According to the United States Treasury Department, traditional cash transactions are the preferred medium over crypto for criminal organizations engaging in money laundering activities.
Despite the rising concerns around crypto being used for illicit purposes, a comprehensive risk assessment report underscores that old-fashioned cash remains the linchpin in financial crime organizations.
Why Criminals Prefer Cash Over Crypto For Money Laundering
The Treasury’s research covered money laundering, terrorist financing, and proliferation financing. The report highlights criminals’ preference for cash due to its anonymity, stability, and wide acceptance.
One of the most traditional yet effective methods highlighted in the report is bulk cash smuggling. This involves physically transporting US dollar banknotes across borders and depositing them into foreign bank accounts.
“Criminals use cash-based money laundering strategies in significant part because cash offers anonymity. They commonly use US currency due to its wide acceptance and stability,” Treasury said.
The report shows surprising numbers for 2023. There were 1,480 seizures in inbound movements, totaling $18 million. Whereas outbound seizures numbered 1,010, with a total of about $53 million. Other methods that criminals use for laundering cash include:
- Cash consolidation cities.
- Cash-intensive businesses and front companies.
- Funnel accounts.
While the use of crypto for money laundering is acknowledged, the US Treasury emphasizes that it falls significantly below fiat currency and traditional methods. Nevertheless, the report does not overlook the misuse of crypto in ransomware attacks, scams, drug trafficking, and other illegal activities.
Read more: 15 Most Common Crypto Scams To Look Out For
The report also points out the compliance failings of crypto exchanges and service providers in maintaining Anti-Money Laundering (AML) and Counter-Terrorist Financing controls, highlighting the $4.3 billion settlement involving Binance.US as a cautionary tale of regulatory lapses.
The rise of decentralized finance (DeFi) protocols and crypto mixing services as tools for laundering illicit proceeds is also a concerning trend. These methods allow for the obfuscation of transaction details, making it increasingly challenging for authorities to trace the flow of illegal funds.
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