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Bithumb Partners with Chainalysis as South Korea Scales up Regulations

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Blockchain forensics firm Chainalysis announced on March 10 that it will partner with South Korea-based cryptocurrency exchange, Bithumb following the successful passing of new crypto-currency laws in South Korea.

Bithumb will use the Chainalysis Reactor Inquisition tool to monitor skeptical activities on its platform. The main reason for Bithumb’s latest move is to keep up with the most recent amendment to the Special Financial Transactions Information Act.

The Korean Government is accelerating the imposition of digital currency taxes following the adoption of the amendments by the National Assembly. According to the Financial Services Commission (FSC), the revised regulations require cryptocurrency firms to implement anti-money laundry measures to ensure that individuals use their real names in the same way as traditional banks.

In addition, the new regulations will provide the Korean tax authority with a foundation to create a legal framework for the taxation of digital assets. As a result, exchange firms will be obliged to provide the authorities with details of their customers and their records of purchases for tax purposes.

Korean exchanges to comply with new regulations by 2021

The South Korean government intends cryptocurrency exchanges to fully implement the new requirements by September of next year. Some provisions of the revised act can take up to 12 months to be fully implemented. The new apparatus could take another six months to come into effect.

According to Thumb’s head of compliance, Sungmi Lee, the lawmakers may further strengthen the rules in the future. He argued that the exchange expects much tougher regulations, and therefore needs to be armed with sufficient support before that. Korea’s exchange companies are required to report their activities to the country’s financial authorities. They are required to obtain the real name of the user from banks in the country. Failure to comply will result in an exchange being fined up to $42,000 in fines or a prison term of up to five years.

Additionally, the law requires all the exchange firms to have their infrastructure attested by Korean Internet Security Agency (KISA). Currently only four exchanges have completed the expensive and time-consuming KISA certification. Bithumb, Upbit, Coinwon, and Korbit are among the companies to have obtained this award.

Chainalysis to help Bithumb Strengthen its AML and CFT Practices

According to the chief revenue officer at Chainalysis, Jason Bonds: 

“As cryptocurrency use in South Korea continues to grow, new regulations such as this will make blockchain analysis solutions like Chainalysis vital for compliance.”

The high number of hacks in the country last year on cryptocurrency exchanges; called for the need for the government to introduce measures, in particular, to increase transparency. As a result, Bithumb aims to improve their AML and counter terrorism financing (CFT); with the support of the Government’s Chainalysis Reactor tool ahead of such initiatives.

South Korea is among the countries that have recently revised its domestic digital assets regulations to ensure they meet the standards set by the Financial Actions Task Force (FATF). During the past couple of days, Switzerland, South Korea, Singapore, The United Kingdom, Ukraine, Hong Kong, Dubai and Japan; have all amended their domestic cryptocurrency guidelines to meet the standards laid down by the G7’s FATF.

Bitcoin – The Jihadist’s Coin for Fundraising

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The world of fintech has sunk into a love-hate relationship with bitcoin. Yet terrorists have something else, they’re completely in love with the digital currency. In other words, there’s no looking back on a system that requires confidential funding.

Back in 2018, a terrorist organization named Hama urged its supporters to send them money through bitcoins. The terrorist group that runs the Gaza Strip, through its bitcoin campaign, was able to collect a few thousand dollars. Today, via crypto, the insurgent group has upped their bitcoin game and also developed more advanced tools for coping with finances.

Another group would also go ahead and request financial assistance for the jihad-related cause. In 2017, the cause sought to improve the squalid fighting conditions for the fortified trench in Syria. Even this group turned to fundraise through bitcoin.

The financing of terrorist activities has become more sophisticated over time. The anonymity of technology has attracted even more militant groups. The result is that criminals are able to circumvent global compliance laws, sanctions, and tracking.

Numerous financing sanctions against terrorist groups have been imposed under international law. For example, the U.S. Treasury Department has sanctioned the IRGC Qods Force and the Al Qassam Brigades for sending millions of dollars to HAMAS. The embedding of the funds was followed by a complicated channel of traditional means, through Iran’s Qods Force and Lebanon’s Hizballah, all the way to HAMA.

Despite the sanctions, HAMA has still been able to raise funds through digitally encrypted cryptocurrencies. In fact, these militant groups are providing their supporters with information on how to use the technology. “Army of the Nation” popularly known as the Jaysh al-Umma,  a Salafi-jihad terrorist group inspired by Al Qaeda put up a banner thanking its supporters for donating through crypto. The banner went on to state: 

“It is appropriate for the nature and conditions of our current age in most countries of the world, especially in light of this war against the Islamic nation in general, and its Mujahideen in particular, as it provides confidentiality in transferring money from and to any country around the world in a technical way available to everyone, God willing.”

The sanctions on Iran are also worth noting. Such sanctions have also impacted the operations of a few militants in the region. The consequence was the incorporation of bitcoin into the funding of militant groups in Iran and other neighboring countries. The long Wall Journey published an article entitled, “Palestinian Militant Groups Appeal for Bitcoin Supporters.” This post highlights numerous militant groups that have been soliciting for funding through bitcoin. 

Efforts have been made to curb this source of funding. Yet, on the other hand, the organizations have been educating their followers on how to invest without being exposed.  Financial regulators and prosecutors are also finding better ways to track and efficiently enforce operational controls on transactions. Meanwhile, the simplicity, accessibility, and convenience provided by Bitcoin has knocked authorities off.  Maybe the use of cryptocurrencies by terrorists is here to stay. 

LATAM Exposes ‘The Dark Side’ of Cryptocurrencies

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To have a clear picture of the world’s worst money laundry schemes, new cybercrime frontiers, and organized crime, perhaps Latin America (LATAM) is the best specimen for you. 

In the midst of a major economic downturn, Latin American countries are facing the worst money laundering schemes as a result of the increase in cryptocurrencies and unregulated P2P exchanges, according to a new report by threat intelligence firm Intsights and Ciphertrace.

According to the report, organized crime groups and drug cartels in LATAM countries use cryptocurrencies such as bitcoin; to cover up their tracks or fund their evil schemes.

The study has deepened into the crime scene in Latin American nations, exposing the challenges faced by law enforcement to curb the threat.

In particular, one way for criminals in LATAM nations to use digital currencies is through ‘ mixing services ‘ to confuse tainted digital currencies with others. Once criminals clean crypto through mixing, they trade in different exchanges and earn further income.

As part of money laundering schemes, criminal groups and cartels are taking advantage of inadequate KYC and AML standards by local exchanges and global P2P networks such as LocalBitcoin.

In fact, the report argues that a massive amount of illicit digital currencies around the globe ends up in LATAM cryptocurrency exchanges. Researchers at Intsights have found that exchanges in the Latin part of the world are usually denoted by indulgent regulations.

The report relates to the big money laundry case involving the payment processing firm Crypto Capital. The Panama-based crypto company was involved in a money laundry case worth up to $350 million.

Panama-Based Crypto Capital Money Laundry Saga

According to reports, Ivan Manuel Molina Lee, President of Crypto Capital, was detained by the law enforcement authorities on the grounds that he was directly involved in the scheme.

Crypto Capital has been able to mislead one of the biggest exchanges in the world, Bitfinex. Colombian drug cartels used cryptocurrencies to launder at least $350 million.

Additionally, criminals in Latin America take advantage of the leniency of P2P platforms; such as LocalBitcoin and Paxful to compound their interests. As per the report, this is the most preferred way for LATAM criminals.

The LocalBitcoin P2P platform has the highest trading volumes in Latin America. This is mainly due to the lack of or minimal regulations such as lack of AML and little KYC requirements. The report reads:

“Threat finance is evolving in Latin America as organized crime groups turn to cryptocurrency to launder large amounts of money and dive into the dark web to find hackers for hire…criminals are taking advantage of unregulated exchanges that do not require registration information and proof of identification for tracking purposes. These illegal exchanges are appealing to criminal groups that are looking to move large amounts of money through untracked channels.”

At Least 70% of the LATAM Population is Online

Furthermore, the report notes that 69 percent of the Latin American population is online, a significant percentage. Majority of Internet users come from Colombia and Brazil. The rapid digitization capped by political and economic precariousness; has resulted in increased hacking, fraud, money laundry, drug cartels and other crimes in the region.

In Conclusion,  this massive hornet’s nest is unlikely to be resolved soon anytime; due to the lack of anti-money laundry legislation in place and the poor state of law enforcement at LATAM.

However, the report suggests that firms or agencies willing to thwart the problem; should  “collect, monitor, and analyze cybercrime intelligence,” to learn and adopt the best security protocols.

 

 

Disclaimer note: This article is based on the writer’s opinions/research and does not necessarily represent the views and opinions of Tron Weekly. 

Are Blockchain Voting Systems the Solution to Election Fraud?

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Blockchain has won attention as a means to boost public trust during elections. The Indian Election Commission is considering a blockchain voting system and has partnered with the Indian Institute of Technology to develop a blockchain voting system.

Mr Sunil Arora, Chief Election Commissioner, believes that blockchain will improve voter turnout as more people from different regions choose to vote even when they are away from their hometowns of registration.

Aleksander Essex and Jeremy were the developers who identified the potential of blockchain in the validation of the voters.  During the early stages of budding technology, when bitcoin was a meager $30; Clark and Essex used bitcoin as a form of carbon footprint in digital information that could make electronic voting secure and efficient. 

Several startups have since followed up to build on the Blockchain electronic voting infrastructure. One such startup is FollowMyVote-a Virginia-based company. FollowMyVote is trying to break the idea that voting systems can’t go online. Especially in an era that has infiltrated democracies through the lure of election fraud and third party tampering.

When governments do not accept the concept of democratic voting systems, developed democracies would probably collapse. Blockchain voting platforms will ensure effective voter identification, registration and also streamline the process of counting and validating votes. At a time when almost all aspects of life are conducted online, technology will help bridge political functions. 

In fact, blockchain researchers have successfully run acid tests on how to eliminate vulnerabilities in blockchain voting systems. However, several entities remain skeptical about the implementation of blockchain in voting. For example, the increasing trend of hackers exploiting blockchain applications provides further cause for concern.

 Back in 2017, Homeland Security posited U.S. elections as the country’s core infrastructure. US Homeland Security Secretary Jeh Johnson told media reporters how elections would qualify for state-funded cybersecurity assistance, federal transport systems, and federal protection.

The Department of Homeland Security reported more than 500,000 damaged voter records after the 2016 US election. A series of investigations led by Robert Mueller, a special counsel, indicted 26 Russian nations for allegedly hacking into voting systems. The investigation report highlighted the hackers target voting systems in at least 21 states.

Security researchers have just recently discovered attempts at phishing campaigns targeting three candidates in the 2018 midterm elections. Homeland Security Department claims that a lack of confidence would impact voter turnout. Say a scenario where you’d prefer to stay home and not vote, rather than participate in a rigged election or may lose their trust in the elections.

Blockchain voting remains one of the most explored blockchain use cases. However it isn’t clear why most tests for blockchain voting have been on a small scale. Especially targeting community projects and student organizations. Nonetheless, the largest blockchain voting system was tested in Moscow, Russia during a city council election. In fact, the end result was increased voter turnout with 90 percent of those registered to use the blockchain program.

 

Bad News for Bitcoin, DoJ Busts an Enormous Money Laundry Operation

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The growth and adoption of Bitcoin and other cryptocurrencies have long been subdued by the notion that they are tied to the dark web and the criminal world. This perception is basically because the crypto technology started as a payment method on darknet marketplaces.

Over the years, this narrative has been gradually disappearing. However, traces of it still exist among the state administration and retail investors. This has played a huge part in the technology’s slow adoption worldwide.

Well, this is symbolized by the United States’ latest 2021 fiscal budget proposal. Cryptocurrency crimes seem to be an area of concern. Trump’s latest budget proposal seeks to crack down digital currency-related crimes in the near future.

Moreover, the recent reports of a massive $300 million money laundry scheme further strengthen the tale. The plot which was just recently busted by the United States Department of Justice (DoJ) may be the poster child of the government’s strengthening account against Bitcoin.

DoJ  Indicts Ohio Man for Laundering $300M in Bitcoin on the Dark Web

The DoJ charged Larry Harmon earlier this week for allegedly conspiring to launder $300 million using Bitcoin. Harmon ran the Helix money laundry scheme which had advanced operations that helped clean money used for transactions. As per the DoJ, Helix laundered the money through a dark market place called AlphaBay.

“Helix functioned as a bitcoin ‘mixer’ or ‘tumbler,’ allowing customers, for a fee, to send bitcoin to designated recipients in a manner that was designed to conceal the source or owner of the bitcoin.” 

In addition, Harmon lured users by acclaiming to conceal cash transfers from law enforcement. On top of Helix, Harmon also ran a Dark Web search tool dubbed Grams. The Assistant Attorney General of the Justice Department’s Criminal Division, Brian Benczkowski commented on the matter through the press release saying:

“Helix allegedly laundered hundreds of millions of dollars of illicit narcotics proceeds and other criminal profits for Darknet users around the globe…This indictment underscores that seeking to obscure virtual currency transactions in this way is a crime, and that the Department can and will ensure that such crime doesn’t pay.”

Furthermore, Harmon’s accusations include that Helix outfit transferred more than 350,000 Bitcoin; valued at over $300 million at the time.In addition, the illegal business also powered money laundry schemes of other users on AlphaBay. According to the DoJ, AlphaBay is a heavily trafficked Dark Web Vendor.

Government’s Case Against Crypto Strengthens

Moving forward, Donald Trump’s recently proposed budget mentions the term cryptocurrency twice. On both occasions, the term is directly associated to funding terrorism and other criminal activities.

The budget also highlights that the Secret Service to be returned back to their original duty in the Treasury. Initially, the Secret Service was formed to investigate financial crimes and protect presidents. This move is particularly to provide more oversight to the Bitcoin and cryptocurrency industry.

In conclusion, it is still not clear whether involving the Secret Service in the digital currency industry will reap more advantages or disadvantages. However, it is crystal clear that the recent Bitcoin money laundry indictment by the DoJ; will drive the government into increasing its involvement and oversight in the market.

 

Blockchain Crime Syndicates – Is Crypto a Den of Thieves?

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Cryptocurrencies have provided significant benefits to individuals and organizations alike. Innovators are finding even better ways to implement these new inventions. A study by Statistica estimates that there were at least 42 million blockchain wallets by September 2019.

However, behind the underlying benefits of digital currencies and the blockchain, is a sinister threat of terrorists and criminal rings. All taking advantage of the technology to drive illicit activities. 

The Massachusetts Institute of Technology (MIT) collaborated with Blockchain analytics firm Elliptic, to identify patterns of illegal bitcoin usage. MIT’s IBM Watson AI Lab implemented machine learning technology to detect criminal activities on the blockchain.

The 2019 dataset study established that 2% of bitcoin transactions that year were illicit. Meanwhile, this dataset was based on approximately 200,000 bitcoin nodes with a sum valuation of $6 billion. Notwithstanding, 77% of the remaining 98% was unclassified -; while 21% of it was lawful.

A 2015 Europol report identified the use of bitcoin in the majority of high profile criminal investigations. In the European Union alone, over 40% of illegal transactions involved a bitcoin transaction. Moreover, Europol director Rob Wainwright stated that 4% of criminal proceeds in the EU were funneled through digital currencies in 2018.

The director noted that Europol was anticipating the figure to increase given the privacy and credibility afforded by cryptocurrencies. He added that at least $5.5 billion were laundered through illegal cryptocurrency transactions.

Although blockchain transactions are not impossible to track down, they make it really difficult for authorities to establish identification information. Verification of transactions on the chain takes place through mining. The blockchain records each piece of the transaction. Unfortunately, all the data has no direct links to any identifiable information such as names and physical addresses. Hence making blockchain transactions anonymous and complex to track down. 

This is not a new situation. Terrorists running funding campaigns and payments through cryptocurrencies dates as far as 2014. Islamic State fighters in Syria were facilitating small purchases and international transactions using digital currencies. Reports have emerged of terrorist groups lobbying for funding in cryptocurrency through Telegram and Whatsapp groups. 

Wainwright told the BBC during an interview, that even if authorities could track down and identify criminals behind illicit transactions. It’s difficult to freeze the funds unlike from a traditional banking scenario. 

It is not only terrorist groups using blockchains to conduct illegal activities. Pornography firms and drug syndicates are using technology to their advantage. A Wales drug dealer was sentenced to eight years of prison in 2018, for running a fentanyl drug store.

The store operated mainly in Bitcoin. While most of these activities take place through bitcoin, authorities have also established the use of privacy coins Monero, Zcash, and Telecoin. These privacy coins take privacy a notch high in the concealment of identification information. Making it even more difficult for authorities to track down the transactions. 

Following PayPal banning Pornhub from its services, the pornography side turned to cryptocurrencies for payment. Last year in October, law enforcement arrested hundreds linked to a South Korean dark web child pornography site that sold explicit videos through cryptocurrencies. 

“Welcome to Video” as was the name of the site relied on bitcoins to sell user access to about 250,000 pornographic videos portraying child pornography operations. 

US and Britain authorities described the site as the largest pornography website in the world. Officials reported they had rescued at least 23 underage victims in Britain, Spain and the US actively using the website.