Press "Enter" to skip to content

Criminals use OTC market to launder bitcoin money, consultancy suggests


(Photo: Shutterstock)

Money laundering using cryptocurrency transactions like bitcoin is a sad reality for the crypto universe, even taking advantage of lawful operations. However, these fraudulent actions can be traced and curbed with the help of blockchain technology and other procedures.

This information is part of the 2020 Crypto Crime Report, a study by Chainalysis consultancy on fraudulent bitcoin operations around the world. The complete material should be released by the company later this month of January.

“Thanks to the inherent transparency of blockchains, we can analyze the
high-level cryptocurrency money laundering ecosystem and extract
insights not possible when studying money laundering in the traditional world
of fiat money, says Chainalysis. ”

OTC Market Use

Throughout 2019, according to the consultancy, fraudulent operations handled a total of $ 2.8 billion in bitcoin that went through exchanges. More than half of this amount came from two of the world's largest brokerages, Binance and Huobi.

However, the study points out that such accounts are actually operated by members of the so-called bitcoin OTC Market, also known as the “Counter Market” or “Trading Desk”. In it, professional investors, funds, early adopters of bitcoin, companies and people buy and sell bitcoin in large quantities.

Although generally associated with a broker,
OTC operators act independently. They move a big market
which Chainalysis itself says is impossible to measure exactly.

Although the OTC Market is lawful, the KYC rules
(Know Your Client) about your operators are looser
than those that focus on brokerages. It is in this gap, according to the consultancy,
that the criminals act.

KYC is a specific determination of the Compliance area of ​​a company and whose
goal is to prevent fraud. This area, however, still lacks a
standardization by exchanges.

Specialization and KYC

To combat money laundering via cryptocurrencies, a
Chainalysis's suggestion is the training of technology experts
blockchain to identify fraudulent operations.

"Law enforcement agencies and regulators need to become experts in this technology to start fighting cryptocurrency money laundering," the consultancy says.

On the other hand, it also suggests to cryptocurrency brokers
improve their KYC policies and extend them more sharply to
OTC market operators.

“Our analysis shows that they need to extend
this scrutiny to counter tables consistently over time and
ensure that counter desks have effective KYC processes on their customers,
in order to do their part in the fight against money laundering. ”

KYC and exchanges in Brazil

In Brazil, the CVM (Brazilian Securities Commission) already requires
companies on which KYC procedures are improving, for
middle of Instruction
CVM 617
. O
The objective is precisely to combat money laundering and possible sources of
terrorist financing.

The charging of more KYC detailing has a direct impact on Brazilian exchanges – which also do not have a clear policy in the industry.

According to the CVM, the changes are aligned with the best
practices currently implemented in major world markets. Between them
are the recommendations of the Money Laundering Financial Action Group
and Terrorism Financing (FATF / FATF).

Within the CVM there is a concern about the scams that use
cryptocurrencies and brokers as bait. The municipality has a special page to alert investors about the “main
irregular activities ”in the market.

Disclaimer - OBN is an informational website which aims to give the latest blockchain related news to the readers. Articles on OBN should not be considered as investment advice. Trading cryptocurrencies is a high-risk investment, every user is advised to consult an expert before making any decisions.