Non-fungible tokens (NFTs), the financial securities consisting of digital data stored in a blockchain, can be used in trade-based money laundering (TBML) operations according to Niels Obbink, chief and general director of the Fiscal Information and Investigation Service, the Dutch government agency responsible for investigating financial crimes.
Price volatility in NFT markets can make it difficult to determine whether a transaction is in line with the fair market value of the goods being traded, thus making it hard to detect some TBML operations.
New TBML typology
“NFTs are one of the new modern digital ways of trade-based money laundering,” Obbink told reporters at a summit of the heads of tax enforcement from the UK, Australia, Canada, Netherlands and the US.
“Since there is – comparing with more well-known classic sectors – less control and less supervision and a limited regulation that makes it vulnerable for fraud,” he says.
Detection difficult
One of the surest ways to detect potential TBML has been to see whether the price of a transaction is set at the fair market value of the goods being traded.
But because the NFT market is novel and prices for tokens are volatile, it can be difficult to tell whether a transaction using a digital currency has been conducted at a fair market price.
Bank warning
The heads of tax enforcement summit that Obbink attended was convened last week in London by the Joint Chiefs of Global Tax Enforcement (J5) to share intelligence and coordinate efforts on a global level against international tax crime and money laundering.
Last month the J5 announced the release of an intelligence bulletin warning to banks, law enforcement personnel and private citizens of some of the dangers when dealing with NFTs.
More information on the bulletin, J5 NFT Marketplace Red Flag Indicators, can be found here.
Categories: Trade Based Financial crimes News
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