The Financial Information Unit (FIU), a section of the Financial Services Commission (FSC), the financial watchdog in South Korea, has released a report indicating that cryptocurrencies are less vulnerable to terrorist financing compared to banks.
Terrorist Funding Methods Prefer Banks To Crypto
The report shows that although banks have better systems to curb money laundering and terrorist financing incidents, their 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.”
The research also revealed that although crypto and fiat have equal chances of being used for illegal purposes, terrorist financiers do not have an appetite for virtual currencies despite their anonymity.
The findings of the report by the FIU coincided with those recorded by a similar report by Europol in its 2018 Internet Organized Threat Assessment research. According to the Europol report, instead of using Bitcoin and other digital currencies, terrorists prefer using traditional banking channels.
Europol noted that:
“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.”
The report goes on to add that although cryptos have the potential of powering anonymous transactions, none of the terrorist attacks in Europe has a crypto trail.
Other government bodies like the Foundation For Defense of Democracies Center on Sanctions and Illicit Finance, have also observed that terrorists have not succeeded in their quest to raise and finance their activities using virtual currencies.
The report by the FIU has recommended the establishment of laws to govern the crypto space in South Korea to prevent the proliferation of money laundering activities using virtual currencies.
Currently, Kim Sun-dong a member of the National Assembly Political Committee has introduced a drafted bill that, according to him will provide a level playing ground for cryptocurrency exchanges in the country.
Sun-dong suggests that, before a cryptocurrency exchange is allowed to operate in South Korea, it should, among other things, have adequate human resources and approximately $2.7 million in capital.
The South Korean government will in 2019 furnish the Financial Action Task Force (FATF) with the risk assessment and improvement plans.