The Hidden Truth Behind Money Laundering, Banks And Cryptocurrency

Last week, a set of documents known as the FinCEN files were released, detailing how some of the biggest banks in the world move trillions of dollars in suspicious transactions for suspected terrorists, kleptocrats and drug kingpins. And the U.S. government has failed to stop it. 

The Financial Crimes Enforcement Network (“FinCEN”), an agency within the Treasury Department, charged with combating money laundering, terrorist financing, and other financial crimes. A collection of “suspicious activity reports” offers a window into financial corruption, and how governments are unable or unwilling to stop it. Profits from deadly drug wars, fortunes embezzled from developing countries, and hard-earned savings stolen in Ponzi schemes, all flow through financial institutions, despite warnings from bank employees

These reports are available to US law enforcement agencies and other nations’ financial intelligence operations. Although FinCEN is aware of the money laundering activities, it lacks the authority to stop it. 

Money laundering is more than a financial crime. It is a tool that makes all other crimes possible – from drug trafficking to political crimes. And banks make it all possible. In a detailed expose, BuzzFeedNews named several of the most trusted banks. Current investigations show that even after fines and prosecutions, well-known JPMorgan Chase
, HSBC, Standard Chartered, Deutsche Bank, and Bank of New York Mellon
are all involved in moving funds for suspected criminals. 

The current financial system largely insulates the banks and its executives from prosecution, so long as the bank files a notice with FinCEN that it may be facilitating criminal activity. The suspicious activity alert effectively gives the banks a free pass. And so, illegal funds continue to flow through banks into various industries from oil to entertainment to real estate, further separating the rich from the poor, while the banks we have grown to trust, make it all possible. 

According to the United Nations, the estimated amount of money laundered globally in one year is 2 to 5% of the global GDP, or $800 billion to $2 trillion, with more than thank 90% of money laundering going undetected today. 

Concurrently, the cryptocurrency industry has also been criticized for being a tool for money laundering, despite statistics stating otherwise. It is estimated that only 1.1% of all cryptocurrency transactions are illicit. During its early days, Bitcoin was widely associated with the Silk Road, an online dark-net marketplace, where users could purchase weapons and illegal drugs anonymously.

But with the growing use of the Bitcoin network, 42 million Bitcoin wallets and counting, it is becoming increasingly possible to track transactions on public blockchains, while private banking transactions remain hidden in plain sight. 

This week, I had an opportunity to sit down with Chanpeng Zhao “CZ”, the Founder & CEO of Binance, largest cryptocurrency exchange by volume in the world, to get his take on money laundering both in the traditional and the digital finance worlds. 

The following are a few highlights from our interview:

Thank you for joining us today, CZ. In your opinion, why is money laundering particularly harmful to our economy?

CZ: As financial services providers, it is our duty to fight illicit activity. Everyone shares this responsibility. But typically once the rules are established, people will try to get around the rules. And there are people who just want more business, and knowing or unknowingly will facilitate these transactions. We live in a complex world, where one country may view an act as a criminal and the other may not. A lot of people have a black and white view, but the world is actually grey. Not all banks are…

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