Crypto Was One of the Biggest Money Laundering Risks in 2022-2023: UK Govt. Report (2024)

FAQs

Crypto Was One of the Biggest Money Laundering Risks in 2022-2023: UK Govt. Report? ›

In a May 1 report, the U.K. Treasury concluded from data provided by the Financial Conduct Authority (FCA) that crypto-asset companies were among the top four kinds of firms that remained “particularly vulnerable” to financial crime, particularly for cases of money laundering between 2022 and 2023.

Since cryptocurrency is subjected to a higher level of anonymity, it is more susceptible to risks of money laundering and other criminal activities.

UK cryptocurrency statistics: Highlights

11% of Brits, or approximately 5.6 million people, have invested in cryptocurrency as of 2024.

Criminals are increasingly using crypto assets to conceal and move the proceeds of crime at scale and pace, pay for other criminal services and as a means to defraud victims.

Irregular patterns relating to the size, frequency, or type of crypto transactions may be red flags pointing to money laundering activity, including: Customers making several high-value transfers within a short amount of time, such as a 24-hr period. Structuring transaction amounts to fall below reporting thresholds.

The analytics firm's data shows the U.S. government as the top crypto holder, boasting a stash exceeding 212,847 bitcoins (BTC) in addition to several other cryptocurrencies, including ether (ETH). Trailing behind are the British government with 61,245 BTC and the German government with 49,859 BTC.

Cryptocurrency awareness and ownership rates have increased to record levels: 40% of American adults now own crypto, up from 30% in 2023. This could be as many as 93 million people. Among current crypto owners, around 63% hope to obtain more cryptocurrency over the next year.

Do drug cartels use crypto? ›

Chinese companies sell the chemical ingredients used to make fentanyl to drug cartels and they get paid in crypto. The drug cartels and the traffickers sell their deadly drugs in the darkest marketplaces, and they get paid in crypto to the tune of about one and a half billion dollars in 2022.

Criminal Forfeiture

A warrant is not the only way for a law enforcement agency to seize bitcoin held by another individual or entity. Bitcoin can also be taken by the government through a process called forfeiture.

How money laundering in crypto works. Criminals employ various techniques and services to channel funds through multiple addresses or businesses, concealing their origins. Subsequently, these assets are transferred from an ostensibly legitimate source to a destination address or exchange for conversion into cash.

The FBI warns Americans against using cryptocurrency money transmitting services that are not registered as Money Services Businesses ( MSB ) according to United States federal law ( 31 U.S.C. § 5330 ; 31 CFR §§ 1010; 1022 ) and do not adhere to anti-money laundering requirements.

Two key components of money laundering using Bitcoin are Bitcoin mixing services and Bitcoin exchanges. Bitcoin mixing services aim to disassociate bitcoins from their source, which is often of a criminal nature. Bitcoin exchange services aim to anonymously convert bitcoins to spendable money.

Know Your Customer (KYC) and AML in Cryptocurrency

Know your customer (KYC) is an initialism often paired with AML. They complement each other to detect and prevent money laundering activities. KYC is the process of collecting customer information to identify outliers.

How safe is cryptocurrency? Simply put, cryptocurrency is in the “high risk, high reward” category of investments. It's considered much riskier than investing in traditional stocks because the sector is still highly speculative at this point.

Cryptocurrencies have many legitimate uses, but they also attract launderers because these transactions can be anonymous, fast and automated. Additionally, cryptocurrencies facilitate cross-border transactions while bypassing the controls of traditional financial institutions.

In 2019, three financial regulators issued a joint statement formally classifying crypto exchanges as financial institutions subject to AML rules. AML regulations require financial institutions to monitor customer transactions, report suspicious activity, and verify their customers' identities.