The U.K. Treasury’s 2015 National Risk Assessment of Money Laundering and Terrorist Financing Report (together with the Report, the “Reports”) defines “money laundering as occurring in three stages: (1) placement, in which illicit proceeds are introduced into the financial system; (2) layering, in which the criminal attempts to separate the proceeds from the crime through a series of transactions; and (3) integration where the illicit funds re-enter the economy disguised as legitimate funds.
Some anti-Bitcoiners have overstated the use of Bitcoin as a money laundering instrument. According to the 2015 and 2017 U.K. Treasury reports, digital currencies rank last among risks of money laundering instruments and facilitators behind cash, banks, accountants, lawyers, money service businesses, trust companies, real estate agents, high value dealers, retail betting, regulated casinos, new payment methods and non profit organizations.
Here are some of the observations on money laundering from the UK Treasury:
“High-end money laundering and cash-based money laundering remain the greatest areas of money laundering risk to the UK.”
“Cash is inherently high risk due to it being untraceable, readily exchangeable and anonymous. Cash money laundering can be assisted by “exploiting UK and overseas financial and professional services industries.”
Cash intensive businesses can disguise “criminal sources of wealth” with no record.
Examples of cash businesses: scrap metal wholesalers, nail bars, takeaways and storage warehouses.
Money launderers can often structure their cash whether legally or illegally obtained with the assistance of service professionals like lawyers and accountants.
The “complexity of wealth management and private banking services, including potentially high risk formation of trusts and companies.These vulnerabilities can be exacerbated by the use of professional intermediaries and the level of anonymity within the sector.”
According to the report, the ability of lawyers and accountants to structure transaction pose a high money laundering risk. “The National Crime Agency (NCA) investigations show that criminals may use a combination of legal services to add layers of complexity to a transaction and hamper effective due diligence.”
“The NCA has assessed the risk of digital currency use for money laundering to be relatively low; although NCA deems it likely that digital currencies are being used to launder low amounts at high volume, there is little evidence of them being used to launder large amounts of money. There remains little evidence of digital currencies being used as an established tool for money laundering, and the money laundering risk is therefore still assessed to be low.”
“As the number of businesses accepting digital currency payments grows, there is an increasing risk of criminals using the currencies to launder funds without needing to cash out into non-digital, or ‘fiat’ currencies.”
From a cyber crime perspective, digital currencies pose a larger threat as digital currencies are often used in criminal to criminal transactions and “constitute the primary method of payment for the purchase of illicit tools or services sold online in the cyber criminal marketplace.”
“The NCA has assessed the risk of digital currency use for terrorist financing to also be low. However, the link between digital currencies and cyber-enabled crime means that this risk is likely to increase.”
“While digital currencies could in theory be used to facilitate and finance terrorist activity, the lack of evidence of this occurring and the greater attractiveness of other methods mean that digital currencies continue to be assessed as low risk for terrorist financing.”
Money laundering is a crime that uses legitimate instruments, assets and services in its commission. Money laundering accomplished through the use of accountants, banks, cash or any combination thereof doesn’t make any of those illegal. Similarly, that Bitcoin or other digital currencies may be used in money laundering, the commission of crimes or funding of terrorism doesn’t make Bitcoin inherently bad, or illegal, absent a specific statute designating it as such. (Any such legal designation of Bitcoin as a illegal instrumentality of money laundering irrespective of its ownership or use, would in the United States, apply only prospectively as the U.S. Constitution prohibits the passing by the U.S. Congress or any state of any ex-post facto law that criminalizes conduct that was legal when originally performed.)
Currently, the U.K. Treasury views Bitcoin as not a good choice for money laundering or terrorist financing activities as it is not fully anonymous, has the potential to be traced and currently not is accepted in many places.
Click on tweet below to see chart.
According to a UK Treasury report risk assessment chart below, cash, banks, accountants and lawyers are the highest risks for money laundering. Digital currencies the lowest#bitcoinhttps://t.co/zv41bU8NT0
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