Cash Not Crypto Remains Favorite Tool For Criminals – Report

In the debate about illicit financing, cryptocurrencies often bear the brunt of criticism despite the fact that cash is the preferred tool for criminals.

A new report released by Homeland Security Investigations (HSI) Oversight Special Agent Robert Whitaker and the Crypto ISAC states that regulated crypto platforms provide valuable support to law enforcement, using on-chain transparency of blogs to fight crime and increase national security, despite persistent errors about their role in illicit financing.

Cash, not crypto, remains criminals’ tool of choice

The proportion of illicit activity within the total volume of cryptocurrency transactions is remarkably small. According to the report, Merkle Science’s analysis shows that only 0.61% of USDT transactions between July 2021 and June 2024 were flagged as potentially illicit, while USDC was come out even better, with only 0.22% flagged and less than 0.005% linked to sanctioned entities.

Meanwhile, Chainalysis reported that illicit activities accounted for only 0.34% of total on-chain transactions in 2023, down from 0.42% in 2022. These numbers are far less than illicit activity beloved in traditional finance, as the Treasury’s National Money 2024 highlighted. Money Laundering Risk Assessment.

Both cryptocurrency and traditional finance (TradFi) systems are facing increasing regulatory scrutiny to combat illicit financing. However, they differ in their transparency. TradFi does not have the public blockchain technology that makes cryptographic transactions traceable.

In traditional finance, law enforcement must obtain financial records from institutions, often requiring a grand jury subpoena. This process involves a group of people and the gathering of substantial evidence before we can begin to trace the funds.

In addition, many illicit activities still rely on cash, which cannot be traced. The 2024 DEA report confirms that cash remains the primary method for transactions in the drug trade due to its anonymity and lack of a paper trail.

KYC or KYT?

In the report, Constable Whitaker said the traceability of transactions on a blockchain is a game changer for regulators and law enforcement in their fight against illicit cash-based crimes such as money laundering of money, the financing of terrorism and other forms of financial crime from offers the ability to “follow the money” in real time and across borders. This is done using something called “Know Your Transaction” or “KYT” tools to track down criminals.

While traditional finance relies on Know-Your-Customer (KYC) processes, KYT uses blockchain transparency to provide real-time information about transactions. This allows crypto companies and agencies to continuously assess risks and adds a layer of security unmatched by traditional systems, ensuring a more secure platform for users.

The report highlighted that integrating KYT with traditional compliance tools could help create a more robust risk assessment framework, continuously updating from new blockchain data to stay ahead of threats emerging KYT is also said to improve sanctions compliance by allowing exchanges to screen and block transactions linked to high-risk addresses identified by bodies such as the Office of Foreign Assets Control (OFAC) and member-led organizations such as Crypto ISAC.

SPECIAL OFFER (Sponsored) Binance Free $600 (Exclusive to CryptoPotato): Use this link to register a new account and receive an exclusive welcome offer of $600 to Binance (full details).

2024 LIMITED OFFER on BYDFi Exchange – Up to $2888 Welcome Reward, Use this link to register and open a 100 USDT-M position for free!