Crypto Money Laundering Is Nothing Compared to What Banks Do
10.02.2018

Late last week, the Wall Street Journal published claims that nearly $90 million in “suspected criminal proceeds” had been effectively laundered through cryptocurrency portals over two years, including by conversion from bitcoin into the untraceable currency Monero. The piece focused in particular on ShapeShift, the U.S.-based trading service that, until recently, resisted collecting information on users’ identities.

ShapeShift CEO Erik Voorhees struck back at the Journal in a blog post Monday night. He provided credible examples of benign transactions deemed suspicious by the Journal, and alleges that ShapeShift cooperated with Journal reporters “under false pretenses.”

This is an understandable form of damage control, but it’s also doubly beside the point. First, because no one even slightly familiar with the cryptocurrency ecosystem can credibly deny that it’s being used by money launderers and criminals—Silk Road, after all, was bitcoin’s first killer app. And second, because another recent story shows just how insignificant such activity is relative to the corruption of the very global banking system that cryptocurrency was designed to keep in check.

On September 19th, Denmark’s largest bank, Danske Bank, released an independent report detailing the funneling of roughly 200 billion euros (USD$230 billion) in suspicious funds through its tiny Estonian branch between 2007 and 2015, mostly from Russia into Europe. To put that in perspective, $230 billion is 25,000 times more than the amount alleged to have been laundered through ShapeShift. It’s 2,500 times more than the entire illicit flow the Journal claims to have found across an array of cryptocurrency exchanges. In fact, it’s more than the entire current value of all cryptocurrency in existence.

And Danske Bank is just one pus-filled sore amidst a global financial plague. The United Nations estimates that dirty money totaling 2 to 5 percent of global GDP—$800 billion to $2 trillion—is laundered every year, using conventional financial institutions and, you guessed it, U.S. cash dollars.

That alone should make money laundering through crypto a very low priority for international authorities. But comparing the nature of the two cases makes the low stakes of crypto-fueled money laundering even more clear.

The Journal found that funds from an array of ICO scams, a crypto phishing attack, and from the North Korea-backed WannaCry hackers had been laundered through various exchanges. Even the North Korean operation was inept and small-scale by global crime standards—one estimate put the total earnings from the attack at a paltry $140,000.

Compare that to the operation that funneled funds through Danske Bank. That respected pillar of global finance was instrumental in hiding money stolen from the Russian government by the kleptocratic, authoritarian Putin regime. As highlighted by Forbes contributor Frances Coppola, this included a portion of the $230 million in tax revenues collected from Hermitage Capital Management. Instead of funding services for Putin’s subjects, those funds were handed over to corrupt oligarchs. Those oligarchs are alleged to act as bagmen for Putin himself, who effectively controls their stolen wealth, making him the world’s richest individual.

The details of the Hermitage case show the depravity of the Russian regime, and the depth of Danske’s complicity. To help cover up the theft of government funds, Russian authorities accused Hermitage of tax evasion. To fight those charges, CEO Bill Browder hired a Russian lawyer named Sergei Magnitsky. In 2008, for having the temerity to try and expose Putin’s lies, Magnitsky was thrown into a Russian jail on trumped-up charges, and then, according to widespread but unconfirmed reports, tortured to death. The case has since led to international sanctions against Russian bigwigs—sanctions which, incidentally, the Trump administration has reportedly made efforts to roll back.

Danske Bank, naturally, took a commission for helping cover up the theft Magnitsky died trying to expose—and, based on the numbers, from dozens of less well-understood crimes. The bank has said its net income from suspicious transactions totaled 200 million Euros, or $230 million. At the risk of beating a dead horse, that’s 25 times more than the total amount ShapeShift is alleged to have laundered.

Danske’s complicity isn’t limited to political assassination, repression, and corruption within Russia. To defend their kleptocracy, Putin and his potato-faced cronies have worked to undermine Western democracy and freedom worldwide. They have used Russian government spies, propagandists, and hackers in that effort, helping swing the U.S. election to Trump and promoting Britain’s vote to leave the EU. The Brexit process has for more than two years drowned Britain’s entire electorate and government in chaos and division, and will likely weaken both Britain and the E.U. for the long term.

ShapeShift allegedly helped a few chintzy scammers to make off with pocket change. Danske Bank’s corruption helped the Russian government erode the foundations of global democracy.

And just as ShapeShift was just one of many crypto exchanges alleged to have facilitated (petty) crime, Danske Bank is just one of the many “respectable” financial institutions that play a role in abetting corruption at the very highest levels of global government. As recently as March, another supposedly upstanding bank in Latvia—like Estonia, an E.U. member state—was found to have laundered billions of dollars for not just Russian thieves, but also for North Korea. And those funds were not linked to North Korea’s pathetic WannaCry hack, but to its development of nuclear weapons.

The world has also been shockingly quick to forget the Paradise Papers, leaked to journalists and publicized just last November. They revealed a network of secret, offshore shell companies used to evade taxes, and implicated some of the most wealthy and powerful people and institutions in the world. The more than 120,000 named individuals included Columbian President Juan Manuel Santos and the Queen of England. Companies using shell companies to avoid taxation included Apple and Nike. And in a bleak symmetry, the Paradise leak also showed U.S. Commerce Secretary Wilbur Ross to have secret ties to the very sort of Russian thugocrats who used Danske Bank to conceal their blood money.

Perhaps the Paradise Papers didn’t provoke more sustained outrage because much of the activity they detailed was, in a strictly literal sense, legal. That’s not to say that global citizens are somehow OK with tax evasion by elites because the law doesn’t prevent it. Instead, the Paradise Papers reinforce a truth many already suspected: that many laws serve not to achieve justice for the many, but to legitimize the power-lust of the few. The very “legality” of such obvious corruption convinces many that fighting against it is pointless.

No wonder, then, that committed political radicals like Erik Voorhees have embraced a technology that at least offers an alternative to that system, and perhaps even a way to resist it. Cryptocurrency has its own shortcomings, including, yes, vulnerability to abuse by criminals and corrupt governments. Those failures deserve scrutiny and should be fought against, exactly because the legitimacy of this new system is precious and delicate.

But an attack on the misuse of cryptocurrency, implicitly made in the name of the global financial establishment, brings to mind a passage from the Sermon on the Mount, attributed to Jesus Christ in the Book of Matthew, Chapter 5, Verse 7: “Thou hypocrite, first cast out the beam out of thine own eye; And then shalt thou see clearly to cast out the mote out of thy brother’s eye!”