Digital Detergent: Crypto money-laundering

AS LONG as dirty money has been around, so has money-laundering. Between $800bn and $2trn, or 2-5% of global GDP, is washed annually, estimates the United Nations Office on Drugs and Crime. Criminals have swapped money for precious metals, mis-stated invoices, rinsed cash through casinos or simply strapped it to their bodies and flown to places where banks don’t ask questions. Now they have a new detergent: crypto-currencies.

Such data as there are suggest that crypto-laundering is still a small share of the whole. But crypto-currencies’ attractions—global availability, the speed and irreversibility of transactions and the ability to hide identities—are plain. Rob Wainwright, head of Europol, Europe’s police agency, has estimated that 3-4% of the continent’s annual criminal takings, or £3bn-4bn ($4.2bn-5.6bn), are crypto-laundered. He thinks the problem will get worse. America’s Drug Enforcement Administration believes international gangs are using crypto-currencies more.

Dirty cash—from drug-dealing, say—can be washed by converting it into crypto, splitting it into smaller amounts and moving it through the crypto-sphere, perhaps via several virtual currencies. Dirty crypto, for example from a ransomware attack, can be similarly swapped around—often at high speed (“atomic swaps”) and in little chunks (“micro-laundering”)—until it is clean enough to be switched into ordinary money.

Authorities are slowly catching up. Last month a Briton was jailed in the Netherlands for taking €11m ($13.2m) in dirty bitcoin from criminals, converting these into ordinary money through his bank account, withdrawing the cash and returning it to the crooks, minus a cut. But professional launderers are using more sophisticated methods, often mixing old and new ways to evade detection, says Michael McGuire of Sussex University.

Europol recently uncovered how European crime bosses used crypto to pay a Colombian drug cartel for cocaine. European henchmen visited crypto-exchanges to convert euros into anonymous virtual currencies. These were sent to a digital wallet registered in Colombia and swapped into pesos on an online exchange. The pesos were withdrawn in cash, which local “money mules” spread over dozens of bank accounts, in sums small enough to avoid suspicion. The cartel bosses got the money by withdrawing the cash or by e-transfer.

“Sticking £10,000 down your underpants and flying to Zurich is still quite a common and easy way to launder money,” says Mr McGuire. But he warns that as governments work to get cash off the street and crack down on other ways of washing money, cyber-laundering may well be the future.

PayThink Cryptocurrency issuers must improve their anti-money laundering game

By Ron Teicher

All signs point to the end of a “Wild West” era of cryptocurrencies, specifically with ICOs. As governments step up to protect investors, companies considering an ICO should take the initial steps to self-regulate, before regulatory bodies step in and do it for them.

In July 2017, the SEC issued an investigative report “cautioning market participants that offers and sales of digital assets by ‘virtual’ organizations are subject to the requirements of the federal securities laws.”

The SEC is strongly considering labeling ICOs as securities, meaning that future offerings or sales of “blockchain technology-based securities” will have to be registered, just like the offerings or sales of traditional securities.

These unregistered offerings would then be liable for violations of securities laws in many countries including the U.S. The penalties for securities fraud are severe, and stand to increase as bipartisan groups of U.S. senators introduce a bill to raise penalties for securities law violations.

Other countries have taken even more strident regulatory actions against ICOs. In September 2017, China’s central bank announced a complete ban on ICO funding because it “seriously disrupted the economic and financial order.” China’s ban reflects a legitimate worry, shared by governments worldwide, over the danger of ICOs facilitating money laundering, online fraud, and terrorist financing.

When regulators recognize ICOs as securities offerings, they will likely require issuers to fully comply with standard Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.

Currently, most ICOs don’t perform even the most basic customer check. In our review of U.S. based ICOs, we discovered that only 11% of these offerings require investors to prove that they are U.S. citizens.

A key piece in the overall AML landscape, KYC enables financial institutions to manage risk by granting them full transparency on their customers. Broadly speaking, the KYC process analyzes basic identity information and checks this information against lists of known parties who have been associated with fraudulent practices. Using profiles of similar customers, KYC models typical transactional behavior, and then monitors actual behavior against this model.

Such traditional KYC/AML regimes, designed to verify merchant identity and business scope, have been the frontlines of fraud prevention for decades. Even before specific KYC/AML regimes are updated to include ICOs, a growing number of companies considering ICOs are proactively ensuring their compliance with basic KYC/AML tenets. KYC also ensures that companies are not concealing part of their business activities or acting as a storefront for illegal products.

And it’s not just startups that are preparing for ICO regulations. Recently, the Waves blockchain platform joined forces with the ICO Governing Foundation, the Ethereum Competencies Centre, and Deloitte CIS to launch a self-regulatory body for ICOs.

The idea is to drive change from the ground-up by having the industry itself provide reporting, legal, tax, accounting, KYC, and business due diligence standards for ICOs.

Recognizing the fact that cryptocurrency fundraising is on the rise, this move makes sense.

Without best practices and standards in place, organic growth can be impeded by perceived risks to investors and issuers. Vladislav Martynov, the Head of the Ethereum Competence Center, noted in the Deloitte release that “joint and voluntary initiatives such as this self-regulatory body for token sales are a critical element in the professionalization of the blockchain industry. As custodians of some of the most remarkable and disruptive technology ever created, we must be seen to be fostering its responsible use as well as building functionality and maintaining the security of the ecosystem.”

U.S. Court Rules Money Laundering-Related Case Against Coinbase Must Have Public Trial

By Molly Jane Zuckerman

A U.S. federal court has ruled that law firm Silver Miller’s money laundering-related class action lawsuit against crypto exchange and wallet Coinbase must be held in open court as opposed to a private arbitration boardroom, Silver Miller attorney David Silver told Cointelegraph in an email today, April 23.

The Eleventh Circuit Court of Appeals ruled today that the class action against Coinbase, brought by Silver Miller and co-counsel the Wites Law Firm, will be held in open court. The case in question alleges that Coinbase assisted in laundering around $8.2 mln of stolen Bitcoin (BTC) – valued at over $100 mln today. In July, 2017, the CEO of the now bankrupt crypto exchange Cryptsy, Paul Vernon, had been found guilty of stealing his users’ cryptocurrency and as ordered to pay $8.2 mln in damages, a case Silver Miller law firm was also involved in.

As Vernon used his Coinbase account to convert the stolen funds into fiat between 2014 and 2016 before fleeing the country, the current Silver Miller class action lawsuit against Coinbase alleges negligence in account oversight:

“Plaintiffs seek damages based upon the unlawful conduct of COINBASE in failing to properly monitor customer accounts that held investors’ money and ignoring its duty to investigate suspicious activities under U.S. anti-money laundering rules.”

Silver Miller co-founder David Silver, who was part of the original Cryptsy lawsuit, told Cointelegraph that he has long “preached that accountability, transparency, and verification are needed in the crypto exchange space”:

“This ruling brings the plaintiffs one step closer to finding out just what type of Know Your Customer protocols and Anti-Money-Laundering protections Coinbase employed and whether Coinbase complied with state and federal statutes in that regard.  Coinbase has delayed and tried to keep discovery hidden from the public long enough. That stops now.”

Miller added that the law firm is “pleased” that the case will be a public trial:

“Coinbase’s ascension to the top of the crypto exchange heap has not come without missteps in its business practices along the way.  We look forward to having Coinbase answer for its role in the millions of dollars in harm suffered by our clients.”

Coinbase is currently the subject of multiple disputes from users, including a complaint filed in March of this year that alleges that the exchange benefited from insider trading when it added Bitcoin Cash (BCH) to its exchange and wallet services. On the merchant side, Coinbase has recently received backlash online from its reported decision to suspend the account of the WikiLeaks Shop, the official merchandise arm of the whistle-blowing Wikileaks organization.

American conman jailed for a year for money-laundering offences in Singapore

SINGAPORE – An American conman, who scammed a singer-songwriter behind Faith Hill’s hit “Breathe” of US$600,000 (S$788,000), was jailed for a year in a Singapore district court on Monday (April 23) in connection with money laundering offences.

Deputy Public Prosecutor Nicholas Khoo noted that the case involving David John Plate, 53, marked the first time that an overseas scammer was convicted of such offences here.

The court heard that in July 2014, Plate tricked Ms Mary Holladay Lamar, 50, a fellow American and singer-songwriter based in Britain, into believing that US$600,000 which she gave to him would be loaned to a company, Globomass Limited. She was promised repayment with interest of at least 30 per cent. Instead, Ms Lamar ended up on the brink of bankruptcy.

In an exclusive e-mail interview with The Straits Times, Ms Lamar said that she was first introduced to Plate by a long-time friend with whom she had not been in touch for four years.

She said the ordeal nearly destroyed her.

She told ST: “It destroyed my business, my relationship with my family. When (the scammers) weren’t sending the interest payments, my mother sold her only property and had only $20,000 left.”

On April 9, Plate admitted in court to one count each of abetting an alleged accomplice, who was named in court as Singapore permanent resident Sandrasegaran Vasimuthu, 56, to receive US$45,000 and to transfer US$10,000 from this amount to another man. Four other similar money laundering charges were taken into consideration during sentencing.

After making off with Ms Lamar’s money, Plate sent an e-mail on July 22, 2014 to someone named Andrew Philpott from a British firm, Captive Risk, saying that the money would be going into the company’s bank account.

Plate instructed Mr Philpott to “turn this around straight away”, providing him with details of three bank accounts for the transfer of funds.

One of them belonged to Mr Sandrasegaran’s Singapore-registered company, Aglobal Management. Captive Risk transferred US$45,000 to Aglobal’s bank account three days later.

Later on the same day, Plate e-mailed Mr Sandrasegaran, asking him to transfer US$10,000 to a Bank of America account belonging to one Todd Peterson.

DPP Chong Yonghui had earlier told the court: “The said e-mail also contained the bank account details of two other persons for the accomplice to transfer monies. In total, the accomplice was instructed to transfer monies to five bank accounts including that of the accused.”

Ms Lamar flew to Singapore on June 6, 2015 and made a police report. Plate was arrested when he arrived here on a social visit pass on Feb 23 last year.

On Monday, DPP Khoo urged District Judge John Ng to jail Plate for a year, stressing that he had made no restitution.

Plate’s lawyer, Mr Amogh Chakravarti, who was assigned under the Criminal Legal Aid Scheme, pleaded for his client to be given nine months’ jail, telling the court that his client was unable to make restitution “owing to his present financial situation.”

Ms Lamar told ST that she was ruined financially at an age when she should be retiring.

She said: “(Plate) is the man who stole Breathe. I wrote something beautiful. My music changed peoples’ lives, but he has stripped the feeling of that from me.”

Mr Sandrasegaran has yet to be charged.

U.S. Says Ex-Official at PDVSA Unit Pleads Guilty to Money Laundering

WASHINGTON (Reuters) – A former official of a subsidiary of Venezuela’s state oil company PDVSA [PDVSA.UL] pleaded guilty on Thursday to a U.S. charge of conspiracy to commit money laundering, the U.S. Justice Department said.

Cesar Rincon, a Venezuelan citizen who was extradited to the United States from Spain after his arrest there last year, pleaded guilty in federal court in Houston to one count of conspiracy to commit money laundering, the department said.

He was one of five former Venezuelan officials accused in February of soliciting bribes in exchange for helping vendors win favorable treatment from Petroleos de Venezuela SA.

Rincon, 50, a former general manager at PDVSA’s procurement unit Bariven, agreed to forfeit $7.03 million, and faces sentencing on July 9 in the U.S. District Court for the Southern District of Texas.

Others charged included Nervis Villalobos, a former Venezuelan vice minister of energy; Rafael Reiter, who worked as PDVSA’s head of security and loss prevention; and Luis Carlos de Leon, a former official at a state-run electric company.

Those three like Rincon were arrested in Spain in October at the request of U.S. authorities amid a foreign bribery investigation into the financially struggling PDVSA.

Also charged in the case is Alejandro Isturiz Chiesa, an assistant to Bariven’s president, who remains at large.

As part of his plea agreement, Rincon also admitted to soliciting and receiving bribes from other owners of U.S.-based energy companies in exchange for helping them win business with PDVSA.

De Leon was extradited from Spain on March 9, and was ordered to remain in custody, while Villalobos and Reiter remain in Spanish custody, the statement said.

All five were charged with money laundering, while De Leon and Villalobos were also charged with conspiring to violate the U.S. Foreign Corrupt Practices Act.

The case flowed out of a U.S. investigation into what prosecutors have previously called a $1 billion bribery plot involving payments to PDVSA officials that became public with the arrest of two businessmen in 2015.

In an indictment announced in February said that from 2011 to 2013, the five Venezuelans sought bribes and kickbacks from vendors in exchange for helping them secure PDVSA contracts and gain priority over other vendors for outstanding invoices during its liquidity crisis.

How new technologies can enhance anti-money laundering efforts and provide financial access

The current system for global funds transfers is based on old and outdated technology, employed primarily by a shrinking network of correspondent banks. Payments moving through the correspondent banking system are handled by multiple intermediaries, most of which are unaware of the identity of the others. The path a cross-border payment will take as it moves around the globe is usually unknown to any of the participants in advance.

As such, cross-border payments stands out as one of the areas where the biggest inroads can be made in combating launderers and terrorists. Advances in both private-sector financial technology (FinTech) and technology supporting public sector regulatory compliance (RegTech) offer tremendous promise for broadening and strengthening the global financial system.

By vastly reducing the cost of providing financial services, FinTech makes greatly expanded and sustainable financial inclusion a realistic goal. At the same time, greater automation, simplified operational processes, and more detailed and less costly analytics create the potential to enable enhanced transparency while maintaining or improving personal privacy and security of financial activity.

In “Enhancing anti-money laundering and financial access: Can new technology achieve both?” (PDF), Michael Barr, Karen Gifford, and Aaron Klein outline the current state of cross-border payments and the challenges it poses for financial access and effective anti-money laundering efforts. The authors then suggest a number of ways to update global financial standards to support innovation as a means to enhance financial inclusion, improve transparency, and financial deepening in support of economic growth.

  1. Require settlement for cross-border payments in a specified, short timeframe (same day or faster). A number of technologies currently enable same-day settlement domestically or regionally. Expanding the requirement for same day settlement to the cross-border context would represent a substantial advance for inclusion and anti-money laundering goals.
  2. Require pre-confirmation of the recipient account. This requirement was put into place in the United States in the Dodd-Frank Act and can and should be incorporated into global standards. Pre-confirmation would vastly reduce the opportunity for operational failures and fraud and would support other regulatory compliance measures such as pre-disclosure of transaction fees.
  3. Require interoperability of payment systems. Making payment systems interoperable between countries would greatly further the goal of lowering the cost and improving the speed of global payments, two essential pre-requisites for meaningful and sustainable financial inclusion efforts.
  4. Require portability of identity. Enabling individuals to own their identity details in digitized form offers the possibility of enhancing personal privacy and information security. Portable digital identity supports financial inclusion efforts by reducing or eliminating expensive and repetitive data collection efforts associated with customer on-boarding.

Now at a time when both established players and new entrants to the financial system are beginning to adopt new FinTech solutions, guidance that encourage greater transparency and inclusion can have a powerful opportunity to shape and speed up adoption processes. The authors conclude that failure to act poses significant dangers.

Read the full report here.

Citigroup Searches for Bitcoin Professionals to Deter Money Laundering

Citigroup is advertising positions for Bitcoin professionals in order to beef up their in-house anti-money laundering operations.

The New York financial services giant Citigroup has posted ads on LinkedIn searching to fill vice president and senior vice president positions that will explore the risks of criminal activity associated with cryptocurrency and other digital payment technologies. The job advertisements stress “knowledge of cryptocurrency and bitcoin monitoring.” Candidates with a Bitcoin Professional Certificate will move to the head of the line.

The position of senior vice president is described on LinkedIn as “support the Global Head of AML Monitoring Risk Management-Emerging Risk by identifying, analyzing, and implementing AML transaction monitoring risk programs related to developments in cybersecurity, cryptocurrency, and emerging payment technologies, products, and methods,”

Including the Bitcoin Professional Certificate is an unusual qualification for a position in such a venerable company. When LinkedIn was searched with the qualification as a keyword only the Citigroup ad was found.

A CPB is unlike similar-sounding qualifications like CPA or CFA as it can be had by paying $50 and taking a 75 question multiple choice test online. The CPB certificate is meant to show a level of proficiency in Bitcoin transactions not to indicate any mastery of the technology that powers the cryptocurrency.

Citi’s Hunt for Certified Crypto Professionals may Indicate a Change in Company Position

The LinkedIn advertisements may indicate a change of position for Citigroup who in the recent past have banned customers from making cryptocurrency purchases with their credit cards. Nor has the group joined other financial giants like Morgan Stanley and Goldman Sachs in clearing Bitcoin futures trades for clients.

Ryan Taylor, the chief executive officer of Dash Core, was quoted by Business Insider as saying;

“Citi is very seriously looking at risks surrounding the nascent market for digital currencies. They are either identifying risk to eliminate certain profiles, or this could be a prerequisite to identifying new opportunities in the space at a later point,”

Despite its apparent hostile position to cryptocurrency, Citigroup has been looking into distributed ledger technology for some years now and have developed their own blockchain in order to run a currency called Citicoin in an attempt at creating a platform similar to Bitcoin.

The financial group had also created an accelerator to fund promising fintech startups in Hong Kong called Citi Mobile Challange Asia- Pacific as far back as the summer of 2015.


Latvia overhauls banking amid money-laundering accusations

EUROZONE member Latvia is scrambling to reform its banking sector after US authorities accused its third-largest lender of large-scale money laundering with connections to North Korea’s nuclear weapons development programme.

Desperate to restore credibility, Riga is eliminating deposits in US dollars, cracking down on dealings with shell companies that may be used to facilitate money laundering, and limiting the number of non-resident depositors that banks can serve.

Latvia’s “boutique banking” sector has long sold itself to foreigners as a gateway to the European Union, with 11 of Latvia’s 23 registered commercial banks catering to non-residents. A lucrative sector, exports of financial services brought in 446 million euros (S$722 million) in 2016.

But its dream to become a regional financial hub turned into a nightmare after authorities shrugged off repeated calls by international organisations such as the IMF and OECD that it needed to tighten banking regulations to prevent it being used for money laundering by foreign clients, the vast majority of which hailed from Russia and other countries from the former Soviet Union.

The US allegations against ABLV Bank were a rude wake-up call that has stirred the nation’s authorities into curbing the practices which landed the bank in trouble and prompted its liquidation in February.

Shell companies are the first on the chopping block. Latvian bank depositors own more than 26,000 of them according to Peteris Putnins, head of Latvia’s Financial and Capital Markets Commission (FCMC).

Existing only on paper, shell companies may be used for legitimate business purposes as a vehicle for a transaction or to hold an asset. But they can also be used to launder money and obscure ownership.

Latvian lawmakers have adopted legislation, which is expected to be signed into law soon, that bans lenders from all dealings with companies that cannot prove they have real operations.

Latvia has also vowed to slash the number of non-resident accounts to 5 per cent of the total, down from 39 per cent in 2017. All the existing and future non-resident clients will also face greater scrutiny over the origin and legality of their money.

A spate of murky money-laundering scandals had already sent Latvia’s once thriving banking industry into decline, with thousands of foreign clients withdrawing deposits.

Total deposits in Latvian banks fell to 18.2 billion euros in April, according to the FCMC, down from a peak of 23 billion euros in 2015. AFP

Microsoft engineer charged with money laundering over Reveton ransomware

A Microsoft employee has been arrested on suspicion of infecting victims with the Reveton ransomware, and money laundering.

Forty-one year-old Raymond Uadiale, who worked as a network engineer for the software giant, faces a 20-year federal prison sentence for playing a key role in the global ransomware campaign, if found guilty.

Law enforcement officials explained that the UK citizen installed the ransomware onto victim’s computers, while Uadiale looked after the financial side. He would transfer payments to K!NG.

Reveton is one of the earliest strains of ransomware. When a cyber criminal installs it into someone’s computer, their screen is instantly locked and they cannot gain re-entry until they pay a ransom fee.

Trojan:W32/Reveton is a ransomware application. It fraudulently claims to be from a legitimate law enforcement authority and prevents users from accessing their infected machine, demanding that a ‘fine’ must be paid to restore normal access,” according to security firm F5 Labs.

“After the Trojan successfully infects a machine, it will prevent the user from accessing the desktop and will display a fraudulent message alleging that the system was locked by a local law enforcement authority.

“The specific authority mentioned varies depending on the affected user’s location, though most of the samples we have seen mainly mentioned various European authorities.”

In the past, most ransomware attacks have demanded payment in Bitcoin. However, in this particular attack, the hackers asked victims to purchase GreenDot MoneyPak vouchers – a form of bank pre-payment debit card.

The victims had to enter the voucher code into a screen locker, and from here, K!NG would transfer the money to a debit card obtained by Uadiale.

Throughout the campaign, Uadiale used the fake name of Mike Roland. After shifting the money into Liberty Reserve, a centralised digital currency based in Costa Rica, the attackers pocketed more than $130,000.

Uadiale used Liberty Reserve as a form of money laundering. However, Liberty Reserve was closed down by US authorities in May 2013 and its servers seized. The creator of Liberty Reserve was sentenced to 20 years in prison in May 2016.

If convicted of the charges, Uadiale could spend up to 20 years in prison and be ordered to pay a $500,000 fine. He is currently on bail., CEO plead guilty in California, Texas and Arizona

The chief executive of, a website investigators have described as an “online brothel,” pleaded guilty Thursday to California money-laundering charges, while the company itself pleaded guilty to human trafficking in Texas.

In addition to those pleas, federal prosecutors in Arizona announced Thursday and CEO Carl Ferrer had pleaded guilty to conspiracy charges on April 5.

Under the California plea agreement, Ferrer will cooperate in prosecuting’s creators and will serve no more than five years in state prison. He pleaded guilty to one count of conspiracy and three counts of money laundering in California.

In the Arizona plea, Ferrer acknowledged knowing that a great majority of’s ads were for sex services. He also admitted to conspiring with others at the company to launder the proceeds from such ads after credit card companies and banks refused to do business with the site.

Ferrer also agreed to make the company’s data available to law enforcement as investigations and prosecutions continue. The guilty pleas are the latest in a cascade of developments in the last week against the company founded by the former owners of the Village Voice in New York City, Michael Lacey, 69, and James Larkin, 68.

The company founders were among company officials indicted by a federal grand jury in Arizona, while Ferrer, 57, was noticeably absent from the indictment. The U.S. Justice Department also seized and shut down the website used to prominently advertise escorts and massages, among other services and some goods for sale. Authorities allege the site was often used to traffic underage victims, while company officials said they tried to scrub the website of such ads.

Attorneys for the company and the three men did not respond to multiple telephone and email messages from The Associated Press.

“Human trafficking is modern-day slavery, and it is happening in our own backyard,” California Attorney General Xavier Becerra said in a statement announcing the plea deal. “The shutdown of is a tremendous victory for the survivors and their families. And the conviction of CEO Ferrer is a game-changer in combating human trafficking in California, indeed worldwide.”

Larkin remains jailed in Arizona while he awaits a hearing Monday on whether he should be released after pleading not guilty to federal charges alleging he helped publish ads for sexual services. Magistrate Judge Bridget Bade said Thursday that attorneys have agreed on the terms of release, but other details must be ironed out.

Four employees and the site’s founders pleaded not guilty to the federal charges.

Lacey and Larkin also earlier pleaded not guilty to the California charges after Sacramento County Superior Court Judge Larry Brown last year allowed the state to continue with money laundering charges. Prosecutors allege Backpage’s operators illegally funneled nearly $45 million through multiple companies and created websites to get around banks that refused to process their transactions.

But Brown threw out pimping conspiracy and other state charges against Backpage’s operators. Brown ruled that the charges are barred by a federal law protecting free speech that grants immunity to websites posting content from others.

President Donald Trump this week signed a law making it easier to prosecute website operators in the future.

Paxon called Thursday’s pleas “a significant victory in the fight against human trafficking in Texas and around the world.”

Texas state agents raided the Dallas headquarters of Backpage and arrested Ferrer on a California warrant after he arrived at Houston’s Bush Intercontinental Airport on a flight from Amsterdam on Oct. 6, 2016. The Dutch-owned company is incorporated in Delaware, but its principal place of business is in Dallas.