Blockchain can combat illicit fund transfers, Nigeria’s top finance investigator says

Blockchain technology and artificial intelligence (AI) can be used to combat illicit activity, according to Nigeria’s Economic and Financial Crimes Commission (EFCC) chair, Olanipekun Olukoyede.

The stakes are high for Africa. The continent loses a substantial $88.6 billion annually to illegal fund flows.

According to The Guardian, Olukoyede expressed concern that these funds could be better utilized for essential infrastructure, healthcare, and education.

A statement from the Commission’s spokesperson, Dele Oyewale, indicated that Olukoyede made this revelation in Tunis, Tunisia, during a keynote address at the Pan-African Conference on Illicit Financial Flows and Tax evasion.

The conference brought together key stakeholders to explore innovative strategies for asset recovery and financial reintegration in Africa.

Olukoyede also highlighted the difficulties encountered in asset recovery, including technical, legal, and political challenges that complicate the tracing, freezing, and repatriating of illicit funds.

He called for the enhancement of legal and institutional frameworks across African nations to combat IFFs more effectively.

Earlier in May, Olukoyede disclosed that terrorists are increasingly utilizing cryptocurrency traders to fund their activities in the country. According to Olukoyede, some young cryptocurrency traders are unknowingly being exploited by terrorist financiers to move funds, complicating efforts to track and halt these financial flows.

In a concerted effort to combat these illicit activities, the EFCC has blocked 1,146 bank accounts implicated in unauthorized dealings in foreign exchange, money laundering, and terrorism financing in Nigeria. 

A significant number of these accounts were found to be connected to peer-to-peer cryptocurrency trading platforms, underscoring the growing intersection between digital currencies and illegal financial operations.

Olukoyede further highlighted the EFCC’s success in recovering $20 million worth of cryptocurrency from fraudsters. 

In a notable move to hold cryptocurrency platforms accountable, the EFCC filed criminal charges against Binance, a leading cryptocurrency exchange, and one of its executives, accusing them of money laundering and tax evasion. 

The EFCC chairman emphasized the importance of capacity building, robust legal systems, and improved coordination and cooperation at national, regional, and international levels. 

He has advocated for using advanced technologies such as data analytics, blockchain, and AI to enhance asset tracking and recovery efforts.

He noted that these emerging technologies could be crucial in combating financial crimes enabled by cryptocurrencies, suggesting a future where advanced tech solutions bolster traditional enforcement measures.

Crypto and money laundering

Cryptocurrency has emerged as a significant facilitator of global money laundering activities, particularly in East and Southeast Asia.

According to the United Nations Office on Drugs and Crime (UNODC) report, cryptocurrencies, coupled with the rise of illegal online casinos and junkets, have contributed to the proliferation of underground banking and money laundering across East and Southeast Asia.

Organized crime groups have exploited vulnerabilities within the cryptocurrency ecosystem and online gambling platforms, using cryptocurrency exchanges and wallets to integrate billions of dollars in illicit proceeds into the financial system. This often involves mixing funds and conducting transactions anonymously.

In Nigeria, the cryptocurrency exchange giant Binance has been embroiled in allegations of $35.4 million in money laundering and tax evasion. CEO Richard Teng claimed to have been blackmailed by unidentified individuals in Nigeria demanding a $150 million cryptocurrency bribe, which the Nigerian government dismissed as baseless and an attempt to divert attention from ongoing investigations into Binance’s operations.

Recognizing the substantial money laundering risks posed by the cryptocurrency sector, the United Kingdom’s Financial Conduct Authority (FCA) highlighted crypto firms, alongside retail banking, wholesale banking, and wealth management, as high-risk areas for exploitation between 2022 and 2023. In response, UK police have deployed crypto tactical advisors nationwide to seize digital assets associated with criminal activities.

On June 4, Weidong “Bill” Guan, the Chief Financial Officer of the Epoch Times, was charged in a $67 million money laundering scheme involving cryptocurrency.

According to the indictment, spanning from 2020 to May 2024, Guan and his “Make Money Online” team allegedly used fraudulently obtained unemployment benefits and stolen identities to acquire prepaid debit cards. These cards were then sold at a discounted rate for cryptocurrency on specific platforms.

The illicit funds were allegedly laundered through various channels, including bank accounts belonging to The Epoch Times, Guan’s personal accounts, and his cryptocurrency holdings.

When financial institutions flagged suspicious transactions, Guan purportedly misrepresented the origins of the funds, claiming they were from legitimate online donations.