In an official report conducted by the Hong Kong Financial Services and Treasury, it was found that criminals were far more likely to use traditional payment methods than cryptocurrencies to commit offenses.
While the city is currently facing accusations of not instituting adequate measures to prevent financial crimes, the Money Laundering and Terrorist Financing Risk Assessment Report found that the number of individuals actually convicted of such criminal activities in the last six years has decreased.
However, the number of ”suspicious financial transactions in Hong Kong has more than quadrupled” in the same time period. This rise may well be attributed to 2012 legislation that imposed a mandate on an increased number of financial organizations and entities to report any suspicious activity.
Cryptocurrencies do not appear to be contributing to the rise in these illicit financial activities, with crypto platforms found to be involved less frequently in such crimes than traditional payment gateways such as Paypal and Alipay.
In a vindication of crypto platforms, Forbes reported “a system of payment only becomes a risk to money laundering and terrorist financing once it becomes relatively commonly used”.
The Hong Kong Police Force is currently investigating 167 Bitcoin-related crimes received since 2013. A very small number of these are related to illicit activities, with the majority regarding ransomware and the WannaCry virus.
The police are still warning Hong Kong residents to take care while trading cryptocurrencies as they may be attached to Ponzi schemes, but they see “no apparent sign of organized crime or ML/TF concerning the trading of cryptocurrencies“.
Complications for Hong Kong
Businesses in Hong Kong are issuing complaints that they are having difficulties obtaining banking services; the overarching fear of money laundering risks has prevented banks from servicing large-scale banking operations.
Companies dealing in cryptocurrencies have been particularly affected by this, despite being less likely for their operations to facilitate criminal activities. In one case, the staff at cryptocurrency exchange Gatecoin received a call in September 2017 from their bank provider Hang Seng Bank, telling them that their accounts had been suspended.
Increased attention and fear focused on money laundering indeed appears to be taking a toll on Hong Kong’s reputation as a finance hub. The governments push to make the city a center for fintech is being jeopardized by the restrictive banking measures and targetting of cryptocurrency.
