United States law enforcement agencies officially expressed their worries about Mexican drug cartels using Chinese cryptocurrency channels in order to launder money. The same is mentioned in regards to other organized crime groups.
The news appears as Chinese exports size is growing for chemicals and different other ingredients that are utilized in order to manufacture hard drugs. Paul Knierim, US DEA senior official, declared that there is an increase in the number of money launderers that are coming from Asia. He stated:
The shift toward Chinese and Asian money launderers is believed to be, in part, due to the natural relationship created by the large volume of botch licit and illicit trade goods and chemicals imported from China. The use of an Asian money broker simplifies the money laundering process and streamlines the purchase of precursor chemicals and paraphernalia utilized in manufacturing drugs for street sales.
Increase Money Laundering Sophistication
Some weeks ago, we saw a report issued by the DEA. In it, the agency pointed out that in the past 8 years, there was a steady decline in how much cash would be seized in the US. This means that much more discreet illicit cash moving techniques were used.
The DEA specifically talked about the CUBS (Chinese Underground Banking Systems) as a main laundering channel. CUBS have money brokers that turned to using Bitcoin in order to assist the Chinese nationals that were interested in moving amounts that were higher than $50,000 per year (country limit) and drug traffickers.
Bitcoin is being sold for cash to drug traffickers. Money was coming from drug sales in Europe, Australia and the US. Drug cash is then being sold to the Chinese Nationals, all in exchange for Bitcoin.
In order to avoid traceability and detection, bitcoin trades are handled over the counter. Chinese brokers use exchanges in other countries, countries with improper anti-money laundering and know your customer policies.
Money Laundering – A Multi-Agency Problem
It is not just the DEA that blames Chines transnational criminal organizations. The Department of Homeland Security also has, blaming them for cryptocurrency use rise in order to launder money.
What should be said is that cryptocurrency use with the purpose of money laundering does offer advantages. However, use is limited, except for when using privacy coins like Zcash and Monero. With regular cryptocurrencies transactions are transparent and can be seen on the blockchain.
It is estimated that money laundering is now around $2 trillion and that cryptocurrency use is only a small part of it. Many other channels that are much larger exist so we should not worry about the impact this news has on the crypto market.