Cryptocurrency Laundering Cases Rise in Japan; over 7000 Reported in 2018

Japan is among the leading countries where the popularity of cryptocurrency is quite high. People use digital currencies for making purchases, conducting financial transactions, or investing in digital assets. Japan also has a proper legislative framework in place to regulate the cryptocurrency, and this fact has worked in favor of crypto industry. However, the wide adoption of cryptocurrency also means Japan faces a greater threat of crypto misuse which is quite aptly reflected in the revelation by its National Police Agency (NPA). NPA has recently revealed that in 2018 Japanese police have received over 7000 complaints of money laundering cases related to cryptocurrencies. The number is staggeringly high and has jumped 10-time from the 669 cases registered by the police between April to December 2017. Just so you know, the Japanese government has already made it mandatory for all the crypto exchanges operating on its territory to report suspicious transactions that could link to money laundering or other criminal activities. As cryptocurrency can be easily transferred and that too with anonymity, police have confirmed that many cases of drug deals, child pornography, and other related crimes have been funded by the cryptocurrency.

Nature of complaints

Out of total 7,096 complaints received by the police, many cases relate to the users who have used different names and date of birth but have used the same photo ID to do the transaction. Some others have logged into their account from outside Japan although they have registered address within Japan. Japanese police said that in the year 2018, a total of 417,465 cases related to irregularities in the financial transactions were reported to the police. In comparison, 2017 witnessed receiving of 17,422 such cases and the figures imply a huge jump in the frauds witnessed by the financial industry. Breaking this number further, police claim that 346,014 cases out of total 417,465 have been reported by banking and financial institution while 15,114 cases are registered by the various credit card issuing companies. NPA says it has provided crucial information to the investigating agencies on 8,259 cases and as a result, police have successfully handled 1,124 cases of fraud in 2018. Last year, NPA provided information on 1,096 cases to the police.

Long-term Strategy

On a broader scale, NPA is conceptualizing a long-term plan which involves building capacity in the field of data analytics to track down the suspicious transactions and their patterns right at their source. The agency is also planning to use artificial intelligence (AI) to identify modus operandi that is usually followed during financial transactions related to money laundering or drug deals. This comes in the backdrop when Japan is increasingly witnessing a large number of heists related to cryptocurrency and digital assets. In one of the biggest incidents of crypto thefts, a Japanese cryptocurrency exchange Mt. Gox, which is now defunct, lost over $433 million (48 billion yen) in 2014. Further in January 2018, a sum of $523 million (58 billion yen) was stolen from the customers’ accounts registered with Tokyo-based Coincheck Inc. After the incident, Japan’s Financial Services Agency conducted a comprehensive analysis of all the crypto exchanges operating in the country and asked six exchanges to take stringent measures to check money laundering cases besides improving on their overall safety and security mechanisms.

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