According to a new report from the Russian Transparency Branch, Russia-based cryptocurrency exchanges are looking to buy digital coins and deliver banknotes in the U.K. without following know-your-customer (KYC) procedures and anti-money laundering (AML) regulations internationally. of.
More than 20 coin exchanges in the city of Moscow breached the rules, with eight preparing to convert dollar-pegged stablecoins into British pounds and handing the cash over to recipients in London, according to the report.
The rise of cryptocurrencies is one of the most notable phenomena in the financial world in recent years. Digital currencies use blockchain technology to transfer digital assets from one place to another, providing an alternative payment platform to traditional financial institutions.
While a payment between banks involves two businesses recording the transaction, blockchain exposes the details of the outflow of funds in one place. In some ways, this makes it very transparent. You can see payment pings between crypto wallets as they are all posted.
However, there is a downside to this transparency as there are still multiple ways to keep a user's identity anonymous. If someone is trying to move legitimate funds outside the control of an overbearing state, they may find this very convenient. Instead, it offers an attractive platform to move funds of questionable origin around the world with fewer checks. Transparency International Russia’s investigation into Moscow’s digital asset exchanges has revealed that some of these exchanges are looking at London as a new hub.
They are willing to convert USDT, the most widely used stablecoin, into cash for delivery in the UK. The report revealed that customers did not have a KYC process and did not require any identification documents for the exchange.
Instead, details of what the collector is wearing, and possibly the serial number of the banknote, may suffice. Conveniently, the courier who delivers the money speaks Russian.
These transactions lack checks and balances, raising concerns about illicit financial flows. Under UK money laundering regulations, it is a legal requirement to provide a passport and possibly some utility bills as proof of identity to transfer funds through the traditional banking system.
However, the exchanges are avoiding this requirement and moving funds from a country subject to extensive financial sanctions to the UK without any anti-money laundering compliance checks.
None of these exchanges appear to be registered in the UK for anti-money laundering purposes, although their activities in the UK require them to do so. Even when questioned, suppliers who responded to TI Russia's request for comment declined to provide those services. This secrecy has raised concerns about the anonymity of transactions and evasion of authorities, making it more difficult to track illicit funds.
Regulators in different countries are pushing stringent anti-money laundering laws and KYC measures to prevent cryptocurrency exchanges from facilitating money laundering. However, making these laws does not appear to be enough if cryptocurrency exchanges do not enforce them.
This recent report revealed that some cryptocurrency exchanges in Russia are embracing money laundering, accepting USDT and GBP cash in London, avoiding anti-money laundering regulations altogether.
