Law enforcement in Sweden has decided to label cryptocurrency exchanges as professional money launderers (PML) due to their role in making it easier for bad actors to funnel illicit loot.
The Swedish Police Authority, along with the Financial Intelligence Unit (FIU), has tagged certain cryptocurrency exchanges as “professional money launderers (PML)” following an investigation into unlicensed providers.
According to the FIU, these operators have links to criminal organizations and are key in helping bad actors and crime networks launder money systematically.
The FIU has identified four profiles of PMLs in a recent report:
Node exchange providers: These are highly connected criminals embedded in networks that facilitate trades between cash and cryptocurrencies, often using their exclusive expertise in illegal markets. They rely on close criminal ties and have access to couriers and frontmen for transactions.
Hawala exchange providers: Operating through informal hawala or underground banking networks, these providers have international connections, especially in the Middle East, allowing them to move money via couriers and intermediaries in unregulated channels.
Asset exchange providers: These criminals focus on using cryptocurrencies in systematic ways for illicit businesses. They handle large volumes of crypto, often offering cheaper services to move assets, sometimes even operating at a loss to serve their own needs.
Platform exchange providers: They operate in peer-to-peer markets and forums, selling more than they buy, and often accept instant transfers or payments in cash. While less linked to organized crime, they tend to serve small-time narcotic buyers and fraudsters.
Further in the report, Swedish authorities advocated for increased scrutiny from law enforcement agencies when dealing with cryptocurrency trading platforms to combat illegal activities.
The report highlighted the emerging threats these crypto-focused entities pose when it comes to facilitating money laundering schemes and allowing organized crime networks to prosper.
However, the authorities acknowledged the role of licensed platforms in preventing illegal activity, urging them to monitor suspicious trading behavior closely and take necessary action to report and contain questionable transactions.
Sweden’s approach to crypto
Sweden has recently intensified its crackdown on illegal cryptocurrency-related activities, including targeting the country’s Bitcoin mining sector.
Last year, the Swedish Tax Agency investigated 21 crypto-mining firms between 2020 and 2023, finding irregularities in their tax filings.
The investigation revealed that 18 firms filed misleading or incomplete information to avoid the value-added tax (VAT) obligation, which led to a $90 million tax demand.
The Swedish government’s stance on the crypto sector was made clearer when they abolished tax incentives for data centers in July 2023.
This decision affected Bitcoin miners who had moved to Sweden in search of lower energy costs.
Removing these tax incentives raised the electricity tax from SEK 0.006 to SEK 0.36 per kilowatt hour, a move many saw as detrimental to foreign investments in the region.
Crypto money laundering
On the global front, cryptocurrencies have gained a lot of notoriety for acting as a tool to facilitate money laundering.
As previously reported by Invezz, German authorities recently shut down 47 cryptocurrency exchanges involved in money laundering and other illegal operations. These platforms had deliberately failed to meet legal obligations, such as verifying user identities, allowing criminals to easily convert illegal funds while remaining anonymous.
Other countries have also stepped up their efforts to combat money laundering via cryptocurrencies.
Earlier this year, China announced plans to update its anti-money laundering policies to include cryptocurrencies for the first time since 2007. The revisions are expected to come into effect in 2025.
Elsewhere, the Financial Conduct Authority (FCA) in the United Kingdom charged an individual for operating a network of unregistered cryptocurrency ATMs, which the agency believes could contribute to money laundering by facilitating anonymous transactions.
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