The major technological advancements we experienced recently have totally transformed personal and financial relationships taking place across the globe. During the past few years, people developed means to communicate and transact with high levels of privacy and anonymity. The dark web, including anonymous networks such as Tor, enables people to communicate in an anonymous, almost totally untraceable manner. Moreover, cryptocurrencies, such as bitcoin, have made it possible for anyone, anywhere in the world, to transact and engage in business relationships in an almost entirely anonymous manner.
A recently published article discusses how the usage of the dark web and cryptocurrencies can facilitate money laundering. The article also delves into the current legal mechanisms that can prevent money laundering via cryptocurrencies and the dark web. The analysis presented via this article shows that using bitcoin on the dark web to launder money renders it extremely hard for law enforcement agencies to monitor and convict criminals who commit this modern form of encrypted money laundering activities.
What exactly is money laundering?
Money laundering refers to the crime of concealing the nature of origin, location, disposition, circulation, owner, and/or recipient of money, which is usually linked directly or indirectly to criminal activity.
Law enforcement and money laundering via cryptocurrencies and the dark web:
Cryptocurrencies and the dark web have both been invented to protect the privacy of people and to circumvent censorship enforced by the governments of some countries. The anonymity provided by cryptocurrencies and the dark web have rendered them ideal ecosystems for money laundering, as they provide means for the prevention of tracking communications and transactions.
It is inarguable that there is no effective, abundant, or direct legislation, anywhere in the world that facilitates the prevention, identification, and combat of encrypted money laundering via the use of cryptocurrencies and/or the dark web. However, there is currently what may be described as a draft legislation in a handful of developed countries, involving some financial operations associated with licensed cryptocurrency exchanges. Regulation, monitoring, and control of cryptocurrencies is something that may need many years to be properly formulated.
It should also be remembered that bitcoin is just one single example of hundreds, or even thousands, of cryptocurrencies. Even though bitcoin is not fully anonymous, it is extremely hard to de-anonymize transactions and identify their senders and recipients. On the other hand, there are other cryptocurrencies that can be considered fully anonymous such as StealthCoin, Vertcoin, DeepOnion, Monero, and others. Usage of these anonymous cryptocurrencies can facilitate encrypted money laundering crimes even more and represents serious challenges to law enforcement agencies.
During the past couple of years, some countries have begun to force cryptocurrency exchanges to implement KYC (know your customer) regulations on their clients. Obtaining personal information of cryptocurrency traders may help in tracing the origin of coins. However, transacting cryptocurrencies via peer-to-peer means may never be monitored by law enforcement agencies, especially if it occurs via hidden services on the dark web.
More and more people are accepting the usage of cryptocurrencies every day, which represents a nightmare for governments and law enforcement agencies as this renders it easy to utilize the values accumulated by criminals via cryptocurrencies without having to convert them to fiat currencies. This is by far the weakest link in the blockchain based economic model. Cryptocurrencies are as strong as their purchasing power, as a currency is nothing more than a tool for exchange of value and concentration of wealth. Whenever money derived from illegal activities is converted into cryptocurrencies, it will be almost impossible to prove whether or not money laundering has taken place.
Even if there are currently some attempts to regulate the cryptocurrency scene, due to the innate features of cryptocurrencies, they will only be effective as long as they are efficient in regulating the conversion of cryptocurrencies to fiat currencies. The main problem is that cryptocurrencies identify no boundaries or country jurisdictions. Achieving an acceptable level of international cooperation that promotes efficient regulation of the cryptocurrency economy mandates extensive efforts and optimism, especially when the goals, peculiarities, and priorities of each country are considered.
The same is totally true for the dark web, which is still an unregulated space when money laundering crimes are considered. The dark web amplifies the misuse of cryptocurrencies in encrypted money laundering crimes, which requires the formulation of new regulatory frameworks to combat these new forms of digital crimes.