Financial Information Unit (FIU) Report: Banks More Vulnerable To Terrorist Financing Than Bitcoin


It seems that banks are more vulnerable to money laundering and terrorist financing risks than virtual currencies. The information was reported by Business Korea citing a report released by the Financial Information Unit (FIU). The FIU is a division of the South Korean Financial Services Commission (FSC).

The investigation researched the Korean financial sector including banks, securities companies, insurers, mutual financial companies and cryptocurrency exchanges. The assessment aimed at understanding the situation in the financial market related to money laundering and terrorist financing activities.

This report found that banks had good systems to fight against money laundering activities and terrorist financing. However, they were also the most exposed to them.

The study conducted by the FIU reads as follows:

“The banks have better systems against money laundering and terrorist financing than other financial companies. Yet the former’s 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.”

Furthermore, the investigation showed that transactions with cash and virtual currencies can also be vulnerable to the same criminal activities. Nevertheless, cryptocurrencies are also less likely to be used for terrorist financing. The report mentions that the anonymity of virtual currencies hinders tracking, which is something that criminals can use and take advantage of it.

The report released by South Korean regulators is similar to what Europol said in is Internet Organized Threat Assessment 2018 report. This study showed that terrorists were not using virtual currencies such as Bitcoin, but instead they were using traditional financial institutions in Europe.

Moreover, Europol found that none of the attacks perpetrated in European soil was carried out after being financed with virtual currencies.

Since virtual currencies started to expand all over the world several experts believed that these digital assets were used mostly or only by criminals. However, this has proven not to be in this way. According to a study published by the Foundation for Defense of Democracies, revealed earlier this year that under 1% of Bitcoin transactions are related to illicit activities.

The report conducted by the South Korean agency was prepared between March 2017 and August 2018. Additionally, South Korea is going to undergo peer reviews in the Financial Action Task Force (FATF) between January 2019 to February 2020.

South Korea has already imposed a ban on Initial Coin Offerings (ICOs) and it has also searched a way to regulate crypto trading activities in the country.

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