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Money laundering is a risk to be taken with cryptocurrencies

Cryptocurrency offers a value exchange system based on an electronic currency in an efficient, reliable and easy-to-exchange manner, without the intervention of state agencies. This last mentioned quality, which is attractive to optimize some financial processes and avoid intermediation in transactions, is a major risk in terms of money laundering..

Money laundering is considered a crime that seeks to disguise assets to be used without detection of the illegal activity that generated them.It is also known as money laundering or money laundering. To achieve this, organized criminal structures generally use the established economic apparatus to give a lawful appearance to their operations. Therefore, it involves the placement of funds in the financial system, the structuring of transactions to disguise the origin, ownership and true location of the funds, as well as the integration of the funds into society in the form of assets with a legal appearance.

When a monetary system is not regulated by any sound banking institutionIf a cryptocurrency, which requires basic information on the origin of the funds, the crime of money laundering can be a much more palpable risk. Specialists in the area have even determined that cryptocurrencies are very attractive for money laundering, terrorist financing and other illicit activities, as they can easily hide behind the anonymity provided by this exchange system.

Why cryptocurrencies are desirable for capital legitimization

In that sense, when transforming illegally obtained money or goods into assets of reliable provenance, the use of cryptocurrencies has been found more and more frequently. The characteristics that make them a desired piece for the crime of money laundering are:

  • Currencies have no electronic support to back them up.
  • Any transaction made with them prevents the identification of the person who executed the economic operation, since the system protects the privacy of the users.
  • There are no clear legislations in all countries of the world to regulate the use of cryptocurrencies, although efforts have been made in some nations. In the United States, Japan and Luxembourg the use of digital currencies has been explicitly permitted and in each of these countries the legal measures have clear differences. For example, Japan has imposed greater controls and requirements when permitting their use, whereas in the United States, the experience has been more flexible.
  • It is attractive because it is not subject to the exchange rate fluctuations to which conventional currency is subject in the case of international payments.
  • Payment channels are difficult to track.

In turn, the Financial Action Task Force (FATF), an independent intergovernmental organization which promotes policies to protect the global financial system against money laundering and terrorist financing, in 2015 issued certain recommendations for those wishing to exchange cryptocurrencies to legal tender. Some of these recommendations are as follows:

  • When making a transaction, it is important to obtain as much information as possible about the other party, thus allowing you to know to whom the transferred funds are going and to prevent the funds from being used for illicit activities.
  • Take into account all recommendations and regulations issued by the competent organizations in the area.
  • Whenever a transaction is to be carried out through an exchange, it is necessary that the exchange has the relevant licenses, i.e., that it is regulated by the authorities.

On the other hand, in order to prevent this type of activity from occurring unintentionally, our staff has made certain recommendations:

  • Keeping an accounting record of cryptocurrencies, their purchase and sale, exchange, place of transfer, etc.
  • Avoid the use of completely anonymous cryptocurrencies (Monero) and avoid those networks or programs that encourage or allow anonymity.
  • Activate and purchase software that increases the security of assets and prevents those with anonymity-enhancing programs from easily accessing accounts.
  • If it is a company that carries out these transactions, it is necessary that people have continuous training on the subject. In turn, create manuals and protocols that provide information to employees on what to do in particular cases.

As previously recommended, the operation of digital currency in Venezuela  and in general in any country, requires the development of specialized programs to prevent the occurrence of this crime. To prevent them, it is important to know the client in depth and to have access to information that allows corroborating the legality of the processes, which necessarily implies an investment in robust cybersecurity systems capable of protecting the stored information and reducing the risks of vulnerability.


The presentation "Legitimization of capitals facing the phenomenon of cryptocurrencies" Dr. Alan Aldana, made at the International Forum "A LEGAL VIEW ON THE USE OF BLOCKCHAIN AND DIGITAL ECONOMY" in Caracas, on November 22, 2018.

Written by:
Alan Aldana
Andres Poleo