Category Archives: money laundering

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Brazilian Government Inspects Activities of Local Crypto Exchanges

In an apparent government crackdown on corruption and money laundering, Brazilian cryptocurrency exchanges have been given a 14-point survey to fill out detailing a number of areas in their operations.

Local news outlet Portal do Bitcoin covered the incident in an exclusive piece after obtaining a copy of the document that was served to the exchanges, despite the message being signed by the prosecutor Ana Paula Bez Batti warning that the dissemination of the message is prohibited by law.

The questionnaire covers a number of topics that will supposedly contribute to the study of combating corruption and money laundering in Brazil, and covers topics including compliance issues, limits offered to customers in relation to declared income, control over the number of operations, control over the originator’s identification, hashes of the portfolios and data of the partners themselves.

Question 10, for example, reads: ”Does the Crypto-Exchange trade popular crypto-coins for their anonymity, such as Monero, Dash and Zcash?” most likely querying these coins in particular as they are notably more difficult to trace ownership of. Other questions were more direct, such as number six: ” What measures, if any, does Crypto-Exchange take to mitigate risks related to money laundering and terrorist financing?”

The Ministry of Finance supposedly issued the questions as part of a stealth dossier “to protect the integrity of the financial system”. Each brokerage was notified they had five days to respond, with the data promised to be kept entirely confidential.

What do the exchanges say?

Portal do Bitcoin contacted three of the countries top 10 exchanges by trading volume, each giving a different response to how they are handling the situation and each wished to remain anonymous. One has been fully compliant, answering each question and has already sent its response. Another claims they do not know if they have received it but are looking onto all possible communication channels.

The final exchange to comment said they do not have any plans to respond to the survey, as it was not sent as an official document from the Brazilian government but rather sent through its contact form. As most inquiry forms on similar platforms send an automated reply, it is unlikely they will be able to claim they never received the survey when the government approaches them.


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5 Countries Form J5 Alliance to Fight Crypto Tax Evasion, Money Laundering

An international coalition of five countries – the United States, United Kingdom, Australia, Canada, and the Netherlands – have formed the Joint Chiefs of Global Tax Enforcement (J5). The J5 will fight money laundering and tax evasion, with a specific focus on cryptocurrencies which they deem to be a global threat.

The United States Internal Revenue Service Criminal Investigation (IRS-CI), Her Majesty’s Revenue and Customs (HMRC), the Australian Criminal Intelligence Commission (ACIC), the Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), and the Dutch Fiscal Information and Investigation Service (FIOD) will be the member organizations of the J5.

The Director-General of the CRA, Johanne Charbonneau, says, “The formation of the J5 demonstrates the serious commitment of governments around the globe in enhancing international cooperation in fighting serious international tax and financial crimes, money laundering, and cybercrime through the use of cryptocurrencies. The J5 complements the important international work of the OECD through operational collaboration. Our collective efforts and experience will be shared to jointly identify and address the increasingly sophisticated and global schemes and the professional enablers that facilitate such schemes.”

The General Director of FIOD, Hans van der Vlist, adds, “The unique thing about the J5 is the operational collaboration between five countries on tackling professional enablers that facilitate offshore tax crime, cybercrime and the threat of cryptocurrencies to tax administrations, as well as making best use of internationally available data and technology.”

The J5 will achieve its goals of reducing money laundering and tax evasion by sharing information and intelligence between nations, collaborating to develop new approaches that increase enforcement capability, and by conducting joint enforcement operations.

Cryptocurrency tax evasion has increased since the 2017 rally that saw Bitcoin reach record levels near USD 20,000. Many investors have chosen to not report their profits as required by law. The IRS has been actively trying to trace cryptocurrency transactions and has forced exchanges like Coinbase to hand over customer data in their efforts to collect taxes.


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BTC-e’s Vinnik Confesses to Laundering Billions of Dollars of Bitcoin

Alexander Vinnik, the alleged operator of BTC-e cryptocurrency exchange, has confessed to the laundering of billions of US dollars worth of Bitcoin. According to Interfax, the admission of guilt has been received by the Prosecutor General’s Office of the Russian Federation and is being transferred to the Moscow police department in the Ostankino district.

BTC-e was a major Bitcoin and cryptocurrency exchange from its launch in 2011 until its forced closure in July 2017. United States authorities seized the website’s domain name and 38% of all customer funds on 28 July 2017, and since then the exchange has been closed. BTC-e was indicted for operating an illegal international money laundering scheme, including laundering of Bitcoins from Japan-based exchange Mt Gox hack, the largest Bitcoin theft in history.

Three days before BTC-e was shut down and customer funds were seized, Vinnik was arrested while on vacation in Greece at the request of the United States. He was accused of laundering between USD 4 billion and USD 9 billion in cryptocurrency. He has already been hit with a fine of USD 12 million from FinCEN in the US.

Although BTC-e originally released a statement saying Vinnik was not an employee of the exchange, he has since admitted that he was a technical consultant for the exchange, and now admits he was in charge. He has sent four letters admitting his guilt to the head of Russia’s ministry of internal affairs, the ministry’s chief investigator, and the Prosecutor General of Russia. He claims responsibility for RUB 750 million worth of damage to Russian citizens between 2011 and 2017 as well as for a large amount of computer information fraud.

He has offered to help Russian authorities with the investigation and this has apparently almost cost him his life. Local media reported that Russian criminals conspired to poison him before he could get to court in Russia and testify. Since the poisoning attempt, he has been put under a special lockdown at the Greek prison where is staying; no one can come into contact with him or give him food besides the prison guards.

The United States and Russia have been fighting for the right to extradite Alexander Vinnik to their respective countries. In January 2018, he submitted an application for asylum in Greece, saying the charges were politically motivated. Before he can be extradited, the asylum request must be decided on by the Justice Minister of Greece.


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$700K in Bitcoin Sequestered by London Police in Hacking Inquest

In a recent case involving fraudulent online activity, the London Metropolitan police conducted Scotland Yard’s first cryptocurrency seizure, a confiscation totaling USD 700,000 in Bitcoin.

As reported by USA Today, the perpetrator, 25-year-old Grant West, pleaded guilty in court December last year to conducting cyber attacks on fast-food outlets, gambling shops, supermarkets, and mobile phone companies. Investigators working on the case claim that he was responsible for cyber attacks on over 100 companies between July and December 2015.

Often, West’s criminal activities played out via phishing emails that lured suspects into sharing their personal and banking information with him.

West, who went by the online pseudonym ‘Courvoisier‘,’ reportedly used the dark web to sell passwords and credit card numbers that he acquired through the hacks. His proceeds from the illegal sales were converted into Bitcoin.

The arrest of West was made on a train by British police. Law enforcement was able to access his online cryptocurrency wallets through discovering their passwords on the unlocked laptop he was using at the time of his arrest. The funds were successfully sequestered.

A British court said Wednesday that West’s sentence would be given on 25 May. The trial also found his girlfriend, Rachael Brooke, an accomplice to the crimes. While she was sentenced to just two years of community service, it is expected West’s sentence to be far more severe.

Criminal activity and crypto

Speaking out on incidents involving online fraud, police investigator Mick Gallagher noted what he found a critical element to West’s arrest: ”These people generally feel they can operate with impunity, that they can’t be touched. We have now debunked that.”

Some criminals believe that Bitcoin can offer them full anonymity, but investigators are frequently able to track the movement of cryptocurrencies. Even if they cannot identify the owner through the transactions themselves, tracking a publicly available trail of transactions on the blockchain may eventually lead them to the perpetrator.

While it may seem like this incident is more bad press for cryptocurrencies, less than 1% of Bitcoin transactions actually involve illicit activities. Indeed, it is valuable for cryptocurrency traders to know that should any fraudulent activity be pursued against them, the police are becoming more equipped to deal with these situations and protect peoples’ online funds.


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Hong Kong Finds Crypto Not Implicated in Rise of Financial Crimes

In an official report conducted by the Hong Kong Financial Services and Treasury, it was found that criminals were far more likely to use traditional payment methods than cryptocurrencies to commit offenses.

While the city is currently facing accusations of not instituting adequate measures to prevent financial crimes, the Money Laundering and Terrorist Financing Risk Assessment Report found that the number of individuals actually convicted of such criminal activities in the last six years has decreased.

However, the number of ”suspicious financial transactions in Hong Kong has more than quadrupled” in the same time period. This rise may well be attributed to 2012 legislation that imposed a mandate on an increased number of financial organizations and entities to report any suspicious activity.

Cryptocurrencies do not appear to be contributing to the rise in these illicit financial activities, with crypto platforms found to be involved less frequently in such crimes than traditional payment gateways such as Paypal and Alipay.

In a vindication of crypto platforms, Forbes reported “a system of payment only becomes a risk to money laundering and terrorist financing once it becomes relatively commonly used”.

The Hong Kong Police Force is currently investigating 167 Bitcoin-related crimes received since 2013. A very small number of these are related to illicit activities, with the majority regarding ransomware and the WannaCry virus.

The police are still warning Hong Kong residents to take care while trading cryptocurrencies as they may be attached to Ponzi schemes, but they see “no apparent sign of organized crime or ML/TF concerning the trading of cryptocurrencies“.

Complications for Hong Kong

Businesses in Hong Kong are issuing complaints that they are having difficulties obtaining banking services; the overarching fear of money laundering risks has prevented banks from servicing large-scale banking operations.

Companies dealing in cryptocurrencies have been particularly affected by this, despite being less likely for their operations to facilitate criminal activities. In one case, the staff at cryptocurrency exchange Gatecoin received a call in September 2017 from their bank provider Hang Seng Bank, telling them that their accounts had been suspended.

Increased attention and fear focused on money laundering indeed appears to be taking a toll on Hong Kong’s reputation as a finance hub. The governments push to make the city a center for fintech is being jeopardized by the restrictive banking measures and targetting of cryptocurrency.


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Citigroup Advertises Jobs Requiring Bitcoin Professional Certification

Citigroup has recently advertised multiple job roles for potential employees requiring a Bitcoin Professional Certification.

The American multinational investment bank is looking to hire a VP and a senior VP with a background in Bitcoin, specifically to explore the risks associated with money laundering and cryptocurrencies. They noted that a specialist would more aware of suspicious transactions denominated in a cryptocurrency, and how to anticipate them.

The advertisements list that a Bitcoin Professional Certification is preferable.

The certification brings a level of legitimacy to cryptocurrency experts. While not necessarily validating one as a Bitcoin expert, it requires knowledge to attain it that is critical to positions such as that advertised by Citigroup.

The senior VP role at Citigroup works collaboratively with the global head of AML monitoring risk management in an analytical role, looking to identify legitimate transactions and those that look suspicious. To prevent additional money laundering occurring, this role requires a very specific area of Bitcoin expertise.

While Citigroup does not currently seem interested in incorporating cryptocurrency into their banking services, the advertisement of these positions shows at least an interest in the area. Additionally, it proves that it is increasingly focused on reducing money laundering practices.

Despite the attention of Citigroup to Bitcoin-related financial crimes, nine in ten money laundering transactions actually occur through banks and other official services, not through cryptocurrency.

If the roles at Citigroup are successfully filled by qualified candidates, it has the potential to increase the legitimacy given to the cryptocurrency industry as a whole, and potentially the Bitcoin Professional Certificate.

Requiring the Bitcoin certification is a relatively new demand in the industry, as employers from the traditional financial sector joining the field consider it more an obligation to prove expertise. It is worth keeping an eye on the certification to consider if it is a success in enabling more professionals to gain jobs in the industry.

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Jon Matonis – The Fincen Whistleblowers

Jon Matonis – The Fincen Whistleblowers:

Bitcoin Foundation board member Jon Matonis (@JonMatonis) writes a post on how the financial surveillance also occurring is no secret.  Excerpts:  

“The Fincen bureau conducts all of its surveillance activity out in the open and in plain sight, probably for its effect as a deterrent. Fincen even recruits banks and other agent financial institutions to participate in the direct surveillance that make serious and consequential judgment calls along the way.”

“Two generations of educated Americans, including some smart attorneys, have been conditioned to think of money laundering as a real and legitimate category of crime. Eradication of privacy is the goal and manipulation of the semantic crime debate is the tool.”

“Since the available cryptography and technical tools of today permit near absolutes on each side of the privacy-surveillance spectrum, each advancement from one side elicits an equally strong reaction from the other side.”

“As shameful as the existence of PRISM is, and it is monumentally shameful for a free society, it doesn’t even compare to the unprecedented level of financial surveillance the world is on the verge of witnessing.”

“Digital currencies with proper mixing services such as bitcoin become a viable option for preserving some transactional privacy, even if identification is required for its initial acquisition from licensed money transmitters.”

“A world where privacy isn’t sacrificed and all human transactions aren’t tracked is not only possible, but imperative. The alternative will be far worse than you can imagine.”

 – (Further discussion of the article)

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Quartz – How Digital Currencies Democratize Offshore Banking

Quartz – How Digital Currencies Democratize Offshore Banking:

Quartz reporter Tim Fernholz (@TimFernholz) writes on how digital currencies extend the international financial system to the rest of us.  Excerpts:

“The two tools Liberty Reserve used to evade financial scrutiny—anonymity and layering transactions through multiple companies—are already embedded in the international financial system. The difference now is merely access and scale.”

“When offshore financial centers first became trendy many, many years ago, you used to have to go to the offshore location, take the money with you, and deposit it in the bank. Now [open up an offshore bank account] you don’t have to go to Guernsey or Cayman or BVI.”

“The internet has shrunk the world, and Liberty Reserve and other digital currencies similarly help bring offshore banking to the masses.”


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