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A common thought of many modern thieves is to try and launder stolen money by converting it into Bitcoin. Unfortunately for the miscreants in Brazil, they were not informed enough. The moment they tried to convert the stolen $5 million from Santander bank, the local OTC crypto-exchange triggered an alert to authorities.
For the longest time, legislators all across the world have used money laundering concerns as an excuse to strip away the fundamentals of cryptocurrency – decentralization and privacy/anonymity. Unfortunately for legislators, auditing companies like Ernst & Young demonstrated in no uncertain terms that one can find irregularities in crypto-transactions. After all, blockchain is an immutable ledger that records all transactions.
It may require some hard work and additional mechanisms, but it is inherent in blockchain-powered transactions to be discoverable. On the other hand, this is not the case with traditional money laundering operations. Government’s own U.S. Attorneys occasionally reveal that 99.9% of fiat money laundering is not prosecuted.
However, as the novelty of cryptocurrency created uncertainty and confusion, criminals all over the world used it to commit illicit activities. Nonetheless, thanks to the fact that cryptocurrency is powered by blockchain, and blockchain is a discoverable immutable ledger, such stolen funds were often recovered by authorities.
When you hear the word heist, the imagery of masked gunmen usually pops up — but not in the internet age. As the transaction, initiated in the local over-the-counter (OTC) exchange, triggered the alert for associated bank accounts, the suspicious funds were immediately frozen when a withdrawal was attempted.
Banco Santander is still clueless as to how the money was actually stolen. However, they have noted bank account irregularities for Gerdau, Brazil’s steel manufacturer. A total of 11 transactions, accounting for $5 million, were all initiated from the same IP address.
After the authorities completed the investigation of suspicious transactions, eight individuals were implicated as they tried to deposit the stolen funds from the bank accounts of four OTC Bitcoin exchanges. According to one OTC exchange employee, the whole criminal operation appears as if one corporate bank account intruded into another corporate bank account.
Considering the way it was conducted, the Santander corporate heist in Brazil appears to be a high-level inside job. And even at such level, AML protocols successfully sabotaged the theft. For the last decade, the headlines were filled with accusations that cryptocurrency facilitates money laundering for criminals.
Unfortunately, legislators are going along with these headlines. By declaring Bitcoin as not a security, the SEC emphasized the decentralized nature of Bitcoin as the reasoning. Decentralization remains the focal point of the threat to large financial institutions and governments. After all, what is decentralized cannot be so easily controlled and centralized power entities generally dislike losing control.
Nonetheless, cryptocurrency is slowly gaining both public acceptance and inclusion — even from well-established global payment processors such as Visa. As a technology, blockchain’s features are either being replicated with FinTech services like Mezu or directly implemented into the daily operations of banking and tech giants.
Since many crypto-related thefts are resolved as recovered, certainly more so than regular money laundering, do you believe the media hype surrounding such occurrences is a result of cryptocurrency’s novelty? We want to know what you think in the comments section below.