Troubling Report Shows an Increase in Money Laundering Cases Involving Crypto in Japan

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The number of money laundering cases linked to cryptocurrencies in Japan surged last year, up ten-fold from 2017. According to a report from local news media The Japan Times, the National Police Agency got over 7,000 cases of suspected crypto-related money laundering incidents in 2018.

The staggering number represents a 960 percent jump from the meager 699 cases reported from April 2017 to December 2017.

What’s even more startling is that the increase in money laundering activities occurred about the same time new crypto rules created to combat money laundering came into effect.

Japan Cryptocurrency

Along with the country’s recognition of cryptocurrencies, trading exchanges had to adhere to a strict set of rules in a bid to prevent another crypto exchange hack.

Crypto Rules for Japanese Exchanges

In April, Japan’s Payment Services Act required crypto exchanges operating in the country to obtain a Financial Services Agency (FSA) license, which allowed them to operate legally in the country and solidify the state as a hub for cryptocurrencies.

Japan’s largest cryptocurrency exchange BitFlyer was the first exchange to obtain the license. This was followed by other exchanges including Coincheck who was granted a license a year after hackers stole $530million from its wallets.

History of The Coincheck Hack

Read: History of the Coincheck Hack

Per the report, the suspected transactions were easy to identify due to the patterns. In some cases, the trader used different personal details but the same photo ID across multiple accounts. For others, their login information showed they were overseas, but the listed address was in Japan.

The report revealed that crypto wasn’t a standout performer; traditional means was also used during the period covered. The total suspected money laundering cases were up 2,296 percent, with 417,465 cases reported to the police, up from 17,422 in 2017. Banks and credit card firms reported the bulk of the cases, the report revealed.

The agency wants to counter the threat posed by money laundering by ramping up its workforce to train experts who can detect patterns related to suspected money laundering transactions. They would be taught data analysis and how to use artificial intelligence technology.

Japan’s role in the Task Force

Last year, the Financial Action Task Force (FATF), a group of nations fighting money laundering and terrorist financing held a meeting where they announced the preparation of global binding rules for crypto exchanges. Japan was one of the countries that were prominently featured in the Task Force, as it did in an earlier G20 meeting that seeks a unified approach to tackling the use of crypto for money laundering transactions.

The Task Force will be looking at the effectiveness of current rules that require licensed crypto exchanges to follow know-your-customer (KYC) laws to report suspicious transactions and combat money laundering.

Money Launderers’ Love for Crypto

Japan is not the only country that is suffering from money laundering cases. American authorities have been busy as well. Last year, LocalBitcoins trader Theresa Lynn Tetley, also known by her sobriquet “Bitcoin Maven,” was sentenced to prison and fined $20,000 for her role in laundering bitcoin as proceeds of selling narcotics. Another American was sentenced to jail in Arizona for using crypto to launder drug proceeds. The U.S. Attorney’s Office in Arizona sentenced 54-year old Thomas Costanzo to 41 months in prison for laundering money and running an unlicensed money transmitting business on LocalBitcoins.

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Based in the UK, Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system. Follow him on Twitter: @adejimi or Contact

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