Money laundering is and remains a major problem. Cash as well as CryptoCurrencies are used extensively to transfer profits from illegal businesses into legal money. With new personell state authorities want to get grip on the problem.
The European Central Bank recently stressed the importance of cash. At the same time, however, it has also said that CryptoCurrencies will play an equally important role in the future on the international financial markets. This may come as a surprise, as these currencies are actually seen as to be used by criminals for illegal transactions. But the market is being cleaned up.
The Financial Action Task Force (FATF) and its recommendations for compliance (Anti-Money-Laundering, AML) set the framework within which digital currencies can be used. They seem to be having an effect. What “CipherTrace” predicted in its report for the second quarter is now being discussed in the report for the third quarter: “Also, after two years of large, high-profile exchange hacks and exit scams, Q3 2019 witnessed a significant reduction in total cryptocurrency crimes from previous quarters. In fact, Q3 witnessed the lowest quarterly thefts and scams in two years.” The annual fraud and theft with CryptoCurrencies is quite high with a loss in value of around 4 billion US dollars. Nevertheless, the market appears to be clearing itself up as the FATF-AML rules are increasingly applied. CipherTrace notes that currently 63% of the digital currencies on the market do so far not or only insufficiently apply to the Know Your Customer (KYC) rule. Additional: the so-called “FATF Travel Rule” will also be introduced in a few months’ time. According to this rule, crypto companies must supply customer data for transfer volumes of 1,000 dollars or more. This is a challenge, as no one has yet adhered to such a requirement. This fits in well with the image of increasing regulation, which German banks will be allowed to administer Bitcoins and other crypto currencies from next year on. Crypto currencies are becoming a normal currency, regulated in the same way as other currencies., too. Some of the experts are speaking of Germany as the “cyber-heaven”.
Regulation has an effect, indeed. It cleans up the market as many actors want to apply to the rules. But the effect is the same as with cash. Legalisation and regulation is one thing. But all this does not help if there is a lack of control. For example, the tax offices are instructed to report larger transactions with cash to the customs authorities. But who should check all the incidents there? There is a lack of rights of intervention and simply a lack of staff to carry out checks. The possibility of checking crypto currencies electronically and automatically is still in its infancy. These procedures are not yet legally binding. So the laborious manual work has to be done. As with cash, the gaps in control are large. But control is everything. If there is no control, even the best regulations are useless. The German customs authorities have created 300 new posts. So far, many of these vacancies are still open. The new “Financial Intelligence Unit” at German Ministry of Finance is well-known for its incompetency.