The fact that cryptocurrencies are not heavily used by the criminal underground doesn’t necessarily mean that some of them are not hugely popular in those circles. According to a Europol report, three to four billion British pounds out of roughly 100 billion in dirty money gets laundered through cryptocurrencies.
“They’re not banks and governed by a central authority so the police cannot monitor those transactions. And if they do identify them as criminal they have no way to freeze the assets unlike in the regular banking system,” Europol Director Rob Wainwright told the BBC.
In Europe, it has become easier to monitor Bitcoin transactions since laws were passed to make exchanges use the same KYC procedures as banks to identify their customers.
Under this new legislation, people who purchase Bitcoin from exchanges will leave behind a sort of “fingerprint.” Since their wallets are now associated with their names, it is easier to track down suspicious activity.
It is, however, still not as easy as tracking down people who use other methods of laundering money.
“It’s very difficult for the police in most cases to identify who is cashing this out. They have to take a responsible action and collaborate with us when we are investigating very large-scale crime. I think they also have to develop a better sense of responsibility around how they’re running virtual currency,” Wainwright said.
As difficult as tracking Bitcoin transactions may be, it is not nearly as daunting as the prospect of having to track Monero or Zcash transactions.
Both of these cryptocurrencies rely on algorithms that make it nearly impossible for authorities to determine the source or destination of a purchase.
Wainwright is well aware of that. At the start of this year, he sent out a tweet to signal that criminals are abandoning Bitcoin in favor of alternative cryptocurrencies that are more difficult to scrutinize.
Although the percentage of money laundered through cryptocurrencies is small, the amount is growing steadily. Authorities are shrugging their shoulders and “winging it” when possible, with no concrete solution to the problem in place.