How are Money Launderers Using Cryptocurrency to Reap Benefits?

The distinguishing characteristic of a cryptocurrency is its fundamental nature: it is not distributed by any central authority, making it technically immune to government intervention or manipulation.

Fremont, CA: Money laundering is the method of disguising a crime's proceeds and integrating it into the legitimate financial system. Thanks to technology, criminals can now use a new way of laundering money cryptocurrency. Cryptocurrency is a digital or virtual currency that uses cryptography for security purposes.

The distinguishing characteristic of a cryptocurrency is its fundamental nature: it is not distributed by any central authority, making it technically immune to government intervention or manipulation.

To launder money via cryptocurrencies, criminals open digital currency exchange online accounts that accept fiat currency from traditional bank accounts. Then they launch the 'cleaning' process (mixing and layering), i.e., moving capital into the cryptocurrency system using mixers, tumblers, and chain hopping (also called cross-currency).

Money transfers from one cryptocurrency to another across digital currency exchanges to build a money route that is almost difficult to monitor. They may also use private coins and cryptocurrencies intended to promote anonymity, such as Monero and Zcash.

Cryptocurrencies pose a massive threat to financial institutions and anti-money laundering schemes. Although investors are currently interested in this market, in many countries, formal regulations are still emerging. Efforts to de-anonymize cryptocurrencies have contributed to the production of new coins intended to be less private and to the advancement of software to examine current coins' activity history to identify user actions and identities.

Various solutions can be put in place to counter money laundering involving cryptocurrencies: Financial Institutions can enhance AML processes; transaction surveillance can be reinforced, and laws can be improved; Third-party ID providers may be put under state supervision; cryptocurrency exchanges may be restricted, in particular, advanced digital exchanges and exchanges providing the buying of primary cryptocurrency; blockchain may be utilized as a remedy.

Less anonymous cryptocurrencies effectively fix money laundering and illegal activity problems. They could have a better chance of accessing the legitimate market than anonymous cryptocurrencies, mainly if supported by national governments.