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This week, a published cache of thousands of reports from major banks showed that these institutions were ignoring their own concerns and willingly moving trillions of dollars around the world on behalf of suspected terrorists, criminals and corrupt governments.
Known as “FinCEN files” because the banks’ reports were filed with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), this cache was brought to light by a group of international journalists. According to the New York Times, it published more than 2,100 reports of suspicious activity relating to transactions of more than $ 2 trillion between 1999 and 2017.
Lenders who filed such reports and then purposely ignored their own concerns include JPMorgan Chase, Bank of America, HSBC, and Deutsche Bank. These groups moved funds for companies like the Taliban, groups affiliated with the North Korean regime, and the organizer of a sovereign wealth fund fraud in Malaysia.
There is definitely a rabbit hole to be explored via FinCEN and its arduous journey to regulate cryptocurrency activity. But I think the real entry point from this reveal about the world’s leading financial institutions is the abusive reputation Bitcoin has for money laundering.
A good starting point for the links between BTC and money laundering is this 2013 article from Bitcoin magazine. Bitcoin has long had a reputation for facilitating dubious transactions. Thanks to its pseudonymity and privacy protection, BTC was the currency of choice for the world’s most prolific darknet market, Silk Road. The Silk Road was such an important part of the Bitcoin economy that Vitalik Buterin covered the project in a two-part report for Bitcoin Magazine back in 2012.
The truth, however, is that while Bitcoin is a pretty solid tool for disguising financial transactions (as Aaron van Werdenum covered in this 2018 study of Bitcoin data protection technology), it is far less capable of protecting privacy than some other cryptocurrencies out there. And as the FinCEN files have underlined, the world’s leading financial institutions also launder money on a regular basis.
While Darknet’s market activity is likely to remain tied to Bitcoin (as we explained last year), this week’s bombshell report is another reminder that using Bitcoin as a tool for criminals is just another myth that may be better off the legacy systems of the world is true.