Cryptocurrency fraudsters are becoming smart.
What Happened?
As per a report from blockchain analytics company, CipherTrace, seen by Reuters, losses from cryptocurrency crime rose by around 160% to $4.52 billion in 2019 against the losses of $1.74 billion in 2018. Cryptocurrency user and investor losses because of fraud and misappropriation surged by over five times in 2019 while hacks and thefts declined by 66%.
Why This Report Matters?
Because banks are becoming a conduit for money laundering and terror financing.
The report says that all of the top 10 U.S retail banks have illegal cryptocurrency money service businesses (MSBs), which include crypto exchanges, transferring funds on their payment networks. The CEO of CipherTrace stated that banks have a lot more virtual assets lurking in their accounts and payment networks than most in the industry had previously thought.
How Do Banks Become Victims?
The agency researchers and government agencies have found that more people are registering businesses only using fictitious or stolen IDs to create corporate entities. Then, they use these corporate accounts to fund investments or operate unlicensed money service businesses and they don’t report these crypto asset activities to the financial institution.
If a large sum of money moves in and out of personal accounts, it triggers an alarm in financial institutions but in the case of corporate accounts, the chance of that is very less. Hence, criminals and terrorists use this technique to fund their illegal activities. The scary part is that, banks have no idea that their payment network is used for money laundering and finance terrorism.
How Do Banks Get Affected?
Since these illegal activities happen in the banks’ payment network, they run into anti-money laundering (AML) and counter terror financing (CTF) compliance risks. The research by CipherTrace found that banks globally paid over $6.2 billion in AML fines in 2019.
In Conclusion
In 2019, Seven major Indian Banks, including ICICI Bank, Axis Bank, Yes Bank, Union Bank of India, Federal Bank, Canara Bank said that they will be joining JP Morgan’s blockchain platform, named as Interbank Information Network (IIN). We wholeheartedly appreciate our Indian banks moving towards a better technology but they should also be ready to deal with these illegal activities and deploy measures to safeguard the depositors’ money.
And that’s a lot of pressure on Indian banks as well as the regulators.
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