Cryptocurrencies offer instant, convenient and direct peer-to-peer transactions, both locally and globally. This is a major reason why they are gaining popularity in Africa. Like mobile money, users can send and receive payments through their smartphones, with minimal transfer charges and no taxes on the funds transacted.
Although Africa only accounts for two percent of the global value of all cryptocurrencies, it is having a more marked impact on traditional financial flows into and out of the continent. As a decentralised platform for payments, crypto makes more financial sense for users in Africa, where banking fees are higher than the rest of the world.
The lower fee structures of crypto apps and their universal access through smartphones make these digital currencies far more convenient than rigid banks and other money-wiring services. However, like any form of money transfer, money laundering and fraud through cryptocurrencies is still possible.
How crypto is used in money laundering
As a decentralised service, crypto can make it easier for criminals to hide the source of payments and the proceeds from illegal activities. These include the purchase of illicit goods and the payment of ransom after a cyber attack. Crypto offers complete anonymity and the ability to circumvent international banking regulations, where fraud is usually flagged by advanced financial software.
Criminals use the crypto platforms themselves, as well as crypto exchanges, to launder their money. Each wallet is linked to a unique coded address which is required when making a deposit. These platforms pay crypto from reserves to the designated address and apply a small fee for the transaction. Fraudsters randomise the frequency and amount of payments so that they seem more legitimate and avoid any red flags.
This conceals the origin of the ill-gotten money and disassociates the fraudsters from their criminal activities. Essentially, dirty money is converted into ‘clean’ crypto, which can then be reconverted to physical currency through these apps and exchanges. This means that as crypto becomes more popular in Africa, it can start to undermine anti-money laundering (AML) efforts by enterprises.
Criminals can use these apps to send digital currencies across the blockchains and bypass the centralised banking services, which would normally flag, trace and freeze these transactions. Recent research shows that ransomware and money laundering are two major illegal activities associated with crypto.
What is AML?
AML is exactly what it describes; the process of preventing money laundering through businesses. Enterprises will adopt a set of processes to prevent them from becoming vessels for money laundering activities. Financial institutions, telcos and mobile money operators can be taken advantage of by criminals and fraudsters in Africa.
4C Group offers various business assurance services to enterprises in Africa, including AML. This offering puts checks in place to identify and flag suspicious events or transactions. Alerts for possible money laundering activities can be used to create custom watchlists for companies. These alerts can be grouped into cases to be investigated further. The findings of the investigations are put into reports, which can be used to take the necessary action.
We have many years of expertise in this industry and our enterprise customers include telcos, banks and mobile money operators, to name a few. It’s critical that these businesses avoid becoming used for any money laundering activities in order to protect their reputation and prevent any possible legal action.
Our intelligent software, called iNSight, implements best practice controls to minimise the risks associated with fraud and money laundering. This software creates automated risk ratings, screens watchlists, monitors transactions in real-time, and enables more effective case management.
We can help large organisations across Africa with their AML efforts. Our software makes this process simpler and more efficient, with automated reporting and alerting features. For more information about our AML services and software, please contact us today.
At 4C Group of Companies, we strive to effect operational changes and cost savings for customers through our iNSight product and associated services. This product’s main function is to re-purpose and deliver business-critical information to a variety of systems and stakeholders.
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