#Security29 Oct

Myth Busters: Does Crypto Fund Illegal Activities?

Alisa Tkach

No more chances for criminals.

No more chances for criminals.

The general perception of cryptocurrency is still heavily affected by prejudice. It was formed back in the day when the space was not regulated. A decade ago, criminals had way better chances to get away with transacting in digital currencies. But the modern cryptocurrency landscape is an entirely different story. 


Today, the majority of developed countries have introduced sets of regulations that oblige businesses to implement sophisticated tools. For example, AML, KYC, and anti-fraud procedures. They serve to protect everyone involved in the payment process. It will leave criminals and other questionable entities little room to succeed. 


The Basics of Crypto Compliance 

Cryptocurrency compliance is an industry inside the industry. And each year companies have to meet higher standards of security assurance and minimizing risks. Well-established crypto businesses protecting their reputation approach KYC/KYB/AML processes seriously. As failing this, they can face astronomic fines. 


Leading market players are not the only ones that have to follow strict compliance procedures. Every platform that allows buying and selling digital currencies in most crypto-friendly countries must follow the rules. It includes  KYC/AML procedures and verifying the identity of its customers. 


If the company wants to operate legally, it is required to comply with local requirements. Or at least obtain a crypto license from a trusted jurisdiction. For example, Mercuryo has a Canadian cryptocurrency buy/sell and wallet services license and is about to receive a Lithuanian one. In the UK, the company is licensed to provide fiat pay-in and pay-out services. 

Crypto vs Criminals #1

At the same time, B2B clients demand a completely different approach. KYB serves to evaluate every potential partner. Working out many details and investigating its company’s directors. Gambling platforms are being filtered out at the very beginning. Reputable crypto businesses would never risk partnering with high-risk businesses.


A few compliance tips for businesses:

  • Make sure all your teammates are well trained and aware of basic crypto security measures
  • Update your policies on time
  • Customize monitoring procedures
  • Prioritize assessing transactions risks 
  • Gather historical data and update your processes accordingly


A Friend or Foe?

Still wondering how many illegal activities are funded by crypto?. According to the study, only 1% of financial crimes in 2019 were carried out using digital assets. In 2020, this number decreased. Moreover, most of these crimes are related to scams. More than money laundering, terrorist financing, or other major offenses. 


Darknet markets hold a steady second position with $1.7 billion worth of crypto transactions. However, when comparing the sum to an estimated $1.6 trillion laundered in cash.

Crypto vs Criminals #2

Responsible crypto businesses are often eager to meet the authorities halfway and help fight financial crimes. When hackers successfully cracked a token swap platform Poly Network, Tether’s chief technology officer immediately. They froze a $33 million Tether transaction related to the hack. A couple of weeks later, the owners of the funds got their money back.


Blockchain surveillance companies, such as Chainalysis and Elliptic, use dedicated software for the following reasons. They work with it to gather blockchain data and check it for suspicious activity. Usually, it is from Dark Web, assisting law enforcement in tracking digital funds’ whereabouts.


In fact, the complete anonymity of crypto transactions is another myth. Cryptocurrencies are not anonymous. And many cyber criminals end up being tracked down. The relatively recent Colonial Pipeline attack serves as a perfect example. The Justice Department traced 63.7 BTC paid by the company to hackers. And they disabled its computer systems, causing fuel shortages and a gas price surge. 


Some crypto transactions are easier to track. While others give authorities a good run for the money. The good news is that law enforcement is getting more skilled in tracking down illegal funds each year. And crypto companies are ready to cooperate.


What About Gambling?

Although remote casinos are considered high-risk, gambling is legal in some places. For example, in most European countries, some US states, and many locations worldwide. Online gambling platforms were among early adopters of cryptocurrency payments. However, not all crypto businesses choose to engage with these controversial establishments. 


Recognizing the harmful nature of wagering, Mercuryo has always had a strict no-gambling policy. The company’s mission is to put digital assets to practical use. And making the financial agenda more effective and accessible. Apart from mental health risks, gambling platforms are potential breeding grounds for criminal activities. From using stolen credits to money laundering. Ignoring these threats goes against our company principles. 


Mercuryo’s KYB procedures eliminate gambling-related platforms. So we do not provide them with payment processing services. We keep informing our users about ongoing security measures, partnership principles, and compliance processes. We aim to educate our audience to make informed financial decisions instead of chasing quick profits.


The same goes for crypto investments. Although quite different from gambling, even experienced investors may lose. People consider, investing in cryptocurrency as high-risk. And in no way do we encourage anyone to put their money on the line. As opposed to promoting risky activities, Mercuryo works on improving global financial operations. For example, by leveraging cryptocurrency technology and fintech innovations.


The Bottom Line

The new wave of global regulations contributes to the development of the cryptocurrency space. Digital currencies are traceable and do not account for most financial crimes despite a common misconception. Responsible crypto platforms cooperate with law enforcement to help prevent illegal activities. They also protect their users from fraud and other risks, including gambling. On the other hand, training and rewarding users are necessary to not forget about their financial affairs.

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