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How to Combat Money Laundering

What is Money Laundering, and how does it work?

The term Money Laundering is used to define the illegal process of transforming money won from illicit activities into “clean” money that can be freely used in legitimate commercial operations and does not require to be hidden from authorities.

In this article, we’ll explore some ways in which we could combat this heinous practice.

Illegal activities can refer to anything that’s outside the law, from organized crime to human and drug trafficking and financing terrorist organizations — and when it’s about large sums of cash, these need to be transformed into money that can be spent. Typically, there are three phases of money laundering:

1. The initial entry of a sum of money that has been won from illegal activities
2. Stratification: the continuous transfer of money through multiple transactions, forms, investments, or enterprises — to make it impossible to track the money back to their source
3. Final Integration: The money is freely and legally used anywhere

Can one use cryptocurrencies to launder money?

Like any other financial space that involves money, the crypto sphere can be a medium for people to launder enormous sums of money. Stratification can occur relatively quickly if one converts a cryptocurrency into another or takes part in an Initial Offering. The payment for one type of cryptocurrency is made using another one. Criminals can also move their crypto possessions into another country. However, money laundering through crypto is still very small compared with traditional methods because it’s complex, risky, and inefficient due to some countries’ unregulated nature (or partly unregulated).

Besides the fact that washing money through crypto is not a method criminals prefer given its complexity, there is one more factor: The Blockchain, the basic technology of all cryptocurrencies. Most Blockchains, like Bitcoin and Ethereum, record all transactions that have ever taken place on public registries, depending on accounts, electronic wallets, platforms, etc.

Of course, many transactions can be attempted, such that it becomes a headache to track specific amounts of money, but they’re submitted and published on this registry. Even with all of this, Blockchains that empower privacy have shown up along with decentralized privacy platforms, which raises money laundering issues.

How to fight money laundering through crypto?

Blockchain Technology has inherent features that can prevent money laundering. Each transaction performed through The Blockchain leaves a permanent mark in the registry that is impossible to modify. This way, authorities can easily track the money’s source.

Nowadays, many software programs can help us regarding this issue. However, given the volume of all transactions from all Blockchains, there’s no way we’re not going to use automation.

Why is Anti Money Laundering (AML) so important to financial institutions?

As cryptocurrency adoption continues, institutions and governments become serious regarding compliance against money laundering. In addition, the uneven cryptocurrency landscape has stimulated governments’ efforts to develop a worldwide regulatory framework. The FATF financial action group has responded to this call and left a well-managed set of standard AML international rules.

Authorities have been fighting for years, so the crypto space is AML-confirmed. If no cleanup is made regarding this issue, sanctions’ evasion at a state-level threatens to escalate into geopolitical instability. The incapacity to restrict privacy Blockchains through platform regulation will offer sure financial paradises for criminals.

What processes do financial institutions need in order to limit crypto’s risk?

Cryptocurrency regulation would allow international bodies to establish cross-border standards that include risk monitoring programs, from transactions to sanctions. In addition, the FATF standards should ask the platforms to eliminate cryptocurrencies that facilitate privacy Blockchains from their markets because they show a risk of being used for tax evasion, money laundering, terrorism financing, etc.

Cryptocurrencies have gradually changed their status as the primary medium of exchange in the digital era. As a result, many companies now accept cryptocurrencies for their products or services, and many banks consider adopting Blockchain technology. These being said, cryptocurrencies have the potential to substitute classic alternatives. Thus, it’s essential to analyze the gaps that allow the use of these coins for money laundering and to develop counteracting technologies to combat crime.

Being such complex technology, the Blockchain could be used for good, as well as for evil. It’s important to stay informed, so do your research on the matter. If you want to experience a safe and trustworthy trading environment, join Your Friendly Crypto Exchange and complete a quick KYC.

Disclaimer: The content of this article is not investment advice and does not constitute an offer or solicitation to offer or recommendation of any investment product. It is for general purposes only and does not take into account your individual needs, investment objectives and specific financial and fiscal circumstances.

Although the material contained in this article was prepared based on information from public and private sources that IXFI believes to be reliable, no representation, warranty or undertaking, stated or implied, is given as to the accuracy of the information contained herein, and IXFI expressly disclaims any liability for the accuracy and completeness of the information contained in this article.

Investment involves risk; any ideas or strategies discussed herein should therefore not be undertaken by any individual without prior consultation with a financial professional for the purpose of assessing whether the ideas or strategies that are discussed are suitable to you based on your own personal financial and fiscal objectives, needs and risk tolerance. IXFI expressly disclaims any liability or loss incurred by any person who acts on the information, ideas or strategies discussed herein.




IXFI is the first crypto trading platform that serves as a complete alternative to banks. We designed IXFI with one goal in mind: to meet our users’ needs and expectations.

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