2021 is coming to a close, and while the vast majority of us are out shopping for last-minute gifts or planning family dinners and wrapping presents, criminals are working.
Organized retail smash and grabs will continue to steal headlines through the holidays, ransomware gangs will continue to demand money from innocent corporations and black market sellers will continue to sell illicit stuff on the black market.
They don’t get holiday time off. All of them, at some point, will need to take a moment to launder the proceeds of their crimes, and that’s where 2021’s most popular money laundering topic* — Cryptocurrency — comes into play.
Cryptocurrency’s influence on the money laundering arena today is so widespread that it has literally become like an umbrella. Without the existence of crypto this year’s 2nd most popular money laundering related topic, NFTs (non fungible tokens), wouldn’t even appear on the list.
Why? Because decentralized cryptocurrencies like Bitcoin and Ethereum power the NFT game. The cryptocurrency umbrella, or ecosystem, offers crooks around the world who are looking to clean large amounts of cash (minus those in China and India) with the most efficient money laundering platform available in the world today, and quite possibly in history.
Crypto’s decentralized nature — no government oversight, regulation or taxation — means that any Illicit funds that have been turned into Bitcoins and then mixed professionally are very difficult to trace. Nor has there been any proactive effort from the crypto industry, the coin companies and crypto exchanges, to implement anti-money laundering (AML) policies, procedures or AML technology solutions.
The crypto industry knows it has a KYC (know your customer) problem and to be frank, that is part of its ultimate appeal. It is like the wild west, only in digital mode.
How simple is the crypto recipe for money launderers?
- -Simply invest your illicit funds in Bitcoin, and then coordinate the transfer and mixing of these funds with other individuals or groups to cover the trail further before cashing out with your legitimate share of the funds.
- -If you don’t have a network of like-minded folks to mix with, don’t fret. There are a number of different coin mixers available for people in your situation, such as Blender.io, ChipMixer or Anonymix, all of which promise user anonymity.
- -After mixing, your cash is virtually clean, all you have to do is spend it. You can conveniently withdraw your mixed cash from any Bitcoin ATM. Keep in mind, going solo is dangerous if you start mixing and spending huge sums.
What’s the biggest problem with the idealistic vision of a digital laundromat presented above if you are, for example, a drug cartel needing to launder billions of USD in profits? Most leaders, even bad ones, understand the simple concept that, ‘things that seem too good to be true typically are too good to be true.
’Crypto, in all its amazing forms and in spite of the claims of its vast audience of fans and investors, may fall into that category. In fact, I fear it might have reached peak velocity a month ago. For cartels, washing funds easily and anonymously is awesome, but the potential of losing 25% of one’s billion dollar investment because of market instability during the washing process is not. People die when cartels lose that kind of money.
That being said, the jury is still out on crypto’s inevitable crash, and while they deliberate there are a myriad of money laundering opportunities still available, all of which have been enabled by the mere existence of crypto. That brings up 2021’s 2nd most popular topic — NFTs.
Everyone is Asking Me About NFTs!
Since publishing an article in October about NFTs and the awesome potential they present for money laundering — an article that outranks in Google search a similar piece with a similar title published by the illustrious TechCrunch — I have a hard time going anywhere without being asked about NFTs.
Most people want to know what an NFT is, first of all, and then once they figure it out they want to know how to get started in the buying and selling of these digital art properties.
Why? Not because my friends and associates want to launder or hide money, but because there are legit profits to be made in the buying and selling, and especially creating, of these non-fungible tokens.
The way I explain NFTs to those who ask is for a summary goes something like this — think of an NFT as you would any piece of artwork, with a few key, techy differences. If a Bansky painting, for example, were sold at a Sotheby’s auction for $25 million USD, it would typically be purchased by a single entity who could then sell it at a later date for a handsome profit.
A Bansky NFT, however, could be sold in a more decentralized manner, giving a wider audience opportunities for ownership of priceless art. For example, Banksky’s famous, ‘Love in the Air’ painting was recently digitized and segmented into 10,000 NFTs for sale at $1,500 per, with each NFT representing a unique section of the painting. There is no telling how much those pieces could increase in value over time.
There are NFTs that have sold at auction as a single piece per traditional artwork, such as digital artist Mike Winkelmann’s ‘Beeple’s Opus’ NFT, which last March sold for a cool $69 million USD at a Christies’ auction. The person who anonymously purchased Beeple’s Opus, if they were a crook, could hypothetically sell it tomorrow for the same price and walk away from it all having just cleaned $70 million without much effort.
They could also hold onto it as an investment and see how its value fairs as time passes. The potential for profit is extreme if you buy the right NFT. According to the Verge an NFT collector who bought a Beeple for $66K USD in October of 2020 resold it for 100 times that amount ($6.9 million USD) just four months later!
The biggest difference between an NFT and a traditional piece of art? The sale of an NFT is done typically through cryptocurrency and since NFTs are backed by blockchain technology the transactions are anonymous and buyer information is protected by encryption.
As a result the Ethereum coin, for which blockchain serves as its backbone, is the leader thus far in these transactions, especially by those needing guaranteed anonymity.
Will Decentralized Crypto Survive 2022?
I hope so because at the end of the day I am a fan, but with the way things went down in 2021 with China shutting down all crypto related activity and India on the verge of doing something similar, I worry as I mentioned above, that the price of coins may have spiked already.
To make things more gloomy, other countries including the US and the UK have made it known publicly that centralization and regulation of cryptocurrency is coming soon, along with central bank-issued digital coin offerings with kitchy names like The Britcoin. Once that happens the digital money laundering boom is all but over.
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