Query
Please provide an overview of the role of cryptocurrencies in the financing of organised crime.
Summary
Cryptocurrency is becoming an increasingly popular tool for organised crime groups (OCGs) to conduct illicit activities. OCGs can exploit the inherent pseudonymity and decentralised nature of cryptocurrencies to conduct money laundering and other crimes related to corruption. Criminals can use cryptocurrencies instead of the formal banking system to move large sums of money which entails a potentially lower risk of being detected by law enforcement or the traditional financial institutions which are required to submit suspicious transaction reports.
The development sector can play an important role in mitigating the risks associated with the criminal use of cryptocurrency. Relevant actions include coordinating the development and implementation of regulatory and legislative frameworks, educating the public about the risks of cryptocurrency use and strengthening law enforcement agencies’ capacity to dismantle criminal networks.
Main points
- Cryptocurrency is not only restricted to cybercrime but is used for all types of crimes that involve the transmission of monetary value. This includes money laundering, financial sanctions evasions and other corruption related crimes such as bribery and embezzlement.
- There are constraints associated with the use of cryptocurrencies in criminal activities, such as the volatile value fluctuations, which contribute to the reluctance of criminals to use cryptocurrencies for long-term investments.
- International development agencies can play a role in mitigating the criminal use of cryptocurrencies. This includes coordinating the development and implementation of regulatory and legislative frameworks, encouraging bilateral and multilateral coordination to establish networks for experience sharing, and supporting platforms for public-private collaboration.
- However, resources spent by donors to curb crypto-related corruption imply an opportunity cost. Donors will need to determine whether the same resources would be better spent on improving traditional law enforcement practices or other development priorities.
- This is a pertinent consideration given that although the use of cryptocurrency in criminal activities is increasing, cryptocurrency transactions related to criminal activities represent only a limited share of the criminal economy compared to cash.
Contents
- Background
- The link between cryptocurrencies and organised crime
- Attributes of cryptocurrencies that make them attractive to organised criminal groups
- Anonymity/pseudonymity
- Cryptocurrency onramp/offramp
- Regulatory ambiguity/lack of regulation
- Global reach
- The role of cryptocurrencies in facilitating corruption
- Bribery
- Embezzlement
- The role of cryptocurrencies in facilitating other forms of IFFs
- Money laundering
- Financial sanctions evasion
- Mitigation strategies for development agencies
- Strengthening the regulatory environment
- Capacity building and use of new technology
- Public-private collaboration
Caveat
The virtual assets industry encompasses not just cryptocurrencies like Bitcoin and Ethereum, but also non-fungible tokens (NFTs) and other digital assets. However, this Helpdesk Answer focuses primarily on cryptocurrencies, not least as the studies suggest that, as yet financial crime represents only a small portion of overall trading activity related to NFTs (Elliptic 2022).
Authors
S Elsayed (TI)
Reviewers
Sophie Lemaître (U4), Vincent Freigang and Matthew Jenkins (TI)
Reviewers
Date
28/03/2023
Tags
FAQs
It was initially criticized for poor methodology and unfair treatment of developing nations, while also being praised for highlighting corruption and embarrassing governments.
What is the purpose of the knowledge hub? ›
Knowledge Hub groups are flexible spaces that can be used for a variety of purposes, from large communities of practice, to small time-limited project groups, working groups, training programmes or recruitment campaigns. A Knowledge Hub group may be open, restricted or private.
Who is the CEO of Transparency International? ›
Daniel Eriksson is the CEO of Transparency International in Berlin.
What does Transparency International measure? ›
Transparency International also publishes the Global Corruption Barometer, which ranks countries by corruption levels using direct surveys instead of perceived expert opinions, which has been under criticism for substantial bias from the powerful elite.
Why is transparency not always good? ›
Human beings aren't perfectly rational, and complete transparency does not entirely rule out bad behavior. In fact, too much transparency may create work conditions in which employees feel their autonomy and uniqueness are being challenged. We can only expect them to rebel.
What is the problem with transparency? ›
Nevertheless, there are some challenges that come along with providing open access to information. These include: Understanding the risk that information may be distorted, misunderstood, or misrepresented. Acknowledging that being transparent may take more time and resources and may slow organizational processes.
Who owns knowledge Hub? ›
Knowledge Hub is owned and managed by Placecube Limited, a digital service provider and open source software specialist, who has been working with the public sector for over 20 years.
Is knowledge hub free? ›
Device (cellphone, tablet, laptop, and/or desktop). Accessing the course materials and recorded lectures online is free as the Knowledge Hub has been zero rated. An initial internet connection is required to connect to the KH.
What are the objectives of knowledge hub? ›
The Knowledge Hub aims to provide Pact members and interested stakeholders with key information on upskilling and reskilling. The online library is a European one-stop-shop for tools, resources and information on upskilling and reskilling.
Who funds Transparency International? ›
How we're funded. We receive funding from a range of donors, including government agencies, multilateral institutions, foundations, the private sector and individuals. Funding may be unrestricted or tied to specific projects or programmes.
Who is the founder of Transparent? Martin Willers, Per Brickstad, and Magnus Wiberg are the founders of Transparent.
Who is the head of projects Transparency International? ›
Vicky T. – Head of Projects – Transparency International | LinkedIn.
What is the US ranked in corruption? ›
When ranked by score, the United States ranked 24th among the 180 countries in the Index in both years. For comparison with worldwide scores, the best score on the 2023 Corruption Perceptions Index was 90 (ranked 1), the average score was 43, and the worst score was 11 (ranked 180).
Why is there so much corruption in Somalia? ›
The International Crisis Group (ICG) notes that while the "chaotic, unregulated laissez faire market system" that came into existence after the collapse of the Siyad Barre regime in 1991 is generally seen as unleashing an entrepreneurial spirit in Somalia, it is also partly responsible for fuelling corruption.
What is Brazil ranked in corruption? ›
Transparency International's 2023 Corruption Perceptions Index gave Brazil a score of 36 on a scale from 0 ("highly corrupt") to 100 ("very clean"). When ranked by score, Brazil ranked 104th among the 180 countries in the Index, where the country ranked first is perceived to have the most honest public sector.
What is the criticism of the international financial institution? ›
One of the central criticisms of the World Bank and IMF relates to the political power imbalances in their governance structures where, as a result of voting shares being based principally on the size and 'openness' of countries' economies, poorer countries – often those receiving loans from the BWIs – are structurally ...
What are the criticisms of the FCPA? ›
Critics of the FCPA are correct to say that enforcement can place U.S. businesses at a competitive disadvantage in securing business opportunities abroad, and that their next-‐best opportunities may well be less profitable in many instances.
What are the disadvantages of transparency? ›
Sharing too much information can slow down productivity, especially when teams are on tight schedules. Too much transparency can contribute to the dissemination of doubt and confusion. For some team members, a transparent workplace and an elevated level of visibility to management can inhibit creativity.
What are the main criticisms of the UN? ›
The United Nations has been criticized for a variety of reasons, including its policies, ideology, equality of representation, administration, ability to enforce rulings, and ideological bias.
