TronWeekly

Crypto World News

You are here: Home / Archives for Money laundering

Money laundering

South Africa’s Crypto Challenges: A Call for Caution

by

A disconcerting scenario has unfolded for crypto enthusiasts in South Africa, raising concerns about the country’s susceptibility to money-laundering activities. Cryptocurrency exchanges within the nation have sounded the alarm, revealing how it has become a hotbed for illicit financial practices. Recent developments reveal that US-based crypto companies have initiated stringent measures, causing disruptions in deposits and payments for South African users.

A local source recently reported that Kraken, a prominent cryptocurrency exchange, has suspended the acceptance of deposits from its South African users. This decision was prompted by the exchange’s banking partner adding the nation to its anti-money laundering blacklist. This move aligns with the Financial Action Task Force’s [FATF] decision, which categorized South Africa as requiring “Increased Monitoring” and placed it on the “grey list” in February of the current year.

Circle, the issuer of USDC [USD Coin], had also taken proactive measures earlier this year by halting fiat payments from South African users. This decision was made in anticipation of potential financial sanctions against the nation. These actions reflect the ripple effect of FATF’s designation, illustrating how regulatory decisions can influence the operations of cryptocurrency entities.

South Africa: Navigating Stormy Waters

Considering these circumstances, Kraken’s cautious approach toward facilitating transactions from South African users is understandable, aiming to avoid any involvement in potential money-laundering schemes, especially those concerning cryptocurrencies. However, these regulatory and technical interventions have cast a shadow on crypto arbitrage, a popular practice in the country.

Although part of a broader global effort to curb money laundering activities, it’s important to recognize that South Africa has experienced instances of high-profile money smugglers utilizing banks and bribes for money laundering, along with notable fraud cases such as the 2021 theft of 70,000 Bitcoins from the Africrypt platform owned by the Cajee brothers and the fraudulent MLM scheme Mirror Trading International Proprietary.

Adding to the landscape, South Africa’s financial market watchdog, the Financial Sector Conduct Authority [FSCA], recently declared that digital asset trading platforms must operate with a license by year’s end. Failure to comply could lead to closure or fines. This dynamic regulatory environment underscores the ongoing efforts to ensure transparency and accountability within the cryptocurrency realm.

Mexico’s cartels used Bitcoin as a shield to launder $25B: Report

by

UN findings revealed that Mexico-based drug mafias are said to have washed roughly $25 billion per year via Bitcoin, the internet, and e-commerce. In the report released recently by the International Narcotics Control Board, the cartels namely Jalisco and Sinaloa have increased their buying spree by utilizing small online bitcoin purchases to evade regulations.

The report further stated that these cartels use drug proceeds to purchase small quantities of bitcoin in succession online while hiding the source in order to enable them to pay associates worldwide.

The US Drug Enforcement Administration representative Raul Martin del Campo stated:

“The INCB is issuing a red alert for countries to come to an agreement and consider how to better regulate this [cryptocurrency] payment system.”

The recent developments come close to the heels after United States President Joe Biden signed an executive order requiring the government to study the dangers and benefits of creating a central bank digital dollar, as well as other cryptocurrency-related concerns.

Mexico safe haven for criminals

In Mexico, it has been reported that several of the country’s most prominent drug cartels are increasingly using bitcoin to finance their criminal activities. The Sinaloa Cartel and the Jalisco New Generation Cartel are two of these notorious organizations.

According to Insight Crime, the Sinaloa Cartel is often called the Western Hemisphere’s largest and most powerful drug trafficking organization. Its Members work together and form an alliance to defend themselves, leveraging contacts at the highest levels and manipulating elements of the federal police and military to keep an edge over rivals.

In April 2019, Mexican authorities detained accused human trafficker Ignacio Santoyo in a posh section of the Caribbean resort of Playa del Carmen after establishing a link between him and a prostitution ring operating throughout Latin America. Authorities also suspect that the accused kingpin is using bitcoin to help launder the proceeds of his crimes.

The Latin American nation is currently lined up to legalize Bitcoin after El Salvador. Last month, Indira Kempis, Senator for the State of Nuevo León, Mexico, expressed her intention to adopt BTC as legal tender.

NFTs could be used in money laundering: U.S. Treasury Department

by

The U.S. Treasury Department has not only recognized digital art as art but has also raised concern about the use of NFTs in money laundering. The department recommends the sector be regulated at the earliest.

The development of anything in the economy means the betterment of society, but it also means that the chances of risks are higher as well. Similarly, the progress of non-fungible tokens (NFTs) in the digital world seems to have given scope for speculation.

The Treasury Department issued a press release and a report on illegal financial activity in markets dealing with the sophisticated standard of art, through which it took a specific interest of the evolving NFT sector and the possibility of money laundering.

The Treasury particularly emphasized that NFTs could be utilized in self-laundering, a process in which users spend money on an NFT they already own to conceal transaction traces on the blockchain. In a 40 page report, published on Friday, the Treasury wrote,

“The ability to transfer some NFTs via the internet without concern for geographic distance and across borders nearly instantaneously makes digital art susceptible to exploitation by those seeking to launder illicit proceeds of crime, because the movement of value can be accomplished without incurring potential financial, regulatory, or investigative costs of physical shipment.”

However, the prime issues faced by digital art owners, such as plagiarized media and phishing scams, were not discussed. Nonetheless, concern over the issue of how the incentive to transact is potentially larger than the incentive of verification of the buyer of the work.

NFTs may be subject to VASP regulations

NFTs have recently shifted a large level of money, according to the Treasury. According to the report, virtual arts recorded $1.5 billion in trade activity in Q1 2021, up 2,627 percent over the previous quarter. Non-fungible tokens utilized for transactions and investments, according to the government authority, might be classified as virtual assets. As a result, organizations that develop or transact digital art may be classified as Virtual Asset Service Providers (VASPs) and subject to Financial Action Task Force (FATF) regulations.

Furthermore, The FATF issued guidance in October that stated non-fungible tokens might be classified as virtual assets if they are utilized for transactions, but that they do not meet the other criteria.

Former BitMEX Exec Arthur Hayes Released On $10M Bond After Surrender

by

Arthur Hayes, the former chief executive officer of the cryptocurrency exchange BitMEX, was reportedly released on a $10 million bond pending court proceedings in New York. According to an exclusive report by Bloomberg, Hayes had turned himself in Hawaii on 6th April.

Nearly xix months prior to the surrender, the federal prosecutors had levied charges against him along with three other BitMEX executives. All four of the top officials of the cryptocurrency exchange were previously accused of conspiring to evade US laws requiring the implementation of money-laundering controls.

Hayes’ lawyers claimed the former BitMEX CEO to be “self-made entrepreneur who has been wrongly accused of crimes”. They also described him as “Singaporean resident” and stated,

“Mr. Hayes voluntarily appeared in court and looks forward to fighting these unwarranted charges.”

The Commodity Futures Trading Commission [CFTC] first began investigating BitMEX in 2019. According to the prosecutors, instead of working with the US agency, the crypto exchange was allegedly involved in circumventing compliance programs and chose to base the company in Seychelles in a bid to escape regulatory scrutiny.

Along with Hayes, Ben Delo and Samuel Reed were each charged with one count of violating the Bank Secrecy Act and one count of conspiring to violate the act. Delo, who happens to be one of the co-founders of BitMEX was released on a $20 million bond after surrendering to the US prosecutors.

The company’s former CTO, Reed, on the other hand, was arrested in Massachusetts on the very same day the charges were disclosed in last October.

BitMEX’s fourth fugitive exec, Gregory Dwyer, had earlier had declined to surrender. On this regard, the lawyers had stated,

“We have been in touch with the government on Mr. Dwyer’s behalf and have informed them of his whereabouts. They are also aware that he has every intention to defend himself in court against these meritless charges and is eager to do so.”

Bulgarian Crypto Exchange Busted For Conning 900 Americans In A Multi-Million Dollar Money Laundering Scheme

by

While pioneers see the Fintech world as a hotbed for innovation, some people see it as a mere opportunity for exploitation. Using blockchain tech, cryptocurrencies have been rolled out to the world more than a decade ago. Some viewed this as a leeway from the hindrance of the centralized system that the world is running on. However, taking advantage of the same, a few others sought easy money making ways. A 53-year old Bulgarian man is the latest to join the latter.

Multi-Million Dollar Money Laundering Ring Busted

As per a recent announcement by the United States Department of Justice, Rossen Iossifov was charged for running the fraudulent cryptocurrency exchange, RG Coins. The Bulgarian individual was presented in Frankfort, Kentucky before District Judge Robert E. Wier in a two-week trial for conspiracy to commit racketeering as well as money laundering. Seventeen other people were also convicted in this case while three others are still on the run.

Lossifov reportedly carried out the operation for about three years from September 2015 to December 2018. The sentencing is scheduled for 12 January 2021.

The announcement highlighted that the aforementioned convicts had lured over 900 Americans into taking part in a virtual auction fraud. False advertisements were reportedly their expertise as they convinced several American citizens to send in money for non-existent goods posted on eBay and Craigslist. The credibility of these goods was maintained by delivering invoices with trademarks of prominent companies. Call centers and customer support was also bestowed to strengthen the belief of these victims.

The announcement further read,

“[…]once victims were convinced to send payment, the conspiracy participants engaged in a complicated money laundering scheme wherein domestic associates would accept victim funds, convert these funds to cryptocurrency, and transfer proceeds in the form of cryptocurrency to foreign-based money launderers.”

Since all the proceeds of the aforementioned hoax were converted into Bitcoin, Iossifev exchanged them to the local fiat currency. More than $4.9 million worth of Bitcoin was exchanged by the Bulgarian man during the span of the fraudulent activities.

Estonia-Based Crypto Firms Lose Permit a $220 Billion Money Laundry Scandal

by

One of the most crypto-friendly countries in Europe, Estonia, is withdrawing licenses from a number of cryptocurrency firms following the biggest money laundering scandal in Europe. According to Bloomberg’s report, Estonian-based crypto firms are being cracked down by the authorities following a $200 billion money laundry scheme.

The Estonian Financial Intelligence Unit, Madis Reimand, stated that regulated Estonian-based crypto firms are taking advantage of their Estonian title to swindle finance elsewhere. As a result, more than 500 Estonian-based crypto firms that had previously failed to secure permits in the EU nation have lost their license within six months. He stated:

“This is a first step in tidying up the market, allowing us to take care of the most urgent issues by permitting operations only for companies that can be subjected to Estonian supervision and coercive measures.” 

Estonia-based crypto firms purge fear

According to the report, Estonian authorities are targeting cryptocurrency firms in the country that did fail to establish operations six months after securing an operating license. Over 900 Estonia-based crypto firms fear to be stripped off their permit, given that they are running no business in the country and are run from foreign countries, according to Reimand.

Furthermore, the Estonian financial intelligence officer noted that authorities would continue upholding a firm procedure before issuing any company a license. According to Andre Nomm, the Baltic nation easily handed out crypto-related permits, resulting in the development of “credibility for some evil schemes.”

Estonia is obliged to comply with EU’s AMLD5 directive

Estonia is a member of the European Union. Since the adoption of the fifth Anti-Money Laundering Directive (AMLD5), Estonia-based crypto firms have been required to obtain licenses to provide crypto-related solutions. 

The legal enhancements of the AMLD5 aim to improve the transparency and sustainability of the firms that engage in financial activities across Europe. Furthermore, the Estonian Financial Intelligence Unit recently introduced new requirements for crypto-related companies intending to start operations in the country. The new requirements are set to be enforced beginning July 1, 2020.

Ethereum User Loses $5.2M After Two Grave Mistakes

by

Over the last day, the Ethereum user has fortuitously spent about $5.2 million on transaction fees to make just two ETH transactions. On June 10, the user-initiated a transfer of only $130 to ETH, accidentally incurring a cost of $2.6 million.

A few hours later, the same Ethereum user started another transaction. This time round, however, the transaction involves a much higher amount of Ethereum worth $86,000. The problem is that users still spend the same amount of transaction fees, another $2.6 million error. Oh, Ouch!

Mining pools’ reaction to the $5.2 million Ethereum user mistake

In the two cases, the mining companies have frozen the funds and are exploring the option to give them back to their original owner. Spark Pool, which mined the first transaction, issued a public statement instantly after block number 10237208 was extracted, noting that it has launched investigations on the matter.

Moreover, Spark Pool noted that the mining firm has the experience of handling similar issues. Notably, the firm saw a similar incident more than a year ago when block number 7238290 was mined more than a year ago. The transaction involved a transfer of 0.1 ETH, at the cost of 2,100 ETH in transaction fees.

On the other hand, the second transaction involving block number 10241999 was mined by a different mining firm by the name Ethermine. Similarly, the firm reacted instantly to the incident and tweeted that the original owner to contact their customer support to settle the matter.

 

 

A bad mistake or a money laundry strategy?

Some people are contemplating that the two transactions could have been a money-laundering tactic. Theoretically, an Ethereum miner could turn illegally earmarked ETH into legitimate by miner’s reward by including a vast transaction fee and mining the block themselves. This is practically possible since ETH miners decide which transactions to include in their blocks.

Nevertheless, this does not seem to be the case in the two incidents. The strongest point of view against the argument is that two different transactions ended up in two separate mining pools, which uses thousands of ETH miners scattered globally, to find new blocks. This means that the funds were not being sent to one receiving entity; since they would be eventually divided among the thousands of miners that make up the pool.

Small-time Russian Rapper in Hot Water for Crypto Money Laundering; Lavish Instagram Photos Point to Evidence

by

The rising popularity of social media has enabled the world to see the different types of personalities and how they live their lives, But there was one feature of applications like Instagram that no one really talks about: Helping the police catch criminals.

As March drew to a close, a Russian national identified by the FBI as a “significant cyber-criminal” was charged with money laundering in Pittsburgh. Evidence against Maksim Boiko was collected when the police searched through his Instagram, which uncovered damming evidence against him.

According to the US District Court for the Western District of Pennsylvania, officials were convinced that Boiko was leading a double life from his small-time rapper self, as evidenced by his lavish lifestyle photos on Instagram. The court filings also added that the Russian had used infamous crypto exchange, BTC-e to conduct his schemes.

The District Court of Pennsylvania further linked Boiko with transnational organized crime organization QQAAZZ. Reports about Russian syndicates infiltrating other regions have been doing the rounds repeatedly with some links supposedly connected with the Kremlin. In Boiko’s case, his flamboyant lifestyle was his biggest downfall. The Russian citizen first popped on the police radar when he entered the US mainland with $20,000 in fiat currency.

According to official court documents, Boiko was in violation of Title 18 of the United States Code. The documents added:

“Maksim Boiko aka Maxim Boyko aka gangass is a 29-year-old Russian National who entered the United States via Miami, Florida with his wife on January 19, 2020. Because he entered the country with $20,000 in US currency, Boikon was interviewed by the US Customs and Border Protection. In the interview, Boiko stated that his income came from investments in Bitcoin and rental properties in Russia.”

What the police confirmed about Boiko’s shady dealings were his activities in the cryptocurrency world. The Federal Bureau of Investigation [FBI] revealed that Boiko had received almost $387,964 in his BTC-e account. The accused also withdrew about 136 Bitcoin from his account. Court filings do not mention that Boiko was a small-time rapper, but that piece of information was highly valuable for the authorities.

Boiko used the rap name ‘Plinofficial’ to create his account on BTC-e, which made it easier for the police to locate his Instagram of the same name. For a rapper that had only 3365 subscribers on YouTube, Boiko was found to have a penchant for uploading photos with large wads of cash. This behavior was inconsistent with the practices of legitimate business operations and was consistent with Boiko’s money-laundering accusations.

To hide his true identity, Boiko also used the pseudonym ‘Gangass’. He made it a point to use the scrambler “exploit.im” to conceal communications with his cybercriminal clientele. A review of FBI holdings further provided incriminating evidence against Boiko. Several Jabber chats were discovered which involved criminal money laundering committed by the holder of gangass@exploit.im.

Boiko’s connection with BTC-e was one of the biggest red flags. When the now-defunct exchange was shut down in 2017, reports came out in the open that almost $500 million had been siphoned by the FSB, Russia’s intelligence agency.

Ex-CIA Analyst Claims that Cryptocurrency Laundering is a National Security Risk

by

The regulatory indecision on cryptocurrency regulations in the United States is mostly owed to the sentiment that the virtual assets industry includes a lot of baggage with it. This includes large scale scams and hacks that have resulted in losses in the billions.

According to a recent paper by Lawfare, the author describes how cryptocurrency laundering was a massive national security risk to the US. This discussion arose after the US Department of Justice indicted two Chinese nationals for funneling money into North Korea.

Allegations of North Korea using covert spies to attack the United States have always been in the making. With the advent of blockchain technology and cryptocurrencies, the US has made it a point to watch out for incessant cyber-attacks. The two Chinese citizens stole some of the $250 million stashes from the DPRK-affiliated Lazarus Group.

The United States Treasury Office Office of Foreign Assets Control [OFEC] sanctioned the two men of being associated with the Lazarus Group. An official statement read:

“OFAC is designating, Tian Yinyin), and Li Jiadong), for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, a malicious cyber-enabled activity.”

Reliable sources said that Yinyin and Jiadong converted a majority of the stolen assets to fiat currency at Chinese banks. Treasury Secretary Steve Mnuchin claimed that the North Korean regime has continued its widespread campaign of extensive cyberattacks on financial institutions to steal funds. The US has said that it will continue its efforts to bring down any bad actors affiliated to North Korea.

In the latest case, the convicted men were being designated for having materially assisted the Lazarus group both financially and technologically. The Lawfare article mentioned the US Treasury Department’s strong stance against North Korea and the steps it would take to activate countermeasures. It was also noticed that the Chinese nations had a three-step plan to funnel money: hack the exchange launder the virtual assets and then convert it to fiat.

According to reports, the cash out step was also very intricate. Tian and Li ran an illicit crypto trading operation, where they converted stolen crypto into fiat and then transferred it to customers for a fee. The former CIA analyst pointed out that the scheme would probably have been a child’s play for North Korea.

Hackers associated with the Lazarus group usually use open-source digital wallets that are freely available online. These wallets can also be downloaded in the highly restricted DPRK, something which the Lazarus Group has fully utilized. The US DOJ fuelled the argument against North Korea by discussing where the funds were going.

According to some reports, DPRK was using the stolen cryptocurrencies to fund its own nuclear projects. Multiple outlets recently broke the news that the country had fired a ballistic into the sea, but no detailed analysis has been revealed yet. The author of the Lawframe article reiterated that the US needs to sort out its cryptocurrency regulations before other countries take advantage of the chinks in the armor.

This was not the first time that the US has come under attack from foreign parties as it was also hit by a Russian Group in 2016. The group of hackers was indicted for stealing Bitcoin and using it to malign Hillary Clinton’s election campaign. Details of the hack only came out in 2018 by which time Trump had already been elected the 45th President of the United States.

LATAM Exposes ‘The Dark Side’ of Cryptocurrencies

by

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.