Report: Banks Are More Vulnerable to Terrorist Financing Than Crypto

A risk assessment report released by the Financial Information Unit (FIU) found banks more vulnerable to money laundering and terrorist financing risks than cryptocurrencies, Business Korea reported.

The division of South Korea’s Financial Services Commission researched its domestic financial sector, which includes banks, securities companies, insurers, mutual financing companies, credit card services, and even crypto exchanges. After a thorough assessment, it found that while banks had better systems to repel money laundering and terrorist financing activities, they were yet more exposed to them than any other financial business.

“The banks have better systems against money laundering and terrorist financing than other financial companies,” the study revealed. “Yet the former’s vulnerability is higher due to the larger size of the banking sector and the innate characteristics of their products and services like trade financing, cash management service, and forex trading.”

At the same time, the FIU study noted that transactions involving cash and cryptocurrencies are also vulnerable to the same criminal activities, but cryptos mainly are less likely to be used for terrorist financing.

“The anonymity of cryptocurrency trading hinders tracking, and criminals can take advantage of it,” FIU found. “The same applies to cash dealing as large-denomination bills rarely return.”

Bitcoin Not Popular Among Terrorists

The report of the South Korean financial regulator finds similarities in what Europol said in its Intenet Organized Threat Assessment 2018 report. The 72-page long study also revealed that terrorists were not using cryptocurrencies like Bitcoin. Instead, they were using conventional banking methods to fund their operations across Europe.

“Despite the clear potential, none of the attacks carried out on European soil appear to have been funded via cryptocurrencies,” Europol had found. “The use of cryptocurrencies by terrorist groups has only involved low-level transactions – their central funding still stems from conventional banking and money remittance services.”

A month later, Yaya Fanusie, who serves as the director of analysis for the Foundation For Defense of Democracies Center on Sanctions and Illicit Finance, told the U.S. Congress the very same thing: that terrorists have attempted to raise money via cryptocurrencies, but to no avail.

South Korea Drafts Crypto Bill

The FIU report has indicated the need for a crypto law in South Korea, fearing a surge in money laundering crimes involving cryptocurrencies. Around the same time, a lawmaker has reportedly introduced a bill, called the Digital Asset Trading Promotion Act, to promote the development of crypto exchanges and trading as the whole.

Seoul Finance, a South Korean daily, confirmed that Kim Sun-dong, a member of the National Assembly’s Political Committee, has introduced a comprehensive plan to regulate crypto exchanges without hampering their innovative prospects. Excerpts from the drafted bill were quoted by the publication as follows:

“Those who want to operate a digital asset trading business should have more than 3 billion won [~$2.66 million] in [the] capital, enough manpower, computerized systems, and physical equipment to be approved by the Financial Services Commission.”

South Korea is scheduled to undergo a financial audit by the Financial Action Task Force (FATF) starting January 2019 until February 2020. The government is likely to impose capital restrictions should the outcome of the audit become negative.

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