My office has been proudly circulating this document that shows Digital Currencies as having low risk of money laundering and terrorist financing.

The study explains the low risk rating:

There is little evidence to indicate that the use of digital currencies has been incorporated into established money laundering techniques.

There is little evidence to indicate that the use of digital currencies has been adopted by criminals involved in terrorist financing, whether as a means by which to raise funds (crowd funding etc.), to pay for infrastructure (e.g. server rental), or to transfer funds.

The absence of evidence is not evidence of absence! In fact, a primary goal of money laundering is to not leave behind a bunch of evidence. (The other goal is to minimize the loss of funds in the process.)

Regardless of evidence, is Bitcoin an effective method for laundering money? My whole company had to undergo anti-money laundering compliance training, so I fancy myself an expert.

Proper laundry conceals the nature, location, source, ownership, and control of illegally-obtained money. Bitcoin is great for this. Mixing services can break up and recombine funds with numerous sources to render the transactions untraceable. One high-volume Bitcoin mixer claims to have processed over $20M last month.

But that’s not a lot. Bitcoin has an average daily transaction volume of maybe $100M. Money-laundering was a $1.2 trillion market in 2009, and likely much larger today. Even if Bitcoin transactions were wholly dedicated to laundering money, it would capture less than 2% of the market.

So not only is Bitcoin a poor payment solution and a terrible store of value, it’s also unscalable for money laundering.

Still an excellent vehicle for speculation though.