UK Treasury: Digital Currencies Pose Lowest Money Laundering Risk

Digital currencies were deemed a "low" risk for money laundering and terrorism financing in a report published last month by the UK government.

In a National Risk Assessment released 15th October by HM Treasury, the government said that digital currencies present the lowest risk rating among money laundering vehicles, a list that also includes cash, banks and accountancy services.

"The money laundering risk associated with digital currencies is low, though if the use of digital currencies was to become more prevalent in the UK this risk could rise," the report states. It goes on to acknowledge that, at present, instances of observed money laundering involving the technology are relatively few, whereas the majority of the criminal use has been in transactions to illicit online markets.

According to the report:

"There are a limited number of case studies upon which any solid conclusions could be drawn that digital currencies are used for money laundering. There are concerns around anonymity, faster payments, and ability to provide cross border remittances and facilitate international trade. These issues are similar to issues identified with many other financial instruments, such as cash and e-money."

The evidence that does exist, the report said, relates to occasions in which law enforcement reportedly observed money laundering taking place at the exchange level.

"Law enforcement agencies have identified, in a limited number of cases, criminals using large franchised [money services businesses] MSBs to purchase digital currencies from exchangers," the report states. "This method, law enforcement agencies believe, has been developed to avoid the retail banking sector."

Further, there appears to be few indications that digital currencies are being used by money laundering specialists working on behalf of ‘traditional’ criminal groups.

The report also suggests that there isn’t much in the way of proof that terrorists are using digital currencies to move money and fund operations, adding:

"There is little evidence to indicate that the use of digital currencies has been adopted by criminals involved in terrorist financing, whether as a means by which to raise funds (crowd funding etc.), to pay for infrastructure (e.g. server rental), or to transfer funds."

The full National Risk Assessment can be found below:

UK NRA October 2015 Final Web