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Cryptocurrencies or Fiat? – Which is more popular with criminals?

 


FIAT funds, i.e. government-issued currencies, are still the best choice for white-collar criminals.


There have always been concerns that cryptocurrencies could be used for shady purposes, but the US Treasury recently released something that somewhat allays those fears.


Despite widespread fears that cryptocurrencies could be used for criminal purposes, a newly released US Treasury Department report shows that the majority of economic crimes are still committed with fiat money.


The US Treasury released a three-year report on money laundering, proliferation financing and terrorist financing in early March. This report now shows that although such crimes have also been financed with cryptocurrencies, classic FIAT funds are still the more popular tool of choice for money launderers and terrorists.


It's fiat, not cryptocurrencies

The Treasury Department's findings include a detailed discussion of virtual currencies, noting that both their user base and market capitalization have increased significantly since the last risk assessment in 2020.


However, these reports noted that criminal flows via fiat currency and mainstream networks continue to outpace flows via cryptocurrencies.


The U.S. Treasury Department announced the following:


“The use of crypto assets to launder money remains significantly less common than the use of fiat cash and other more traditional means.”

Cryptocurrencies are still a good choice for crime

According to the National Money Laundering Risk Assessment, "virtual assets" are an ever-evolving area in money launderers' growing arsenal to conceal their finances. DeFi and “anonymity-increasing technologies” are named as possible perpetrators.


Virtual assets appear to have been used extensively in phishing attacks and ransomware scams throughout the pandemic.


Shady operators can use promises of profit from the unpredictable cryptocurrency market to trick victims into revealing personal information or infecting their devices with viruses. The attackers can then demand payment in cryptocurrency after the attack, which is both pseudo-anonymous and irreversible.


According to a recent Chainalysis Crypto Crime Report, many criminals use over-the-counter brokers to launder their cryptocurrencies. OTC brokers are individuals or companies that facilitate transactions between buyers and sellers who do not want (or cannot) transact business on a cryptocurrency exchange.


How much money is laundered?

According to a United Nations report, money laundering costs the global economy between $800 billion and $2 trillion a year. This corresponds to between 2 and 5% of gross domestic production. Today, almost 90% of money laundering goes undetected.


However, technological advances have led to the development of more effective tools. Criminals continue to use these advances to move dirty money. At the same time, government agencies and fintech firms are using the technology to identify transaction characteristics and help detect fraud.

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