is not the money to be ‘dirty’ but the activity from which it derives it), the study shows that for cryptocurrency with illegal origin the process takes place in two ways. The first through a transformation into another cryptocurrency (even of the same protocol), and thus with the intent of hide the cyber trace of origin ; the second, through the transformation into the fiat currency.
Given the flows expressed by the model, at the end of the interception, they are completely disconnected from the current control system; this because the clean-up quantities can stay for an undefined time (or to the defined purpose) within the cryptoeconomy ecosystem that is completely detached by the centralized control system, on which the anti-money laundering system is currently based. Not only. More time is available and more are the possibilities to implement policies of obfuscation, otherwise articulated, of the amount.
If this is intuitive for cryptocurrency flows subject to transformation, for exchangers, which are the most important market players in the transformation in fiat currency, the speech is the same: with the appropriate exceptions, until the transfer of the money from an account at an exchanger to to a bank account there is no obligation to check, even minimal, identity. This also applies if in the account at the exchanger there is fiat currency resulting from a normal exchange with cryptocurrency (of illegal origin and not).
So from the model developed by the study of cryptocurrency flows of illicit origin, which specifies market players that best lend itself to making recycling possible, you can come up with a more general summary. The assert is that until the illicit source money (cryptocurrency or fiat currency) originates and remains within the cryptoeconomy ecosystem it is not intercepted by the current AML/CFT system.
This line of thought can also be extrapolated from the recommendations resulting from the FATF Plenary Assembly, of a few days ago, on cryptocurrency.
Corollary to this affirmation is that those who continue to invoke the application of existing regulations to the phenomena of the cryptoeconomy monetary economy perhaps, as gracious as possible and to the minimum, should seriously consider the hypothesis of a meditative time-out.
This post was originally published on February 22, 2018, in Italian version on www.thescanner.info .This is adaptation of a neuronal Italian/English AI translation by IBM Watson.