Admittedly, it would be rather odd if drug lords and cartels weren’t using crypto to launder money – it’s a rather simple and easy way to “wash money” and make it look legitimate after all. There are still numerous loopholes in crypto exchanges that allow money laundering to take place, largely thanks to lax anti-money laundering (AML) and know your customer (KYC) processes, and cartels are exploiting these to the extreme.
A Partnership Made in Satoshi’s Paradise
Drug cartels are taking full advantage of lazy AML and KYC procedures to get their hands on crypto. They then use this crypto to purchase precursor chemicals and ingredients from China on the black market. Thanks to the invention of privacy-focused coins with shielded addresses, these transactions are very hard to track to an individual – making them the perfect choice for those working within the underworld. Without cryptos, cartels and precursor manufacturers would have to rely on stacks of cash or banks in order to facilitate these transactions.
Loose Exchanges Helping Cartels
If you know where to look, there are scores of crypto exchanges that virtually have no regulations in place, meaning there is still space for cartels to launder their money. They load up their accounts with huge deposits, make a few trades and then withdraw the cash to their bank accounts. The banks then believe this is simply the profits of crypto trading, as crypto exchanges are meant to have proper KYC and AML checks in place, leaving the cartels with smaller bills to pay when compared to traditional money laundering processes.
Illegal Bitcoin Transactions in a Downtrend
According to the Drug Enforcement Agency (DEA), illegal transactions using Bitcoin have fallen by more than 80% in the past five years. While the DEA didn’t make it clear whether the total number of transactions has actually fallen, or whether legitimate transactions are just more numerous. Either way, Bitcoin is still easily traceable and makes a poor crypto to use for money laundering.
Ethereum Counts as Proceeds of Crime
For a long time, criminals were using legal loopholes to avoid any prosecution for money laundering. One of those loopholes was using Ethereum, as related funds weren’t considered proceeds of crime for a substantial amount of time. However, one Irish court has declared that Ethereum does constitute proceeds of crime, and it can now be seized by police if it’s thought to be the proceeds of illegal activities.
Cartels are constantly looking for faster, cheaper, and easier ways to launder money, and due to the lack of crypto regulation and enforcement on certain exchanges, crypto is looking to be the cartel’s best friend. While this might not always be the case, in the meantime privacy coins and poorly controlled exchanges present the perfect option for anyone that has something to hide from the authorities.
