Blog: Q&A: Cryptocurrency and financial crime — Financier Worldwide – Financier Worldwide

FW: Could you provide an overview of how the rising popularity of cryptocurrencies increases the potential for financial crime across the globe? How would you characterise this risk?

Stepanyan: Although an understanding of the technological and economic implications of cryptocurrencies has come a long way, a large subset of individuals, regulators, legislators and institutional players still have a hard time grasping the concept and its risks. While darknet markets, cyber crime and ransomware dominate the news cycle, scams, fraud and exploits like smart-contract and bridge hacks are by far the most common forms of financial crime related to digital assets. There is no doubt that illicit actors will continue to innovate and try to circumvent preventative safeguards, so all parties should remain vigilant as the industry continues to evolve.

FW: Drilling down, could you explain some of the common types of financial crime committed using cryptocurrencies?

Stepanyan: In the eyes of law enforcement and regulators, money laundering is the most common type of criminal activity involving cryptocurrencies. Digging deeper, the most egregious precursors to money laundering are sanctions evasion, ransomware theft and the facilitation of darknet market transactions. In 2022, hacks and exploits were the most common types of crypto-related financial crime, with funds stolen in hacks estimated at approximately $4.3bn as of November 2022, according to Privacy Affairs. Looking ahead, more traditional white-collar crime is expected to enter the cryptocurrency space. Because cryptocurrency transactions are complex and lack uniform accounting standards, criminal actors may attempt to manipulate financial statements.

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