Peer-to-Peer Crypto-Exchanges: A Haven for Money Laundering

By Tara Seals

Buyers and sellers can exchange cash in person, transfer bank funds online or can exchange funds for prepaid cards, gift cards or other cryptocurrencies.

The need to launder money is omnipresent in the criminal world, and lately, a new way of doing it has come to the fore: peer-to-peer cryptocurrency exchanges.

These exchanges offer one-to-one relationships and transactions; buyers and sellers of virtual currency sign-up with their location information, IP address and other data to verify their identity, link to their wallets, and from there can swap and cash out currencies with other people who decide to trust them. Parties sometimes take the relationship offline too, meeting face-to-face to close out deals. After striking a bargain, a buyer can exchange cash in person, transfer bank funds online or can exchange funds for prepaid cards, gift cards or other cryptocurrencies.

These platforms offer an alternative to the marketplace methods represented by big Bitcoin exchanges such as Coinbase, and many users feel they can get better deals and a better service experience by using them. There’s another difference though: Peer-to-peer exchanges are decentralized and often lack the accountability, security and transparency measures used by the larger players.

Coinbase for instance monitors for dark web activity and recently implemented the Know Your Customer identity verification service (not that it’s not in hot water in other ways), which in theory makes it harder for criminals to launder money or use the funds to buy items from the underground. So, peer-to-peer alternatives have started to be a go-to choice for criminals looking to take advantage of the anonymity of cryptocurrency.

“Although certain peer-to-peer cryptocurrency exchanges might willingly cooperate with law enforcement, there are readily available methods that threat actors utilize while laundering their illicitly gained funds to maintain anonymity,” said Flashpoint, which flagged the increasing criminal activity on the exchanges in a post Monday. Intelligence analyst Kathleen Weinberger told Threatpost that these include tried-and-true methods like using forged documents to sign-up for the services.

“A lot of what’s going on here is just a criminal rather than a technical story,” she said in an interview. “It’s easy to look for a technical solution to prevent this – there certainly is one (or rather a thousand of them). But there’s pressure on services to try and make their service usable – they don’t want their average user having to struggle for days to have their identity verified. At the same time, they have to make sure that this isn’t getting in the way of things being safe and accountable.”

Being a relatively new arena, that’s a work in progress. So for now, “it’s law enforcement having to crack down on those buying and selling identities and fake documents to combat this,” she said.

Law enforcement has seen some successes despite the hurdles that the exchanges present; for instance, OxyMonster, a notorious dark web purveyor of drugs and other illicit goods, was nabbed in May after detectives made a connection between a Facebook page and his dark web site on the Dream marketplace. Even though he was using a peer-to-peer Bitcoin “tip jar” for transactions, they managed to track him down by other means, arresting him as he entered the country from France, on his way to a beard contest in Miami.

Because of this Wild West element, Flashpoint analysts have observed a growing number of underground discussions around using these exchanges for criminal means, including recommendations around certain peer-to-peer services that threat actors consider valuable or the safest. Some discussions include listings of established—also known as “aged”—local exchange accounts for sale, which are less likely to be flagged for fraud because they have the appearance of long-term use.

“Discussions among threat actors in these forums primarily are concerned with recruiting others to cash-out schemes,” explained Flashpoint. “They also spell out the prerequisites for others to join and the terms necessary to convert stolen funds to Bitcoin or Monero, even in large amounts.”

Some discussions around peer-to-peer exchanges date back at least four years, but the interest is growing and likely to continue as larger exchanges stiffen their security controls.

“We’ve seen threat actors on a daily or weekly basis looking for ways to clean Bitcoin or Monero – it’s not a huge secret,” Flashpoint intelligence analyst Carles Lopez-Penalver said in an interview. “It’s somewhat easy to commit tax fraud and money laundering in general, or to purchase drugs with these methods, so the government needs to crack down. I appreciate blockchain technology – but I think that there has to be a better understanding of what’s happening out there, and that people doing very bad things with cryptocurrency.”

“Bitcoin Maven” Theresa Lynn Tetley Sentenced To 12 Months Jail For Money Laundering

By Yuri Besmanoff

Theresa Lynn Tetley, the so-called “Bitcoin Maven,” who admitted to running a Bitcoin-for-cash exchange business without a license, as well as laundering Bitcoin purchased from the proceeds of drug trafficking, was last week sentenced to 12 months and one day in federal prison and also fined $20,000.

The Downfall Of The Bitcoin Maven

She reveled in being known as the “Bitcoin Maven,” a moniker she gave herself because of her deep knowledge of cryptocurrency. That knowledge enabled her to make a substantial amount of money in a shorts space of time.

However, this week, Theresa Lynn Tetley, aged 50, of Southern California, who in a former, less complicated life had been a stockbroker and real estate investor, pleaded guilty to one count of money laundering and one count of operating a money transmitting business without a license, and was sentenced to 12 months in prison by US District Judge Manuel L. Real.

The official charge was conducting an illegal business and engaging in unlawful monetary transactions involving Bitcoins. Tetley was also ordered to forfeit some 40 Bitcoin, worth around $250,000, to forfeit $292,264.00 in cash, as well as 25 assorted gold bars (worth around $12,500) that were deemed to be the proceeds of her illegal activities.

Between $6-$9.5 Million In Illegal Transactions

The court heard how Tetley ran a Bitcoin-for-cash exchange platform without first registering with the Financial Crimes Enforcement Network (FinCEN). She had also failed to implement anti-money-laundering mechanisms such as customer due diligence, and had failed to report certain transactions required for these types of businesses.

Tetley advertised on the website LocalBitcoins.com, and took part in illegal transactions that totaled between $6-$9.5 million. Her customers were almost all from the United States. Ironically, clients that used her exchange received no special favors, as Tetley actually charged higher rates for Bitcoin transactions than legal exchange platforms do.

Laundered Drug Money Earned On The Dark Web

The most serious offence – at least in the eyes of the public – was that Tetley knowingly laundered funds from an individual suspected of receiving Bitcoin as payment for selling drugs on the “Dark Web.” During the investigation, an undercover agent representing himself as a drug trafficker successfully swapped Bitcoin for cash using Tetley’s exchange platform.

According to sentencing documents, the prosecution had successfully argued that:

“In light of the growth of the dark web and the use of digital currency, unlicensed exchangers provide an avenue of laundering for those who use digital currency for illicit purposes. Tetley’s business fueled a black-market financial system that purposely and deliberately existed outside of the regulated bank industry.”

The case against Tetley was the first of its kind in the annals of the Central District of California.

Tether Hires Anti-Money Laundering Specialist as Chief Compliance Officer Read more: https://cryptovest.com/news/tether-hires-anti-money-laundering-specialist-as-chief-compliance-officer/

By Peter Genoff

Tether Ltd. recruited former anti-money launder quality control manager Leonardo Real as Chief Compliance Officer (CCO). Real, whose previous position was at Bank of Montreal, will be responsible for managing regulatory compliance issues within the organization. The company behind the USDT cryptocurrency announced its new appointment in a press release this Thursday.

“We are all very excited to introduce Leonardo as Chief Compliance Officer at Tether, as he joins us on what has already been a remarkable journey to date disrupting the legacy financial system,” said Jean-Louis van der Velde, CEO of Tether Ltd., in the announcement.

Tether (USDT) is one of the few alt-coins claiming to be backed by fiat money. The company behind the currency claims that they hold $1 in for every USDT in circulation. However, this claim has been challenged by other crypto experts, including cybersecurity expert Tony Arcieri, who published a detailed report in January.

Much of the controversy surrounding the cryptocurrency revolves around its association with the crypto exchange Kraken, and claims that Tether was used to manipulate Bitcoin’s prices to create the Bitcoin spike in December of 2017.

Tether’s new appointment comes after the company has repeatedly denied such claims in the past half year. Leonardo Real’s previous experience includes positions within the finance and funds compliance industries. According to the press release, at Bank of Montreal, Real was in charge of establishing policies and procedures “in line with regulatory requirements”. More importantly, he was also responsible for the quality control of anti-money laundering investigations.

“Joining Tether as CCO is an incredibly exciting move for me personally, and I am particularly impressed by the motivation, dedication, and talent of the Tether team. I look forward to helping showcase Tether’s commitment to transparency and regulatory compliance within the blockchain and cryptocurrency space,” said Tether’s new Chief Compliance Officer.

 

‘Bitcoin Maven’ Jailed for Multi-Million Dollar Bitcoin-for-Cash Money Laundering Operation

By AJ Dellinger

Bitcoin has lost most of its (likely inflated) value in the last few months, but it still has plenty of value for law enforcement agencies looking for financial crimes to punish. The latest cryptocurrency criminal to get the book thrown at them is “Bitcoin Maven,” a 50-year-old woman who ran a bitcoin-for-cash exchange operation.

The Department of Justice announced Theresa Lynn Tetley, a former stockbroker and real estate investor, was sentenced to 12 months and one day in federal prison this week for operating an unlicensed money transmitting business and money laundering. She was also ordered to forfeit 40 Bitcoin (valued at about $250,000), $292,264 in cash, and 25 gold bars acquired through her illegal business.

Tetley’s scheme, highlighted by Ars Technica, involved offering people Bitcoin in exchange for cash, which on its face probably doesn’t sound like much of a crime. But Tetley did everything off the books. She failed to register her operation as a money services business and didn’t offer any sort of “anti-money-laundering mechanisms,” per the Justice Department.

Most of Tetley’s transactions were completed in person, with cash being provided for the virtual currency. She advertised her service through localbitcoins.com, a site that facilitates such exchanges, where she posted under the name “Bitcoin Maven.” She lived up to it, too; According to the DOJ, she exchanged $6 and $9.5 million over the course of several years.

Her undoing came when she began unwittingly started doing business with an undercover agent from the Drug Enforcement Administration. The agency started closing in on her in 2016, and dragged her along for nearly a year as they built a case against her.

The plan to bring Tetley down included introducing a second agent, posing as the first agent’s boyfriend, to conduct a number of large transactions with the Bitcoin Maven. According to Ars Technica, at one point the fake boyfriend informed Tetley that he possessed a large supply of “coke, meth, and weed” that had been “stolen” and was selling that stash for the bitcoin he was trading with her. Tetley moved forward with the transactions anyway, at one point showing up with $300,000 in two Trader Joe’s grocery bags to make a trade with the undercover agent.

“Providing cash in envelopes (and in the significant amounts she did), in coffee shops and restaurants, is no way to conduct legitimate business, certainly when that volume exceeds the millions,” prosecutors wrote in a sentencing memorandumper Ars Technica. “Someone such as defendant—a former stockbroker and real estate investor—was certainly aware of that.”

Not helping her case was the fact that Tetley was also doing business with William James Farber, a man believed to be at the head of one of the largest drug rings on the now-shuttered dark web marketplace Alphabay. Ars Technica noted Farber was arrested last year and charged with conspiracy to possess and distribute controlled substances.

For her run as the Bitcoin Maven, Tetley will spend 366 days behind bars in a federal prison. Her stash of bitcoin collected from the business, which now belongs to the government, is worth about $250,000 as of Wednesday evening—but it’ll likely be worth $400,000, then $75,000, then $250,000 again by the end of the week.

‘Bitcoin Maven’ sentenced to a year in prison for money laundering

By James Koren

Bitcoin and other cryptocurrencies have for years been a preferred payment method on the so-called dark web — anything-goes corners of the internet where you can find drugs and other illegal products and services.

But once a drug dealer accepts crytocurrency, how do they turn that money into real currency? The case of Theresa Tetley is instructive.

The Marina del Rey woman exchanged millions of dollars in cash for bitcoin, including for a suspected online drug dealer. She was sentenced Monday to a year in federal prison after pleading guilty to money laundering.

Tetley, a former stockbroker turned bitcoin enthusiast who called herself “Bitcoin Maven,” will also pay a $20,000 fine and give up nearly $300,000 in cash, 25 gold bars and 40 bitcoin — worth about $270,000 as of Monday afternoon — that federal authorities seized last year.

From 2014 to last year, Tetley exchanged as much as $9.5 million in cash for bitcoin, meeting clients at restaurants, coffee shops and other public places to hand over envelopes of cash in exchange for the virtual currency, the Justice Department said in court filings.

She was arrested in March 2017 after a sting operation orchestrated by the U.S. Drug Enforcement Administration. She offered to exchange $300,000 in cash — carried in two Trader Joe’s paper grocery bags — for bitcoin held by an undercover DEA agent posing as a drug dealer, prosecutors said.

The Justice Department also alleged that Tetley made $6 million worth of bitcoin-for-cash exchanges with William James Farber, a Los Angeles man charged last summer with running an Altadena drug ring that sold cannabis on dark-web marketplaces Silk Road and AlphaBay.

Tetley was charged with money laundering and operating an unlicensed money-transmitting business and pleaded guilty to both charges in January.

It’s not illegal to exchange bitcoin or other digital currencies for cash, but Tetley did so without obeying federal rules that require banks and other financial firms to report suspicious activity and large cash transactions — measures that aim to curb money laundering by drug traffickers or other illegal businesses.

Bitcoin and other virtual currencies, which are not issued by governments and can be directly exchanged from person to person without going through banks or other regulated institutions, are a preferred payment method for dark-web transactions.

But those who accept virtual currency payments for illicit transactions may have a difficult time exchanging those holdings for real currency — unless they find someone like Tetley who would not report suspicious activity to federal regulators.

Brian Klein, one of Tetley’s attorneys, called the 12-month sentence a victory, noting that it is substantially shorter than the 30-month sentence sought by federal prosecutors. In a sentencing document submitted to the court, her attorneys argued that Tetley, though guilty, “did not set out to engage in a broad-ranging criminal enterprise.”

“We are pleased the judge made such a dramatic departure,” Klein said.

The U.S. attorney’s office argued in court filings that Tetley should have received a longer sentence because her conduct showed she knew or should have known some of her clients were engaging in illegal activity.

“Providing cash in envelopes (and in the significant amounts she did), in coffee shops and restaurants, is no way to conduct legitimate business, certainly when that volume exceeds the millions,” government attorneys said in court filings. “Her decision to continue to proceed in this manner highlights the seriousness of the offense.”

Crypto Thefts Triple, Driving Growth in Coin Money-Laundering

By Olga Kharif

Criminals are stealing more cryptocurrency from exchanges, and that’s driving growth in a cottage industry of services that allows for money laundering of coins, according to a new report.

In the first half of the year, more than $760 million in cryptocurrency was stolen from exchanges — nearly three times more than in all of 2017, CipherTrace said in its initial quarterly report on the subject. CipherTrace is a Menlo Park, California-based blockchain security firm that works with more than 40 companies and governments to trace crypto transactions.

The current market value of the top 100 cryptocurrencies is around $270 billion, according to CoinMarketCap.com. Services that clean dirty funds are widely available, CipherTrace said, and some have even advertised through Google AdWords.

“There are so many cryptocurrencies now, and they are worth so much money, and there are so many exchanges globally where you can cash out, that we’ve seen not just traditional cyber gangs but we’ve seen a new set of criminals enter this space,” Chief Executive Officer David Jevans said in a phone interview. “This overall market expansion has created a whole new generation of cyber criminals that didn’t exist 15 months ago.”

Crypto coins number more than 1,600, and tracking them all is increasingly difficult — which gives criminals an opening. Regulators have said that many exchanges and startups issuing new coins still don’t do enough to check customer identities and verify that users aren’t laundering stolen funds. Users buying and selling coins are typically represented by anonymous addresses.

Meanwhile, many exchanges — and new ones are opening all the time — have security vulnerabilities. And cryptocurrencies, once stolen, often can’t be returned or even traced to the thieves.

“It’s a lot easier than robbing banks,” Jevans said.

Regulators globally are likely to crack down on crypto money-laundering, Jevans said. While that’s probably good for investors, some coins could suffer.

“There are going to be small coins kicked off exchanges because it’s going to be difficult to track transactions,” he said.

The DOJ Ran a Bitcoin Laundering Sting and Caught Dozens of Drug Dealers

By Aaron Mak

The Department of Justice announced Tuesday that it had arrested more than 35 people and seized more than $23.6 million in assets in the “first nationwide undercover action to target vendors of illicit goods on the Darknet.” Over the course of a year, Homeland Security Investigations (HSI) agents posed as money launderers who were helping narcotics and weapons dealers convert cryptocurrency into U.S. dollars. A cache of around 2,000 Bitcoins, which are worth more than $20 million, make up the bulk of the seized assets. Agents also seized Bitcoin mining equipment, 333 bottles of liquid synthetic opioids, and a grenade launcher.

“At this crucial time of unprecedented drug related deaths, one of the greatest threats we face is cyber drug trafficking,” a Drug Enforcement Administration official said in a statement. “Because the Darknet invites criminals into our homes, and provides unlimited access to illegal commerce, law enforcement is taking steps to identify and arrest those involved.”

Bitcoin is often the currency of choice on the darknet, also known as the dark web, because it allows buyers and dealers of illicit goods to more easily retain their anonymity. Authorities claim that they identified dealers in popular marketplaces like Silk Road, AlphaBay, and Hansa. HSI Agent Angel Melendez told the Verge the agency is starting to focus more on individual sellers rather than marketplaces, because the illegal activity simply moves elsewhere when a hub is shut down.

In the past, authorities have also posed as weapons dealers, harvested IP addresses, and hacked suspects’ computers to track down alleged criminals on the dark web. Bitcoin exchanges themselves have also been pressured by law enforcement to keep better tabs on their customers to ensure that their platforms aren’t hosting money laundering and other crimes.

Major Crypto Exchanges Face Action Over Money-Laundering Fears

By Wolfie Zhao

Japan’s financial watchdog is reportedly planning to force improvements at a number of licensed cryptocurrency exchanges over perceived issues with internal systems, including anti-money laundering (AML) measures.

According to a report from Nikkei on Tuesday, the country’s Financial Service Agency (FSA) intends to ensure full compliance with current AML rules at larger exchanges as their holdings of customer funds rapidly increases. The report suggests at least five exchanges, including bitFlyer, Quoine, and Bitbank, are on the FSA’s list to receive “business improvement orders” this week.

The report said that, based on its recent inspections, the FSA found that some licensed exchanges still do not have sufficient measures in place for spotting suspicious transactions. Further, the agency is also concerned that the firms have not recruited enough staff to cope with the growing volume of transactions on their platforms.

Back in April, the FSA was already raising questions over what it considered a loosely enforced ID-verification process at bitFlyer, after which the firm pledged it would strengthen its procedures.

The agency also issued business improvement orders in March to a number of registered but lesser known cryptocurrency exchanges – including GMO Coin and Tech Bureau – as part of its review of crypto trading platforms following the $530 million Coincheck hack in January.

And, earlier this month, the FSA gave its first-ever license rejection to cryptocurrency exchange FSHO after having issued two suspension orders to the firm over its alleged failure to properly implement security and AML improvements.

The latest move by the FSA comes just days after a Japanese self-regulatory group of cryptocurrency exchanges proposed to strengthen their AML measures by prohibiting member platforms from listing anonymous cryptocurrencies such as monero and dash.

Formed in the aftermath of the Coincheck hack, the Japanese Virtual Currency Exchange Association consists of major exchanges such as bitFlyer, Bitbank and Quoine.

https://www.coindesk.com/major-crypto-exchanges-face-action-over-money-laundering-fears/

Crypto a threat to central bank driven monetary policy says IMF

By Kieran Smith

Decades before Bitcoin, the arrival of the internet prompted speculation that the relentless march of information technology would eventually put central banks in the same category as typewriters and cassettes—obsolete inventions that people once thought would last forever. The rise of cryptocurrency has rekindled this debate, and it is now being explored by one of the most powerful forces of the world economy—the International Monetary Fund.

In a blog post titled “Monetary Policy in the Digital Age”, fund director Dong He asserts that cryptocurrency has the potential to topple the monopoly of central banks, and that to stay relevant, banks must adapt to the demands of an evolving economy.

Toppling the monopoly

In a world of decentralised currency, the role of a centralised monetary policy is uncertain, and the blog suggests that in order to compete, banks must “strive to make fiat currencies better and more stable units of account”, noting that “effective monetary policy”, with an openness to fresh ideas, offers the best route towards economic stability.

This alone, however, will not be enough to guard against the dangers presented by cryptocurrency, and the post proposes rigorous regulation to prevent any “unfair competitive advantage” that might be offered by crypto-assets, along with reducing the possibility of them being used for “money laundering and the financing of terrorism.”

Finally, to adapt to the new era of digital finance, central banks should consider issuing tokens of their own—Central Bank Digital Currencies—which could also be exchanged peer-to-peer.

The post also explores what could happen if banks fail to adapt to widespread adoption of cryptocurrency. In this case, another potential scenario is put forward—one in which the demand for cryptocurrency over bank-issued currency undermines the authority of central banks’ monetary policies: “Central banks typically conduct monetary policy by setting short-term interest rates in the interbank market for reserves (or clearing balances they keep with the central bank). According to King (1999), ceasing to be the monopoly supplier of such reserves would indeed deprive central banks of their ability to carry out monetary policy.”

Aside from ideas of decentralisation, the post suggests that the cryptocurrency movement might in fact represent a deeper historical pattern in the evolution of finance—the decline of credit money, in favour of commodity money.

As he writes, “monetary systems seem to have alternated between commodity and credit money throughout history”, and crypto assets could be the impetus for another historic reversal.

 A new SEC advisor

While pragmatic, the IMF report is unflinching in its call for regulation to address the risk and volatility that cryptos pose, suggesting that with better issuance rules— even “smart rules” based on artificial intelligence, their valuation could become more stable. Timely then, that a new advisor for digital asset regulation has recently been appointed by the SEC. Valerie Szczepanik is filling an entirely new position that will oversee the application of US securities law to cryptocurrencies and digital assets.

This appointment may be a sign that financial regulators are beginning to warm to cryptocurrency. Ms. Szczepanik, who moved from the Division of Enforcement’s Cyber Unit, has previously indicated a balanced approach to regulation. At a conference on Financial Fraud earlier this year, she spoke of the need for the SEC to strike a balance between protecting investors and facilitating the emerging technology, stating “We do not want to chill the markets…the promise of blockchain technology is not one that we want to ignore.”

Her efforts, like the recent fake ICO scam website “Howeycoins,” are likely to be focused on protecting investors without smothering innovation. Some commentators, however, are suggesting otherwise. Certain figures in the crypto community have taken a more adversarial position on recent events, and powerful influencer John McAfee has issued a declaration of currency independence, warning of an impending currency war against the “powerful forces trying to derail the progress of the cryptocurrency revolution.”

Transaction Laundering – Money Laundering Goes Electronic in the 21st Century

By Ron Teicher

The age-old art of hiding money from governments truly took flight in the online era. The good news for us (and bad news for cyber criminals) is that regulators are starting to use technology to catch up.

In October 1931, American gangster Al Capone was convicted of tax evasion of approximately $1 million and sentenced to 11 years in prison. Federal Anti-Money Laundering (AML) laws didn’t exist yet, but prosecutors were able to prove that Capone was illegally hiding his bootlegging profits to avoid paying federal taxes. To this day, it remains the most famous case of financial crime in American history, as it put an end to his Chicago-based crime operations.

The FBI’s success in using financial law against Capone forced criminals to devise a more sophisticated method to disguise profits from their illicit practices. Succeeding gangsters learned from Capone’s demise, and realized the importance of establishing businesses as “fronts” for their underground, illegal activity. Casinos were probably the most obvious examples of fronts, where large volumes of money could flow in and out.

The legal struggle against money laundering began, in earnest, some 50 years ago with the Bank Secrecy Act of 1970. This law required financial institutions to record large cash transactions, and report suspicious fiscal activity to the government. Various legislation over the following decades mitigated criminal activity, and made it much more difficult for criminals to hide illicit funds.

But then, came the age of the Internet and online commerce, where hiding behind a computer screen was able to give you a degree of anonymity.

And with this, a new category of online crime began exploiting the industry of digital payments in order to facilitate money laundering. Regulators, who previously devoted massive resources to building complex, mostly manual, AML processes – now simply can’t keep up in this digital age.

Transaction Laundering – The New Face of Money Laundering

Electronic money laundering, also known as Transaction Laundering, is the most common, but least enforced , method of money laundering. The principle is simple: an unknown online business uses an approved merchant’s payment credentials to process credit card transactions for unknown products and services.

For example, a cyber criminal can set up a website in a matter of minutes, accepting payment via card, and disguise their income from illegal activities by rerouting payments through a legitimate merchant account, like an online book shop.

In addition to regulatory offenses, Transaction Laundering infringes upon credit card brand policies, putting merchants and acquirers in violation of KYC requirements  and violates numerous federal regulations.  This leads to potential fines, legal action and brand damage.

Transaction Laundering is happening, right now,  directly under the noses of regulators through the exploitation of online anonymity. The threat of this criminal activity grows as the volume of Internet commerce grows. How big is Transaction Laundering, really?

Our research has shown that Transaction Laundering for the online sales of products and services reaches over an estimated $200 billion a year in the US alone. Of this, $6 billion involves illicit goods.

Not Just Drugs, Guns, and Trafficking: Transaction Laundering Also Finances Global Terror

Just like in the days of Al Capone and the early advent of money laundering, Transaction Laundering is linked to illegal activity.  Perhaps an even worse reality, in our current times, it is now proven to be the source of financing for numerous terror attacks – including the violent attack on the offices of French satire magazine Charlie Hebdo.

Moreover, the FBI recently revealed that ISIS was using Transaction Laundering to finance a US domestic terror agenda via eBay and PayPal. As reported in The Wall Street Journal, the FBI announced that an American-born ISIS operative and US citizen was arrested after he received nearly $10,000 via PayPal for fraudulent sales of fake computer printers via eBay.

Transaction Laundering is not just a domestic U.S. threat. The Daily Beast recently reported that Russian criminals are using Airbnb to launder illicit funds from stolen credit cards. Unlike other Transaction Laundering instances, the Airbnb scheme also involves fraudulent, complicit hosts instead of merchants – exploiting Airbnb’s online marketplace to conduct illegal activity.  The scam is simple: fraudsters use stolen credits cards to launder the dirty money through complicit Airbnb hosts they meet in underground, online forums. Once the Airbnb booking transaction is processed, no one actually stays at the advertised accommodation; instead the two parties split the payment and create fake end-of-stay reviews to close the transactional loop.

The Good News: Regulators are Finally Catching Up

The good news for 21st century is that AML regulations are starting to sync with the digital world. There are an estimated 40 million e-commerce websites worldwide, making manual monitoring and long onboarding  processes inefficient and overall impossible. As new Regulatory Technology, or “RegTech” players, enter the scene, AML regulators are able to take advantage of emerging technologies like AI and machine-learning solutions to more effectively fight digital money laundering. This is a game changer for regulators who have long been statutorily powerful, yet unable to exert the full measure of their power against digital money launderers.

Newfound regulatory confidence and advanced RegTech are making the detection and prevention of Transaction Laundering a shared responsibility among law enforcement agencies, e-commerce players, MSPS, fintech providers and individual users. With the right digital tools in place, electronic money laundering can be detected, and ultimately intercepted. After so many years of hiding their illegal practices behind the screen, e-money launderers have good reason to be worried. Much like Al Capone’s, their elaborate schemes and operations could soon come to an end.

https://www.finextra.com/blogposting/15423/transaction-laundering—money-laundering-goes-electronic-in-the-21st-century