NFT’s at High Risk of Being a Money Laundering Tool

A report detailing the risks of NFT money laundering was published by The Royal United Services Institute (RUSI), calling into question if the new industry is becoming the new hub for money laundering.

To start with, NFTs are most often purchased with cryptocurrencies on online marketplaces. Cryptocurrencies are routinely exploited for malicious means, such as obfuscating the source of criminal proceeds and, despite transactions being traceable, more sophisticated criminal actors use a variety of techniques to disrupt investigations by law enforcement,” the RUSI report reads.

RUSI report outlines how NFT’s can be used similarly to how the traditional art market is utilized to avoid paying taxes.

“Criminal actors can hack into user accounts on NFT marketplaces and transfer NFTs to their own actions. After transferring the NFTs, the hacker can quickly sell the stolen token(s) and attempt to launder the proceeds,” RUSI said.

Other than traditional finance crimes, NFT’s can harbor secret pieces of code that can infect users’ computers, or be used as a communication device for hackers.

The group suggests the current regulations help around regular cryptos, at the point of exchange, be implemented to NFT sellers, such as OpenSea. As well as the widely used system of Know Your Customer (KYC).

The think tank also suggests a registry for stolen or fraudulent NFT transactions, which will mirror the Art Loss Register in the traditional art world.

The RUSI is not the only organization aware of NFT inherent risks earlier this year a PR person for the London Metropolitan Police’s Arts and Antiques Unit told Decrypt they were “very much aware” of these risks, and that blockchain technology “allows ultimate beneficial owners to conceal their identity,”.

Money launders beware.