J.W. Verret, a law and forensic accounting professor at George Mason University, stated that it is challenging for criminal organizations to use cryptocurrency due to the anti-money laundering (AML) programs in place on crypto exchanges. These programs pose a barrier to converting crypto into fiat currency. Verret shared his statement with Federal Newswire on July 2.
"Criminal organizations are almost exclusively using cash in the traditional banking system for their activities," said Verret. "They have a very tough time turning crypto into dollars on crypto exchanges, because crypto exchanges have robust AML programs."
A report from the U.S. Treasury Department entitled "National Strategy for Combating Terrorist and Other Illicit Financing" found that the majority of terrorist organizations "primarily rely on the traditional financial system and cash to transfer funds."
According to Dr. Andrzej Gwizdalski from the University of Western Australia, data compiled from the United Nations, World Economic Forum (WEF), and Chainalysis indicates that "Traditional fiat, like the USD, is implicated in an estimated $3.2 trillion in illegal activities annually—over 100 times the $20 billion linked to cryptocurrencies." This information was shared in a post from Oodaloop. Gwizdalski said, "Using crypto for illegal purposes is inherently risky and plainly unwise with every transaction transparently recorded."
New York-based blockchain analytics firm Chainalysis released its annual report on crime in the crypto ecosystem in January. The report found that the total value of crypto transactions sent to illicit addresses decreased from $39.6 billion in 2022 to $24.2 billion in 2023. According to Chainalysis team members, the percentage of total on-chain crypto transactions tied to illicit activity also decreased from an estimated 0.42% in 2022 to 0.34% in 2023.
Jane Khodarkovsky, a partner at Arktouros and former Human Trafficking Finance Specialist with the U.S. Department of Justice’s money laundering and asset recovery section, testified during a Congressional hearing in November about the traceability of blockchain technology. She said that this traceability enables prosecutors and other professionals to track bad actors who are trying to use cryptocurrency for illicit activities. "What I found as a prosecutor—and my experience is not unique—is that when criminals turn to digital methods, they actually leave breadcrumbs for investigators to follow," Khodarkovsky said, according to her testimony. She added, "Baked into this technology are lines of code which make up the blockchain itself. When analyzed by sophisticated professionals, blockchain analytics help investigators follow the money in a way that they cannot with more traditional payment systems."
Verret joined George Mason University's law school faculty in 2008, according to the university's website. He teaches forensic accounting, finance for lawyers, and banking, securities and corporation law. He previously served as senior counsel and chief economist for the House Financial Services Committee, where he oversaw federal AML law.
