Money Laundering and Role of Law Enforcement in Securing NFTs
Due to the involvement of global financial watchdogs, all the major jurisdictions have taken drastic steps to curb money laundering in NFTs marketplaces. Not only the wealthy business tycoons but several gangs on a smaller scale are found to be involved in this heinous crime, and law enforcement authorities are working tirelessly to bring them under the law.
Here are some of the recent high-profile NFT crime cases observed in the United States:
NFT Sellers Charged in $1 Million Money Laundering Scheme
US law enforcement authorities have arrested two NFT sellers who were involved in selling fake digital assets to users and further laundering illegal money to other countries. Police have revealed that criminals were running a marketing campaign encouraging users to buy NFTs, and after a large number of sales, they shut down their website along with users’ digital assets. They managed to collect $1.1 million dollars from their customers and were trying to launder this money through cryptocurrency. Both scammers have been charged in court and are yet to be penalised.
HMRC Seizes NFT in £1.4m Fraud Case
The UK tax authority HM Revenue and Customs (HMRC) has arrested three people for attempting to make a fraudulent transaction of £1.4 million through NFTs. The law enforcement authorities have seized an NFT, and it has been termed to be the first-ever seizure of non-fungible tokens by the UK Police. All the criminals have been charged in court, and investigations are still going on to trace more illicit transactions linked to the case.
Global Regulatory Authorities Monitoring NFT Marketplaces
While the crime percentage in the NFT market is increasing with every passing day, the global regulatory authorities have also started taking the right action against the culprits. The Financial Action Task Force (FATF) and European Union (EU) are the leading bodies which have made a clear stance against prevailing money laundering activities through the NFT marketplace.
FATF’s Stance on Money Laundering Threats Posed to NFTs
Since 9/11, FATF is the primary regulatory organisation which has taken drastic steps to curb money laundering and terrorist financing in the economic system. FATF has highlighted the vulnerabilities of NFTs to financial crimes and guided all the Virtual Assets Service Providers (VASPs) to implement s security system based on Enhanced Due Diligence (EDD) measures. Moreover, it has also been made mandatory for the VASPs to get a license from the belonging country and track the financial activities of all their users. The guidance by the FATF is binding for all the member states, and failing to comply with them can even lead to their name being placed on sanctions lists.
The Role of European Union
Members of the European Parliament has vowed to fight money laundering by regulating NFTs, metaverse and the DeFi sector. The finance experts of the EU have asked all the member countries to track the transactions through blockchain and report to law enforcement authorities in case of any suspicious activity.
How NFT Sector can Ensure AML Compliance
Non-Fungible Tokens (NFTs) are actually working through the blockchain, which has a decentralised system, ultimately leaving the authorities to end up losing the criminals. The ideal way to counter the bad actors is through stringent measures during the onboarding. FATF and EU have formed sanctions lists having the record of a large number of money launderers and terrorist finances. The NFT sector should have a system where they can screen customers’ data against these lists and identify the criminals while reporting them to law enforcement authorities. Many financial institutions like banks and insurance companies are following the same practice, which has successfully countered bad actors.
What Shufti Pro Offers?
Eradicating money laundering and terrorist financing from the NFT marketplaces is quite crucial, which must be done to secure the platform for sophisticated users. NFTs are here to stay, and steps in the right direction can help the service providers counter criminals.
Shufti Pro’s AML screening solution is an ideal option for NFT marketplaces which can help them to meet global anti-money laundering compliance. Powered by an AI algorithm that is getting smarter over time, Shufti Pro’s AML solution has access to 1700+ global sanctions lists, and while screening data against them, it generates results in seconds with a ~99% accuracy.
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