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British Security Think Tank’s report warns that NFTs could boost money laundering schemes

British Security Think Tank's Report Warns NFTs Could Bolster Money Laundering Schemes

The Royal United Services Institute (RUSI), a British defense and security think-tank, is unsure if non-fungible token assets (NFT) can be used to launder money. The report determines that in order to mitigate the money laundering risks a ‘know your customer’ monitoring system “needs to be implemented.”

RUSI: ‘NFT Technology Can Raise Alarm Bells From a Money Laundering and Financial Crime Perspective’

The Royal United Services Institute for Defence and Security Studies otherwise known as RUSI, was founded in 1831 and it is the oldest defense and security think tank worldwide. On December 2, RUSI published a report that covers the subject of non-fungible token (NFT) assets and the RUSI researchers ask whether or not NFTs can contribute to money laundering schemes.

” This technology could raise alarm bells in a money laundering or financial crime perspective,” RUSI warns. “NFTs are often bought with cryptocurrency 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 called “NFTs – A New Frontier for Money Laundering?” also states:

A system of ‘know your customer’ policies and ongoing monitoring, similar to those used in the traditional art market and in compliant cryptocurrency exchanges, needs to be implemented.

Money laundering is a common practice in the traditional art market — RUSI researchers say an ‘Art Heist’ is also possible within the NFT Realm ‘

Money laundering in the traditional art scene has been an ongoing debate for decades. The New York Times investigative reporter Graham Bowley explained on June 19, that U.S. politicians want to investigate the secret art market. Bowley wrote that although secrecy is part of the art market’s mythology, lawmakers now fear it fosters abuses.

RUSI researchers emphasize that criminal actors are also able to infiltrate NFT marketplaces and take advantage of “novel risk.” Hackers can also hack into NFT marketplace user accounts and transfer NFTs to themselves. The hacker can then quickly sell the stolen tokens and try to launder the proceeds

While RUSI researchers believe that money laundering in the NFT art and collectibles world can be deterred, the report also highlights that “NFT forgery and theft can also be mitigated.” RUSI suggests that NFT marketplaces use two-factor authentication (2FA) solutions and maintain “good cyber security.” Furthermore, RUSI suggests developing a registry of stolen NFTs that “would mimic the Art Loss Register.”

What do you think about the RUSI report on NFTs and money laundering risks? Comment below to let us know your thoughts on this topic.

Image Credits: Shutterstock, Pixabay, Wiki Commons

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