December 4, 2023

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According to some highly reputable reports, an inquiry into digital asset exchanges in Moscow has revealed that several of them are willing to purchase digital coins and provide physical currency in the UK without necessarily verifying the client’s identities.

This means that funds can be transferred without the usual identification protocols in place. The report has also shed light on several crypto exchanges in Russia capable of transferring funds overseas without adhering to KYC and anti-money laundering protocols.

Over 20 coin trading platforms based in the Moscow International Business Center, also known as Moscow City, discovered that eight of them were willing to exchange U.S. dollar-pegged stablecoins for British pounds, providing cash to recipients in London.

In the report, the authors highlighted the involvement of Suex, a cryptocurrency broker that was blacklisted by the U.S. Treasury Department’s Office of Foreign Assets Control in September 2021 for its role in facilitating transactions linked to ransomware attacks.

Additionally, it was found that Pridechange, another platform, had transferred substantial sums of money to Garantex, another exchange that has been blacklisted and has its offices in Moscow City.

How are these Transfers Being Carried Out

Across all instances, the transfers were carried out in a similar fashion. Initially, customers were required to send the specified amount in tether to a wallet address provided by the exchange.

Once the payment was verified, an operator would dispatch a courier, typically fluent in Russian, to a predetermined location in London for the physical delivery of fiat cash either on the same day or the next day.

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In the United Kingdom, anti-money laundering regulations mandate that cryptocurrency exchanges should be registered and carry out customer due diligence checks.

Despite the amounts of money exceeding £10,000, none of the Russian platforms ever requested to verify the identity of the undercover representatives from Transparency International who were conducting the investigation.

In the course of its communication with the cryptocurrency exchanges, the organization was able to obtain the crypto addresses used for the transfers.

Analysis of the transaction history revealed that the average monthly amount of money passing through such wallets ranged between 420,000 and 470,000 Dollars, based solely on the USDT turnover.

It is worth noting that USDC, another stablecoin, was also utilized in some instances.

What Else Did the Report Suggest?

As per the report’s excerpt, the study’s findings indicate the presence of several unregulated OTC cryptocurrency exchanges in the U.K. that are willing to offer cash transactions without adhering to the required KYC protocols.

Although the exact extent of this phenomenon remains unclear, it is evidently significant enough to warrant increased scrutiny.

This calls for closer monitoring and regulatory oversight to prevent illicit activities and safeguard the integrity of the financial system.

A Look at Crypto Regulation in the U.K.

In 2020, digital businesses in the UK came under the purview of anti-money laundering rules. Crypto firms, according to UK regulations, fall within the jurisdiction of the Financial Conduct Authority.

For those who don’t know, the Financial Conduct Authority is primarily responsible for overseeing digital assets for anti-money laundering purposes.

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However, digital asset businesses that are not under the FCA but handle substantial amounts of cash must register with Her Majesty’s Revenue and Customs.

The primary objective of these regulations is to prevent cases of money laundering in the UK’s crypto industry, such as the one recently uncovered by Transparency International.

Final Thoughts

When questioned about their involvement in facilitating money laundering, the exchanges completely denied providing such services and claimed to have no offices in London.

Many crypto experts think that there could be more exchanges in different parts of the globe performing similar activities.

All of this highlights the increasing need to enforce crypto regulations stringently to ensure that digital asset businesses operate transparently and with integrity, helping to safeguard the financial system from illicit activities.

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