money laundering

As technology and finance evolve, so do crimes unfortunately. Modern day criminals have quickly adapted to the recent changes in technology and finance and are quickly abusing holes in security for profit. Many of the leading digital currencies like Bitcoin and Ethereum may not pass through the trials of time. The technology however, is here to stay.

Innovations and revolutions always present wonderful opportunities. They also represent very fearful prospects, which can eventually be exploited. Hackers or criminals who “work” in the shadows are often paid with digital currency. It’s very easy for people knowledgeable in the dark web to deal with cryptocurrencies.

Historically money laundering has far surpassed the efforts of law enforcement and anti-money laundering (AML) professionals. Very careful examinations are required into the future of financial fraud and money laundering. Especially when it comes to cryptocurrency, special measures must be taken to distinguish between the “good” and “bad” guys.

Money laundering is easier than ever and harder to detect

There are some currencies like eCache, which offer complete and total anonymity. It does not link a user to his/hers transactions and works like a Digital Bearer Certificate (DBC), which can be transferred to another party just like any other information online.

Others like Bitcoin, have a public ledger, which stores transactions, but not the identities of the users. It’s possible to link IP’s with transactions, but The Onion Router (TOR) can be used to grant total anonymity. Simply put TOR hides user activity by sending encrypted messages through a network of random proxy servers before they are delivered to their end destination.

There are also ways to launder money through crowdfunding. An issuer can collude with an investor to exchange money for securities in a criminal enterprise under the name of a business transaction.

Suspicious-activity reports see unidentified use of crowdfunding platforms for money laundering, terrorist finance, credit-card frauds, identity thefts, account takeovers and shell company abusing. Bitcoin has always had a big problem. There are not many places to use it.

Recently that’s changing quickly with companies like Coinbase and BitPay. BitPay is now processing more than $1 Million in Bitcoin payments every day. However a criminal can load multiple prepaid credit cards with illicit cash and buy bitcoin. He can then proceed to use these coins to purchase coin and services online.

This short example displays all three stages of money laundering: placement, layering and integration. Investors will mostly struggle in following the trail, especially since the whole process is done online.

High-risk industries like casinos, online auctions, used-car dealers, pawn brokers will eventually adopt virtual currencies, since they’ll eventually become easier to process.This leads to the problem which many experts fear.

Money laundering can unfortunately reach even children

The technology to conduct almost instantaneous and anonymous transactions is extremely appealing to terrorist organizations.  Modern financial fraud has spread even in online games.  The most frequent victims are the MMORPG’s (Massive Multiplayer Online Role-Playing Games).

The virtual currency systems in these games are used by criminals from one country to send virtual money to associates in other countries.

There are also “farms”, which massively collect a game’s currency and sell it to players for digital or fiat currency. This can be observed in games like World of Warcraft and Black Desert Online.

Terrorists and criminals will always abuse innovations. There is no amount of regulations or safety options which can prevent a possible new attack. Criminals will always find a loop hole.

The best solution at the moment is to educate fraud examiners and other security specialists in new technologies. If enough resources are put together, people can be educated enough to turn the tables on those willing to commit fraud and abuse.

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