Banks most vulnerable to terrorist financing compared to Bitcoin

Report of the Financial Information Unit (FIU): Banks most vulnerable to terrorist financing compared to Bitcoin

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

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

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

The study conducted by the FIU reads as follows:

"Banks have better systems against money laundering and terrorist financing than other financial companies, but the vulnerability of the former is higher due to the larger size of the banking sector and the innate characteristics of their products and services such as commercial financing, liquidity management and forex trading ".

Furthermore, the investigation showed that cash transactions and virtual currencies may also be vulnerable to the same criminal activities. Nonetheless, cryptocurrencies are also less used for terrorist financing. The report states that the anonymity of virtual currencies hinders monitoring, which is something that criminals can use and exploit.

The report published by the South Korean regulatory authorities is similar to what Europol said in the Internet Threat Assessment Report 2018. This study showed that terrorists did not use virtual currencies like Bitcoin, but instead used traditional financial institutions in Europe.

Furthermore, Europol found that none of the attacks on European territory were made after being financed by virtual coins.

Since virtual currencies began to expand worldwide, several experts believed that these digital assets were used primarily or only by criminals. However, this proved not to be this way. According to a study published by the Foundation for Defense of Democracies, revealed at the beginning of this year that less than 1% of transactions with Bitcoin are linked to illicit activities.

The report from the South Korean agency was prepared between March 2017 and August 2018. In addition, South Korea will undergo joint reviews in the International Financial Action Task Force (FATF) between January 2019 and February 2020.

South Korea has already imposed a ban on Initial Coin Offerings (ICO) and has also sought a way to regulate encryption activities in the country.

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