£50 notes to stay despite money laundering claim

£50 notes will not be scrapped but instead get a polymer redesign in a bid to make them more durable and harder to forge.

The announcement by the Bank of England follows growing calls to withdraw the note altogether over fears that the UK’s largest denomination was widely used by criminals and rarely for ordinary purchases.

In March, a review by the Treasury found the roughly 330 million £50 notes in circulation, with a combined total of £16.5bn, were “rarely used” for routine transactions.

The Treasury concluded that “there is also a perception among some that £50 notes are used for money laundering, hidden economy activity, and tax evasion”.

Peter Sands, former chief executive of Standard Chartered bank, said in a 2016 report that high-denomination notes are favoured by terrorists, drug lords and tax evaders.

Illegal money flows exceed $2 trillion (£1.4 trillion) a year, Sands said. But rather than focus on the criminals, he argued G20 countries should now target the cash itself, urging central banks to stop issuing £50, $100 and €500 notes.

Following the study, the European Central Bank announced it was to axe the €500 note, known in some circles as a “Bin Laden”, in a bid to crackdown on money laundering.

However, Robert Jenrick, exchequer secretary to the Treasury, has resisted a similar move

“People should have as much choice as possible when it comes to their money and we’re making sure that cash is here to stay. Our money needs to be secure and this new note will help prevent crime” he said.

The decision to switch to polymer plastic notes will, however, “also raise questions over which famous Briton will feature on the reverse of the note”, says the BBC.

Steam engine pioneers James Watt and Matthew Boulton appear on the current £50, issued in 2011.

http://www.theweek.co.uk/97093/50-notes-to-stay-despite-money-laundering-claim

Report: 64 Percent Of Countries Have Money Laundering Risk

By Pymnts

Amid the headlines detailing the billions of dollars in money laundering done through conduits like Danske Bank and Deutsche Bank, among others, a report shows that the problem is a global one — and that it is getting worse.

Certainly the topic is a timely one, and here we delve into why the current anti-money laundering (AML) system and standards in place are less than optimal. In an interview with Karen Webster of PYMNTS, Akli Adjaoute, founder and CEO of Brighterion, said the rules-based system adopted by banks and others battling criminal activity are “pretty much useless.” The tech and rules in place simply go about generating volumes of false positives and are hardly efficient.

A report issued earlier this week by the Basel Institute on Governance trains a spotlight on just how poorly the status quo is working. The seventh annual edition of the Basel AML Index, the report shows that 83 of 129 countries have a risk score of at least 5.0 on a 10-point scale. This classification, as The Wall Street Journal notes, means that there is a “significant” risk for money laundering and terrorist financing. Even more unsettling is the fact that the risk appears to be growing: over 40 percent of companies have higher scores than they did in the last report issued in 2017.

The Basel report notes that there is no country with a “zero” risk of such illegal activities. The risk is scored using data points from sources that come from the World Bank, the World Economic Forum and the Financial Action Task Force. The Basel report also noted that only countries with data sufficient to be used in scoring were ranked. Thus some countries — such as Iran, which stood at the top of the list across the last four years — were excluded from the risk scoring.

There is no quantification of how much money is actually flowing through money-laundering activities and across different nations.

Going down the ranks of “top spots,” Tajikistan topped the list for countries at risk for money laundering. Tajikistan was followed by, in order, Mozambique, Afghanistan, Laos and Guinea Bissa. At the bottom of the list — the lowest-risk countries, according to the index — are Finland, Estonia, Lithuania, New Zealand and Macedonia. In reference to the U.S., the score most recently was 5.0, the ranking was 82, and was up 50 basis points from last year.

What the Data Show

In terms of general trends, the headline is that 64 percent of countries show significant risk of those illegal activities. That risk comes, the Basel report said, as countries are not using the tools they have at their disposal to battle money laundering and terrorist financing.

But even the lower-risk countries, the study found, have seen upward  momentum in their risk scores, tied in part to greater access to data and of course the flow of recently-disclosed scandals at banks and elsewhere tied to money laundering. In one example, Denmark’s score was up in the most recent reading to 4.1, a significant jump from 2.98 in the previous year. Denmark’s Danske, of course, has been under investigation tied to as much as $234 billion in illicit fund flow.

“A low risk score in the Basel AML Index is not a ticket to taking a leave from [anti-money-laundering and counterterrorist financing] vigilance, either for a country’s administration or for companies and financial institutions doing business in that country,” the report pointed out. Danske is a Danish Bank, and “seems to confirm the observation that there are big issues with the effectiveness of money-laundering supervision in countries generally regarded as low risk,” the report said.

In other observations published on the Basel site and centered on the findings, at a high-level view, “money laundering and terrorist financing continue to cripple economies, distort international finances and harm citizens around the globe. Estimates of the amount of money laundered worldwide range from $500 billion to a staggering $1 trillion.”

Fewer than 4 percent of countries that were ranked — four of the 129 — bettered their scores by at least one point. Those countries were Ghana, Bolivia, Tanzania, Trinidad and Tobago. Progress has been slow, where only 17 percent of firms improved their score by one point over the period stretching from 2012 to 2018.

“The downward trend is more striking,” said the report, which noted that “42 percent of countries have worsened their risk scores between 2017 and 2018. Almost 37 percent of countries now have a worse risk score than they did in 2012.”

What Must Be Done

Against that backdrop of rising risk, said the report, “taking a holistic approach to tackling money laundering issues is therefore essential. Economic development can only contribute to reducing the risk of money laundering if it is sustainable, in other words not based on corrupt practices or illegal trafficking.”

But, cautioned the Basel Governance report, countries that undertake what the report termed indiscriminate de-risking — “avoiding rather than managing [money laundering and terrorist financing] risks” by terminating relationships with entire regions or classes of customers — can have disastrous consequences as it cuts entire jurisdictions off from international financial flows, including legal ones.

In terms of guidance, the Basel Governance report said actions to undertake — both to improve risk scores or maintain already relatively low ones — include strong legislation that includes freezing terrorist funds, and measures set in place for domestic and international cooperation. Financial sectors must be highly regulated, with “competent supervisory authorities, and minimal, if any, cash-based transactions.”

Money Laundering Tactics Adapting to Colombia Cocaine Boom

By Parker Asmann

A new investigation says that record cocaine production in Colombia is causing criminal groups to diversify the ways in which they launder their money, reflecting the fragmented state of the country’s criminal world.

Criminal groups in Colombia are increasingly diversifying their traditional money laundering techniques involving real estate and large public works contracts, as well as new laundering methods involving cryptocurrencies and non-profit organizations, according to a report from the country’s national anti-money laundering body, the Financial Investigations and Analysis Unit (Unidad de Información y Análisis Financiero – UIAF), El Tiempo reported.

Such changes are occurring amid record cocaine production in the Andean nation.

The article reports that 40 trillion Colombian pesos (around $13 billion) of illicit money have been generated in Colombia, without specifying a time frame. Furthermore, every year 16 trillion pesos (around $5 billion) are moved through different money laundering schemes, according to the UIAF.

El Tiempo also received information that traffickers returning to Colombia and to drug-related activities after serving prison time in the United States have been increasing investment in rural properties since 2016.

The real estate boom that major urban centers like Medellín and Colombia’s capital city of Bogotá saw in the past has now moved on to smaller cities near major coca growing areas, such as Pasto in Nariño, southwest Colombia — the department with the most cocaine — and Popayán in the nearby Cauca department. Property records have grown by 300 percent in Pasto and Popayán alone, according to El Tiempo.

In 2017, Nariño department accounted for more than a quarter of the 171,000 total hectares used for coca cultivation last year, according to the United Nations Office on Drugs and Crime (UNODC). The UNODC also found that the number of coca hectares in Cauca department increased by 55 percent between 2016 and 2017.

On average, each hectare of coca produces 6.9 kilograms of cocaine, with one kilogram of cocaine selling for around 5 million pesos (about $1,600) in Colombia, meaning that a single hectare of coca could produce up to 35 million pesos in illicit earnings (about $11,500), according to El Tiempo.

While there are no official reports linking the real estate boom in Nariño and Cauca with the illicit money derived from increased cocaine production, Colombia’s outgoing superintendent of Notary and Registry (Notariado y Registro), Jairo Mesa, says he has no doubt about the links between what he calls the country’s “new urbanism” and illegal drug proceeds.

The shift in money laundering techniques used by criminal groups in Colombia is likely tied to the departure of the now largely demobilized Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia – FARC) and the increasingly fragmented criminal landscape that the guerrillas’ exit ushered in.

The more localized makeup of criminal groups in Colombia and the large profits that are coming in amid record cocaine production may help explain the diversification of money laundering techniques and the substantial uptick in property records observed in smaller municipalities in departments that are strategic to the cocaine trade, such as Nariño and Cauca.

“The Mexicans are full of cash and paying quickly for cocaine, so these more regional groups in Colombia are likely looking for places close to their centers of operation to put their money,” Adam Isacson, a senior associate at the Washington Office on Latin America (WOLA) think tank, told InSight Crime.

This is in line with the historic behavior of Colombia’s most notorious drug trafficking organizations, such as the Norte del Valle, Medellín and Cali cartels, according to Douglas Farah, president of the national security consulting firm IBI Consultants.

“Colombian crime groups have traditionally loved to operate in areas where they know the terrain, have family, and know officials and their vulnerabilities,” Farah said. “As you go from large transnational groups to smaller regional groups, there’s not much protection for them in big cities.”

As Colombia’s criminal landscape continues to take shape, it appears that traffickers are adapting their money laundering strategies to best suit the current dynamics of the cocaine trade.

EU to Act on Visa-For-Sale Schemes After Warnings of Money Laundering Risks

BY FRANCESCO GUARASCIO

BRUSSELS (Reuters) – The European Commission said on Wednesday it will provide guidance to EU states on how to manage national schemes to sell passports and residency permits to wealthy foreign citizens, as campaigners and lawmakers warned of money laundering risks.

Government schemes to trade citizenship or residence rights for large investment are currently applied in 13 EU countries: Austria, Cyprus, Luxembourg, Malta, Greece, Latvia, Portugal, Spain, Ireland, Britain, Bulgaria, the Netherlands and France. Hungary has terminated its program.

“If you have a lot of money that you acquired through dubious means, securing a new place to call home far away from the place you stole from isn’t just appealing, it’s sensible,” Naomi Hirst of rights group Global Witness said.

She said checks on individuals that bought EU citizenship or residency permits were not satisfactory and exposed countries to corruption and money laundering risks.

The joint report by Global Witness and Transparency International urged the European Union to set standards for managing the schemes and to extend anti-money laundering rules, applied so far to banks or gaming firms, to all those involved in the visa-for-sale industry.

The European Commission will publish a report on schemes in EU countries by the end of the year, commissioner Dimitris Avramopoulos said on Wednesday. He said the report would offer guidance to member states on managing the programs, “including on necessary background checks for applicants”.

Acquiring these documents costs on average 900,000 euros, but Cyprus’ passport could cost up to 2 millions, the report said.

Cyprus has raised 4.8 billion euros ($5.51 billion) from its scheme, while Portugal could earn nearly a billion euros a year, according to figures cited in the report, called “European Getaway – Inside the Murky World of Golden Visas”.

EU states generated around 25 billion euros in foreign direct investment in a decade from selling at least 6,000 passports and nearly 100,000 residency permits, the report said using what it called conservative estimates.

“Money must not be the criterion for citizens’ and residents’ rights in the EU,” said EU lawmaker Sven Giegold, who sits on the assembly’s special committee on financial crimes.

“The trade in passports and visas by EU states must be stopped as soon as possible. These programs are a gateway to criminal money,” he added, echoing the view of other EU lawmakers.

The report said in Malta, which has raised 718 million euros from its scheme, applicants who have criminal records or are under investigation could still be considered eligible “in special circumstances”.

“Poorly managed schemes allow corrupt individuals to work and travel unhindered throughout the EU and undermine our collective security,” Laure Brillaud, anti-money laundering expert at Transparency International, said.

All the countries who run these schemes, except Britain, Cyprus, Ireland and Bulgaria, are part of the Schengen free-movement area which comprises 26 European states.

($1 = 0.8708 euros)

Two Senate Dems call for investigation into money laundering in luxury real estate

By Francis Monofort

Senators Chris Van Hollen (D-Md.) and Sheldon Whitehouse (D-R.I.) have called on the Government Accountability Office to study whether vulnerabilities in anti-money laundering laws applicable to the real estate sector present increased risk of criminal activity.

The senators’ announcement noted that there has been widespread reporting on potential criminal activity in the real estate market, including between the Trump Organization and Russia.

In a letter to Comptroller General Gene Dodaro, the senators expressed concerns that transnational criminal organizations and other corrupt actors may be exploiting the gaps in US regulatory and law enforcement processes related to the laundering of money through the US real estate market.

“The luxury real estate market attracts money launderers because all-cash deals through shell corporations allow criminals to mask their ownership information. Cash-only real estate transactions are subject to fewer reporting requirements than financial institutions have to comply with. Addressing this problem is even more urgent when you consider the widespread reporting on the potential of criminal activity in the real estate market with regards to the Trump Organization and Russia,” according to the senators’ press release.

Van Hollen and Whitehouse requested the GAO to assess the results of the real estate Geographic Targeting Orders issued by FinCEN. GTOs temporarily require certain US title insurance companies to identify the persons behind shell companies used to purchase high-end residential real estate, among other requirements.

https://www.mpamag.com/news/two-senate-dems-call-for-investigation-into-money-laundering-in-luxury-real-estate-113274.aspx

North America’s most unaffordable city cracks down on dirty money

Vancouver’s red hot housing market has prompted authorities to introduce a series of transparency measures aimed at uncovering the owners of homes in Canada’s most expensive real estate market.

One new probe will scrutinize dirty money in the province of British Columbia’s real estate, horse-racing and luxury car sales industries, according to Attorney General David Eby who announced the investigation in late September, Bloomberg reported. Finance Minister Carole James also appointed an expert panel to examine money laundering in the housing sector.

These probes, which are expected to be complete by March, follow a similar review of the province’s casinos.

“There is good reason to believe the bulk of the cash we saw in casinos is a fraction of the cash generated through illicit activities that may be circulating in British Columbia’s economy,” Attorney General David Eby told reporters late last month. “We cannot ignore red flags that came out of the casino reviews of connections between individuals bringing bulk cash to casinos, and our real estate market.”

Similar calls to action have been made south of the border. Earlier this month, two U.S. senators — Chris Van Hollen of Maryland and Sheldon Whitehouse of Rhode Island — sent a letter to the Government Accountability Office, calling for an investigation into the potential vulnerabilities of existing U.S. money-laundering provisionsas they pertain to real estate.

Last month, The Real Deal‘s quarterly magazine in South Florida dove into a $1.2 billion Venezuelan money laundering case in which federal authorities are looking to seize 16 high-end properties. [Bloomberg]—Kathryn Brenzel

Senate Democrats call for federal investigation into money laundering in luxury real estate

By Ben lane

The Treasury Department’s Financial Crimes Enforcement Network has been looking into whether foreign buyers are using shell companies to buy luxury U.S. real estate in order to launder money for almost three years, but two Democratic senators want the government to do more to figure out how much criminal activity is prevalent in these deals.

The initial FinCEN investigation delved into unknown buyers using shell companies to buy high-end real estate in Manhattan and Miami-Dade County, because the government was “concerned about illicit money” being used in the deals.

The results of that initial investigation showed more than 25% of transactions covered in the initial inquiry involved a “beneficial owner” who is also the subject of a “suspicious activity report,” which is an indication of possible criminal activity.

The initial investigation also led FinCEN to expand the probe to include all of New York City, Los Angeles, San Francisco and several other areas. The investigation was later expanded again to include wire transfers.

The expanded investigation required title insurance companies in the designated areas to identify the actual person behind shell companies used to pay all cash for high-end residential real estate.

But that investigation isn’t enough for two Senate Democrats.

This week, Sens. Chris Van Hollen, D-Maryland, and Sheldon Whitehouse, D-Rhode Island, asked the Government Accountability Office, to also look into whether money laundering is taking place in U.S. real estate.

In a letter sent to the independent watchdog agency, Van Hollen and Whitehouse say that they are concerned that “transnational criminal organizations and other illicit actors” may be taking advantage of “gaps” in the government’s regulatory and law enforcement process surrounding real estate dealings.

“The widespread money laundering risks posed by real estate transactions conducted without any financing (i.e.,“all-cash”) through the use of shell companies creates challenges for law enforcement and federal regulators seeking to safeguard the financial system from illicit use,” the senators write in their letter to the GAO.

The senators write that they are hopeful that a GAO investigation will help determine whether violations of the Bank Secrecy Act or federal anti-money laundering laws are taking place.

“FinCEN has indicated that these GTOs (geographic targeting orders, the measures FinCEN has taken to this point), which have been renewed and extended several times, are temporary measures intended to help the agency, ‘better understand the vulnerabilities presented by the use of shell companies to engage in all-cash residential real estate transactions,’” the senators write.

“To better ensure effective and consistent AML safeguards, we are requesting an assessment of the results of the real estate GTOs, including the information provided to FinCEN and any actions taken, and how it has helped FinCEN achieve its defined objectives,” they add.

Van Hollen and Whitehouse also lay out a series of questions they’d like the GAO to answer about the issue, including:

Has the information gathered by the GTOs provided useful insight about any of the above mentioned regulatory gaps or exemptions that exist regarding the BSA and the real estate industry?

Has the information gathered by the GTOs produced other tangible benefits, and in what ways will closing the above mentioned regulatory gaps or exemptions enhance financial market integrity in the United States?

How has FinCEN used the information collected from the real estate GTOs to inform its ongoing efforts to address money laundering vulnerabilities?

Has the information gathered by the GTOs improved the ability of FinCen, DOJ, the FBI and other law enforcement agencies to prevent money laundering in the real estate industry?

Based on the information it has collected from these GTOs, is FinCEN considering any regulatory changes?

Are there ways to improve upon the information gathered by the GTOs to make FinCEN more effective in the fight against money laundering?

Are there any gaps or loopholes that exist in the design of the GTO program that could be exploited by illicit actors, such as the beneficial ownership thresholds  or limiting the GTO to title insurance companies?

Are there any unintended consequences from targeting specific geographic regions while leaving other areas uncovered? The adaptive nature of illicit actors raises concerns they may shift their real estate activities from GTO areas to other regions of the United States.

Lastly, we ask that GAO identify any additional vulnerabilities and gaps in the current BSA framework, specifically as they pertain to the real estate sector, and how they might be addressed through regulatory or legislative action.

https://www.housingwire.com/articles/47033-senate-democrats-call-for-federal-investigation-into-money-laundering-in-luxury-real-estate

U.S. to Allow Small Banks to Pool Anti-Money-Laundering Resources

Community banks and credit unions can share certain resources for anti-money-laundering compliance purposes, helping them address the risk of financial crime while keeping down costs, federal regulators said Wednesday.

joint statement issued by the Federal Reserve, the Federal Deposit Insurance Corp., the Treasury Department, the Office of the Comptroller of the Currency and the National Credit Union Administration is the result of a working group formed by the agencies aimed at improving the effectiveness and efficiency of the country’s anti-money-laundering legal regime.

Sigal Mandelker, the Treasury undersecretary for terrorism and financial intelligence, said the statement was part of a broader effort to work with regulatory partners to strengthen money-laundering defenses across the U.S. financial system.

Banks may benefit from using shared resources to manage their obligations more efficiently and effectively, but they should approach the establishment of such an arrangement as it would other business decisions, the joint statement said.

The statement highlighted the benefits of collaborative arrangements that pool resources, such as staff or technology. The statement explains how these arrangements are most suitable for banks with a community focus, less complex operations and a lower-risk profile.

Each bank in such an arrangement, however, is responsible for ensuring its own compliance.

“Sharing resources in no way relieves a bank of this responsibility,” the statement said. “Nothing in this interagency statement alters a bank’s existing legal and regulatory requirements.”

The EU’s 5th Anti-Money Laundering Directive: What Does It Mean?

By Vishal Marria

In the past week alone, cases of money laundering have hit headlines all around Europe. An investigation found that up to $30 billion of ex-Soviet and Russian money had potentially passed through the Estonian branch of Denmark’s largest bank, Danske Bank. It also emerged only last week that Dutch bank ING will have to pay €775m in fines after it allowed ‘structural infringement’ of the Netherlands’ Money Laundering and Terrorist Financing Act. So, what is being done about Europe’s evident money laundering problem?

In July this year, the European Commission brought into force the 5th Anti-Money Laundering Directive. In the preceding 12 months, a string of money laundering cases which involved high-profile and politically exposed individuals had placed increasing pressure on the Commission to update its policy. The same 12 months saw a series of devastating terror attacks across Europe which raised serious questions about terrorist financing and therefore confirmed the need for policy reform.

The primary focus of the latest directive is to establish a centralized and public register of companies and their ultimate beneficial owners. A typical method of money laundering involves the creation of a shell company which exists solely on paper in order to transform the profits of crimes into ostensibly legitimate assets. Making corporate ownership information public is expected to reduce the use of shell companies because this information will be open to much greater public scrutiny. The directive also requires that the data on these registers be subject to comprehensive verification mechanisms to ensure that the registers themselves cannot be manipulated.

International cooperation is another priority of the directive. Historically, criminal networks have been able to capitalize on the lack of interinstitutional communication by choosing to launder money through countries or banks where they know they are less likely to be detected. The directive is explicit about European banks and their respective Financial Intelligence Unit’s working collaboratively. Centralized bank account and corporate ownership registers must be able to interconnect and be accessible to all member states. Cooperation at this level is expected to be particularly impactful in preventing laundering designed to exploit vulnerabilities of specific member states.

The new directive is the first of its kind to take into consideration digital currencies and prepaid cards. Newer financial technology had been largely overlooked by AML policy until it became clear that they had been used to fund several terror attacks across Europe. The vehicles used in the 2016 Nice truck attack were paid for by pre-paid card because of the anonymity that these cards afford the user. The maximum amount that can be placed on these cards has already been drastically reduced but the new directive also dictates that banks must investigate the holder of any pre-paid card with a value over EUR 150. Similarly, cryptocurrencies and wallets will be held to the same standards as other financial institutions under the new directive to ensure that digital currencies cannot be used to obfuscate a trail of money.

Europe’s money laundering problem was born historically out of an apathy manifested by inefficient detection systems which have been routinely capitalized on by criminals. The EU’s 5th Anti-Money Laundering Directive is the latest in a series of policy developments which demonstrate its commitment to remedying the problem itself. The cooperation of banks on an international level should have a profound effect on the efficacy with which fraudsters operate by drastically restricting their means of deception. And, the introduction of public registers and limits on anonymous financing options restrict their opportunity further still. Europe has a long way to go before it is rid of its dirty money problem but its latest directive is another fantastic step in the right direction.

Crypto Exchange ShapeShift Calls Money Laundering Claims ‘Deceptive

By Nikhilesh De

ShapeShift has issued a stinging rebuke of a Wall Street Journal investigative article that claimed the crypto exchange was used by criminals to launder money.

In a blog post published Monday, CEO Erik Voorhees said the news outlet’s report showed a misunderstanding of how cryptocurrencies work and that the article’s claims were factually incorrect.

Calling the claims “factually inaccurate and deceptive,” Voorhees wrote that his exchange had been working with the Journal for nearly half a year, but the final story “omitted relevant information” and showed that “the authors do not have a sufficient understanding of blockchain and our platform in particular.”

The article – published Friday – follows an investigation by the Journal into cryptocurrency exchanges. The authors concluded that some $88 million was laundered through 46 different exchanges over two years, with $9 million going through ShapeShift in that period. This was the largest sum sent through any U.S.-based exchange, the report said (though registered in Switzerland, ShapeShift operates out of the state of Colorado).

Voorhees wrote that “even if it was true” that $9 million was laundered through ShapeShift, it would represent only 0.15 percent of the exchange’s total volume. Moreover, the exchange has “a strong record of complying with law-enforcement requests, providing valuable assistance in over 30 investigations in 13 different countries all over the world.”

He also claimed users cannot launder fiat currencies through the exchange, saying:

“Unlike most other exchanges, ShapeShift is a crypto-to-crypto, non-custodial platform.  We don’t take custody of user funds, but instead swap our own assets for theirs, at a set price.  We don’t touch fiat currency, so users cannot swap their dollars/euros/yen for our bitcoin/ethereum/dogecoin. Not a single dollar, euro, or yen has ever been laundered through ShapeShift.  It can’t be done.”

Understanding transactions

Voorhees claimed that some fundamental misunderstandings of how wallet addresses work may have resulted in some of the Journal’s conclusions.

He cited one example, saying that funds from a suspicious transaction were sent to an exchange, which later sent funds to ShapeShift.

“Because ShapeShift happens to be a customer of this same exchange – 10 months later in a completely unrelated transaction – the exchange sent funds to ShapeShift. The authors didn’t understand how to properly read the blockchain transactions, so they assumed there was $70k in ‘dirty money’ sent to ShapeShift,” he wrote.

Voorhees said ShapeShift has asked the Journal for additional transaction information to verify other claims, but the news organization has so far not done so.

Data transparency

Voorhees also asserted that ShapeShift is one of the most transparent exchanges operating today.

Every transaction through the exchange is published online, despite the user privacy protections that it has maintained to date, he wrote.

The Journal relied on this information to conduct its investigation, he said, adding that “perhaps the irony is lost on the WSJ, but the WSJ would have been unable to do this kind of investigation with any other crypto exchange, because they aren’t transparent in this way.”

“Ultimately, we are trying to pioneer a new financial system,” he concluded. “We don’t expect to be loved by the old … yet ShapeShift has always been in favor of complying with the laws of the jurisdictions in which it operates, even though many of these laws are unclear, ever-changing, contradictory, and in some cases ineffective.”