Perhaps one of the greatest challenges of cryptocurrencies and the blockchain is that they support criminal activities in some ways.
Believe it or not, there is no argument with the fact that the international law enforcement agencies have been fighting against cryptocurrency and recognized it as the criminal’s playing field.
In fact, we have heard cases of criminal activities involving cryptocurrencies such as money laundering, tax evasion, extortion and kidnaps, contraband transactions like drugs purchase, thefts, and hacks.
Digital assets have led to a massive cat and rat fight with regulators and government authorities. As these law enforcement agencies improve their techniques of identifying criminal attempts, the criminals also design new methods in the ever-growing anonymous cryptocurrency industry to surpass the tricks of law enforcement.
The blockchain and cryptocurrency Industry is innovative, and while this innovation may uplift the interests of criminals, there is another side of the coin: the growing recognition that government authorities need to be innovative to keep up with the game.
Recently, the United States Treasury Department added some content to its FAQs sections on their official website in connection with the unit which is in charge of the U.S. economic sanctions, dubbed as the Office of Foreign Assets Control (OFAC).
The additions reveal that the OFAC plans to include cryptocurrency addresses on a list called Specially Designated Nationals and Blocked Persons (SDN).
Financial institutions and other businesses are expected to run a check on the SDN list before they provide any form of financial service to avoid dealing with individuals, organizations, and governments that have been enlisted due to their involvement in crimes such as kleptocracy, nuclear weapons, terrorism, kidnap, human rights violations, and theft, just to mention a few.
The OFAC can legally compel financial institutions to halt the transactions of those found on the SDN list, as well as freezing their assets. If any financial institution or business fails to follow this order, the penalties can be devastating. With this new policy, investors need to be careful of the kind of financial transactions they do because it can send them to jail.
Aside the SDN list, another tool that could be effective in detecting illicit financial activities is the public crowdsourced Blockchain AML, which has a direct effect on cryptocurrency heists. This tool won’t help in returning the stolen assets to the owner, but it could make stealing of funds more challenging.
As the power of the blockchain spreads to other sectors of the economy, developers would need to come up with innovative ways to enhance a clean blockchain ecosystem.