The method and consequences behind high-tech money laundering

| Jun 9, 2020 | Fraud

Illicit cryptocurrency transactions skyrocketed in 2019, according to Chainalysis.com, and New York cyber-investigators are likely watching for illegal activity. Furthermore, those who take advantage of cryptocurrency’s anonymous nature to launder unlawful gains may incur harsh federal punishments. 

Here’s a look at the current state of high-tech money laundering and what a federal conviction might bring: 

Who launders illicit cryptocurrency? 

It may be surprising that a select few of the largest cryptocurrency exchanges in the world handle a substantial percentage of illicit transactions. This is despite federal Know Your Customer regulations, which require financial institutions like these to gather information on their clients in an effort to curb illegal activity. 

These unlawful transactions may be undermining scrutiny due to a small number of Over the Counter brokers who act as intermediaries for those who do not wish to operate directly on a cryptocurrency exchange. As their KYC requirements are often much more lenient, OTC brokers have the leeway to fly under the radar and offer a way to legitimize illicit capital gains. 

What are the penalties for federal money laundering offenses? 

The reality of money laundering indictments may hit close to home for New Yorkers. The United States Sentencing Commission reported that the U.S. Attorney’s Southern District of New York ranked among the top five districts for these charges in 2019. Nine in ten of all individuals convicted for money laundering spent at least some time in prison, with the average being around 70 months. 

Still, the data also shows there may be a fair chance that prosecutors could show leniency in exchange for help with bringing charges against other players. Of all the penalties handed down in accordance with federal sentencing guidelines, U.S. attorneys significantly reduced more than half of them by an average of more than 55% after the person charged offered assistance in one way or another. 

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