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CRYPTOCURRENCY TO PUT A DENT IN ILLEGAL LAUNDERING

In 2007, a report was filed stating that 881 million USD was channelled illegally through HSBC’s accounts to untraceable offshore holdings.

A detailed audit further revealed that close to 7 billion USD was moved out of the country by the multinational banking conglomerate. The money was connected to unaccounted drug cartels and their overseas accounts, as well as rogue Russian trade and Iranian terrorist transactions.

The entrance and offloading of this money exposed the US market to suspicious foreign money and international non-compliant banking laws. A similar scam involving the laundering of illegal money was exposed recently, and this time it was UK based firm Standard Chartered at the heart of the issue. The total amount of money illegally laundered by these two corporate entities, alone, equals to about 5 trillion USD over the past fifteen years!

In a world where money laundering and governmental scams are a general norm, the anonymity that comes with cryptocurrency normally would be considered a bane amidst the chaos. Bu the fact of the matter is that the digital currency alone cannot provide a solution to these concerns. The platform it was coded on is the solution, which is Blockchain technology!

Different cryptocurrencies exist in the world today, in different countries and continents. Most of them function using ‘Unknown’ servers and ‘Hidden Blockchains’ as well as an inaccessible ‘Hub’. These cryptocurrencies are normally used to felicitate transactions over trans-continental channels illegally, or to use as currency over the ‘Dark Web’ for nefarious activities. You can apparently buy a Military Grade Tank over the dark web. Poker player and trust-fund child, Dan Bilzerian, was reputed to have purchased one through this method.

The solution that is in dire need, is the creation of ‘Regulated Virtual Currencies and E-Wallets’.

This occurs when the government of a country gets on board with the idea and creates a verified electronic ledger or ‘blockchain’, and uses it as a mode of trade and exchange on a virtual market. The currency is regulated and accounted for. Laundering will be next to impossible as access to these funds will be controlled by an encrypted key, and to move the funds overseas, the government will be notified through the electronic ledger if there are any unaccounted movements of funds, thus making it impossible to move the money overseas.

Banking norms and regulatory framework, for businesses, gives a certain liberty to MNCs to operate under specific guidelines without much scrutiny. In other words, these institutions are ‘expected’ to act in accordance with the centre’s financial security protocols. But honesty was never really an effective policy!

The casino giant Las Vegas Sands was also in the midst of a laundering scam. It helped the local mafia, which operated within the confines of the state of Nevada, to funnel out more than 100 million USD of drug money to their offshore accounts in the Cayman Islands, rerouting it through their casinos in Asia. The casino acted as a front for the money to move out systematically without being detected by the IRA (Internal Revenue Association – US). The exploitation of the ‘trust factor’, which is doled out to these MNCs, is the main reason for these discrepancies.

So how will Cryptocurrency solve this?
It is overwhelmingly evident that no one can be trusted when it comes to huge sums of money. And it has also become clear that governments are incapable of keeping a constant check on these institutions on the monetary front, and hence, the only possible solution would be the decentralized ledger or blockchain.

How does it work? Well an account holder will have a ‘eWallet’ that contains the money in the form of digital tokens. These tokens can only be accessed by the end-user with the help of an encrypted key. The digital ledger, which is maintained by the bank and regulated by the centre, will notify the central ‘Hub’ in the case of frivolous and unauthorized transactions. A transaction will only take place after a majority of the users verify the transaction, which is the governing principle behind the working of a blockchain.

In the case of a government regulated cryptocurrency, the financiers and exchequers from the governing body will have to verify the transaction. Any manipulation or unverified transactions will not take place as the centre will hold the majority and will decline the transaction through the ledger.

In Russia, the Russian Association for Cryptocurrency and Blockchain (RACIB) is already amidst the process of hashing out the regulatory framework for decentralizing their finances to issue a government subsidized cryptocurrency. They have announced the creation of the ‘CryptoRuble’, which is set for a mid-2019 launch.

RACIB will be present at the upcoming World Blockchain Summit in Moscow, to showcase their initiatives in the implementation of blockchain and cryptocurrency in the country. They will also be inviting innovators to come forward and display their technology, and how it can benefit their country.

Nikhil Menon
LinkedIn:
  https://www.linkedin.com/in/nikhil-menon-9b4a78111/

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