Latvian Bank Faces U.S. Ban Over Money-Laundering Concerns

The U.S. Treasury Department took the severe step Tuesday of proposing to ban Latvia’s third-biggest bank from the American financial system, saying it helped process illicit transactions, including for entities with alleged ties to North Korea’s ballistic missile program.

Financial institutions in the U.S. would be barred from maintaining correspondent accounts for ABLV Bank AS, effectively ending its ability to transact in U.S. dollars, according to the Treasury Department’s Financial Crimes Enforcement Network, known as FinCEN. ABLV had allowed transactions on behalf of blacklisted entities tied to North Korea’s effort to develop nuclear weapons, as well as corruption in Russia and the Ukraine, the department said.
“ABLV has institutionalized money laundering as a pillar of the bank’s business practices,” Sigal Mandelker, the Treasury Department’s undersecretary for terrorism and financial intelligence, said in a speech Tuesday to compliance executives at a conference in New York. “We are resolved to use our economic authorities to take action against foreign banks that disregard anti-money-laundering safeguards and become conduits for widespread illicit activity.”
The U.S. Treasury relied on “unfounded and misleading information” in reaching its findings and didn’t take into account advances ABLV has made to prevent money laundering and terrorism financing, the bank said in a statement posted on its website.
The bank “shall make every care to rebut this outrageous defamatory information,” it said.

ABLV has 60 days to submit written objections to the finding. U.S. Treasury Secretary Steven Mnuchin has the final say on the imposition of the ban.

Latvia’s bank regulator said it’s cooperating with the European Central Bank, which directly supervises ABLV, and called on the bank to actively communicate with its clients.

ABLV is the 18th financial institution to be designated as a primary money-laundering concern by the Treasury Department since a law giving it authority to do so was passed in 2001. The most recent designation before ABLV was China’s Bank of Dandong in July. It was named for allegedly providing a gateway for North Korea to access the U.S. and international financial systems.

The U.S. made broad-based allegations about ABLV’s lack of anti-money-laundering controls and highlighted its recent transactions on behalf of entities related to North Korea. “ABLV facilitated transactions related to North Korea after the bank’s summer 2017 announcement of a North Korea ‘No Tolerance’ policy,” FinCEN wrote in a notice of proposed rulemaking.

Global Bank Pullback

As global banks have cut international services amid tighter regulations, steeper fines and declining profitability, Latvian banks as a group have seen access to the U.S. dollar tighten. JPMorgan Chase and Co. ceased offering dollar-clearing services in 2013 and Deutsche Bank stopped dealing with Latvian lenders last year. As a result, banks like ABLV have had to rely on other institutions that have accounts with New York-based lenders to transfer U.S. dollars.

Latvia’s banking regulator has also imposed tighter rules, record fines and annual checks for those working with foreign clients as part of an effort to shake off a reputation that the country’s institutions hold wealth with questionable origins.

The tighter dollar-clearing services have coincided with a series of money-laundering allegations. The Latvian regulator fined three banks a total of 5.5 million euros ($6.8 million) for handling accounts that were involved in a $1 billion Moldovan fraud in 2014, equivalent to about an eighth of that nation’s economic output at the time.

Five Latvian banks agreed last year to fines totaling 3.5 million euros for failing to perform adequate due diligence and gather sufficient information on transactions and beneficiaries of deals linked to North Korea.

ABLV, like the rest of the bank sector that primarily serves foreigners, has lost deposits due to the stricter enforcement regime.

The Latvian lender opened a subsidiary in Luxembourg in 2012, and ABLV Advisory Services opened an office in the U.S. in 2016. It also has representative offices in Moscow, St. Petersburg, Russia; Kiev, Ukraine; Odessa, Ukraine; central Asia, and Hong Kong.

Bitcoin money laundering report ignores gambling’s history

A new report claims online gambling sites are prime conduits for laundering ill-gotten Bitcoin cryptocurrency proceeds, but its authors either chose to ignore or remain ignorant of gambling’s role in Bitcoin’s rise.

Last week saw the release of a report titled Bitcoin Laundering: An Analysis of Illicit Flows into Digital Currency Services. The report was issued by the Center on Sanctions and Illicit Finance (CSIF), an offshoot of the Foundation for Defense of Democracies (FDD), a Washington-based neoconservative think-tank.

The CSIF enlisted the help of cryptocurrency analytics provider Elliptic to study “illicit inflows” of Bitcoin to “conversion services,” basically any mechanism that allows users to convert Bitcoin into fiat currency.

The study examined the movement of Bitcoin derived from “clearly identified illicit activity,” which the study primarily defines as any Bitcoin moving off ‘darknet’ marketplaces, including the now-defunct Silk Road, as well as Bitcoin derived via fraud activity, ransomware and Ponzi schemes.

Before we go any further, it’s worth quoting the report’s finding that “the total percentage of identified ‘dirty bitcoins’ going into conversion services was relatively small. Only 0.61 percent of the money entering conversion services during the four years analyzed were verifiably from illicit sources.”

The study, which covered Bitcoin transactions during the years 2013 to 2016, also noted that there’d been “an across the board decline in the proportion of illicit transactions” during 2016.

The authors speculated that this decline is likely due to Bitcoin’s increasing popularity as a speculative investment, plus better anti-money-laundering compliance by conversion services. For example, illicit entities accounted for 3.6% of gambling sites’ incoming transaction volume in 2015, but this fell to just 0.57% in 2016.

Bitcoin exchanges accounted for 45.4% of laundered Bitcoins, while gambling sites ranked second with 25.8% and ‘mixers’ – anonymous online software services that swap bitcoins with different transaction histories – placed third with 23.4%.

The study refers to mixers and gambling sites as processing “far and away the highest proportion of dirty bitcoins,” while justifying the significantly higher percentage of illicit transactions at cryptocurrency exchanges due to their handling “much higher volumes” of overall crypto transactions.

The study’s authors fail to take into account that the online gambling sector was largely responsible for Bitcoin’s early development. As early adopters, gambling sites handled a disproportionately large volume of Bitcoin transactions in the years covered in the CSIF study, and thus would be similarly overrepresented in illicit transaction volume.

Moreover, the study notes that “97% of all illicit volume” via gambling and mixers “is being laundered through just three mixing or gambling services.” These same three services “account for almost half of all Bitcoin laundering.” European conversion services were particularly prone to handling illicit transactions.

So, a few bad apples, whose illicit transaction volume is on the wane, are used to discredit an entire industry, without whose early faith in cryptocurrency technology the Bitcoin revolution may not have succeeded.

The study’s authors also appear intent on creating a pejorative impression of a symbiotic association between gambling and darknet sites. The latter’s association with hard drug sales and murder-for-hire schemes couldn’t be further removed from gambling, a legal and popular form of entertainment enjoyed across the globe. Any attempt to create such an association in readers’ minds suggests an alternative agenda.

It’s worth noting that the FDD’s major donor list includes Las Vegas Sands supremo Sheldon Adelson, whose antipathy towards online gambling is no secret. Adelson has funded plenty of online gambling misinformation in the past and vowed to spend whatever it takes to ensure its demise. Caveat lector,

Treasury Eyes Cryptocurrencies For Money Laundering

The U.S. Treasury’s financial crime unit is picking up enforcement of cryptocurrency platformsthat don’t have strong internal mechanisms in place to prevent money laundering, according to a report in Reuters.

Sigal Mandelker, the U.S. Treasury Department’s undersecretary for terrorism and financial intelligence, told the Senate Banking Committee that the unit will go after virtual currency platforms – even those located outside of the U.S. – if they don’t have the proper safeguards in place. The cryptocurrency platforms in the U.S. must comply with the anti-money launderingrules on the books, including the requirement to file reports about suspicious activity. The report noted that roughly 100 platforms have registered with the Financial Crimes Enforcement Network.

“The real vulnerability that we all have to address is that while we have regulatory authorities in place here in the United States and we do enforce those … we need other countries to do the same,” Mandelker said. He noted that the U.S. government will also urge other countries to implement more regulation of cryptocurrencies.

In the summer, the Treasury went after the BTC-e bitcoin exchange, the Russian cryptocurrency platform, and fined it $100 million for allegedly participating in illicit practices that included computer hacking, ransomware and drug trafficking.

The U.S. isn’t the only country looking to crack down on the cryptocurrency market. Bitcoindropped 14 percent on Tuesday (Jan. 16), hitting its lowest point in a month and trading at below $12,000 a unit, as concerns emerge that a regulatory crackdown is imminent in several nations worldwide.

South Korea, which has been a bit back-and-forth on the issue, announced last week (via the Justice Ministry) that it would be banning bitcoin exchanges before announcing (via the Blue House) that it actually would not be banning bitcoin after all. The uncertainty continued this week, when South Korea further “clarified” that the nation is not banning bitcoin now, but could ban cryptocurrency trading in the future.

EU agrees clampdown on bitcoin platforms to tackle money laundering

European Union states and legislators agreed on Friday (15 December) on stricter rules to prevent money laundering and terrorism financing on exchange platforms for bitcoin and other virtual currencies, the EU said in a statement.

The agreement is part of a broader set of measures to tackle financial crimes and tax evasion. EU legislators also backed stricter controls on pre-paid cards and raised transparency requirements for the owners of trusts and companies.

The dismantling of online drug platforms last summer has highlighted the primary role of e-commerce for Europe’s drug trade. EURACTIV France reports.

“Today’s agreement will bring more transparency to improve the prevention of money laundering and to cut off terrorist financing,” Europe’s Justice Commissioner Věra Jourová said.

The EU decision comes as bitcoin’s prices have risen more than 1,700% since the start of the year, triggering worries that the market is a bubble that could burst in spectacular fashion.

The agreed measures will end anonymous transactions on virtual currency platforms and with pre-paid payment cards, which investigators said could have been used to fund attacks by militants.

Bitcoin exchange platforms and “wallet” providers that hold the cyber currency for clients will be required to identify their users, under the new rules which now must be formally adopted by EU states and European legislators and then turned into national laws within 18 months.

It took EU legislators more than a year of negotiations to agree on the legislative proposals, put forward by the European Commission in the wake of shooting and bombing attacks in Paris and Brussels in 2015 and 2016 which killed more than 160 people.

The talks dragged on because some EU states opposed increased transparency on trusts and companies, fearing a negative impact on their economies.

The EU lawmaker in charge of the issue, Dutch Green Judith Sargentini, said Britain, Malta, Cyprus, Luxembourg and Ireland were among those opposing the changes. The deal allows the authorities and “persons who can demonstrate a legitimate interest” to access data on the beneficial owners of trusts.

Trusts are legitimate financial vehicles to manage assets but have sometimes been accused of hiding illegal activities because of their lack of transparency.

Transparency International, a rights group, called the deal “a breakthrough” but lamented the fact that data on trusts’ owners will not be completely public, as it will be for beneficial owners of companies. The increased public scrutiny is considered essential by the EU commission and also by rights groups, to prevent financial crimes and tax evasion.

Long Island woman laundered money to ISIS through Bitcoin, prosecutors say

By: Nicole Darrah

A Long Island woman was indicted Thursday after she allegedly laundered more than $85,000 through Bitcoin and other cryptocurrencies overseas to the Islamic State.

Zoobia Shahnaz, 27, of Brentwood, was charged in federal court with bank fraud, conspiracy to commit money laundering and three counts of money laundering, according to the U.S. Attorney’s Office.

Shahnaz, between the months of June and July, allegedly used 16 credit cards that were fraudulently obtained to purchase nearly $63,000 in Bitcoin and other cryptocurrencies. She was also allegedly able to obtain a loan from a Manhattan bank for approximately $22,500 in June.

After she laundered the money to people in Pakistan, China and Turkey, federal officials say, she “planned to travel to Syria and join ISIS.”

While she was transferring money to the terrorist group overseas, authorities claimed, Shahnaz had “accessed ISIS propaganda, violent jihad-related websites and message boards, and social media and messaging pages of known ISIS recruiters, facilitators and financiers.”

Shahnaz also researched maps and locations of ISIS-controlled areas of Syria, in addition to looking up “ISIS recruiters, financiers, and fighters, including those who have urged lone-wolf attacks against American targets,” according to prosecutors.

In June, Shahnaz quit her job as a lab technician at a Manhattan hospital, and obtained a Pakistani passport, officials said. A month later she allegedly attempted to get on a flight at John F. Kennedy International Airport with the intention to leave the U.S. and join ISIS.

Federal agents stopped the woman and took her into questioning where she “provided false and conflicting explanations” about her wire transfers, officials said.

If convicted, Shahnaz could face a maximum of 30 years for bank fraud and 20 years on each count of money laundering.

Borders and Customs: Do You Need to Declare Your Crypto?

When arriving in the United States – and most other countries – customs officials often ask that travelers fill out a form to declare various items. Most of this is to try and catch various contraband items, unapproved foods, and exotic (dangerous to native ecosystems) animals from entering the country. However, these forms also ask about carrying certain amounts of money. This begs the question: if you have a mobile client or a hardware wallet, do you need to claim it? What if you simply memorized your private keys? Wouldn’t this just be treated like a debit card? 


Many travelers have already had to fill these forms out. In the United States, Customs asks if travelers are carrying more than US$10,000 or its equivalent on them in cash. This is largely to prevent money-laundering and other nefarious activity.

But those who have more than ten grand in their bank accounts need not claim their debit cards on these customs forms. Wouldn’t the same apply to having over US$10,000 in cryptocurrency on a mobile wallet, hardware wallet, or in an account for which the individual has memorized his or her seed phrase or private keys?

Probably not, I would argue. Bank accounts are exempt because these can be controlled and frozen. Essentially, having money in a bank means the account holder has given up control of that money; they’ve given over custodianship of these funds to a third party. While the third party should be beholden to its customer, there is always the possibility that it won’t keep the customer in mind. The money stays in the bank, and the account holder requests that they be granted access to their money when using their debit card or withdrawing cash.

Cash, or money over which an individual has full control is really what’s being targeted here. Crypto acts similarly to cash (but is far more secure) in that whoever holds the ability to spend it is the one who owns it. So it is likely that in the future we will see customs require individuals to claim their cryptocurrency holdings, including those that are stored in mobile or hardware wallets, as well as those for which individuals memorize the associated private keys.

I know what many of you are thinking, because was thinking it too: “What if I just don’t tell them?” It would be hard for them to follow up, and most customs agents have no idea what cryptocurrency is. Wouldn’t it be too much of a hassle to explain that knowing a phrase or an app on a phone can have access to funds which may be worth  more than $10K? Perhaps, but it’s about to get way worse if one were to withhold that information.

S.1241, also known as the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017, might – among other things – make withholding information about one’s cryptocurrency holdings a felony.

The UK and EU Plan to Make Bitcoin Investors Use Their Real Names

By: Rhett Jones

Bitcoin managed to set a new price record on Sunday, briefly hitting $11,826per coin. And governments around the world are taking note of the boom in divergent ways. In the European Union, a new plan is expected to regulate cryptocurrencies under the same anti-money laundering laws as fiat money. It’s expected to take effect sometime next year.

For governments that are suspicious of cryptocurrencies, fears of bubbles, ponzi schemes, and economic destabilization have often been the focus. Countries like South Korea and China have publicly come out against initial coin offerings (ICOs) that work as investment opportunities and have a high potential for fraud. But for the UK and the EU, cryptocurrencies’ potential for enabling money laundering, drug dealing, terrorist funding, and other nefarious activities have lawmakers up in arms. According to The Guardian:

[Britain’s] Treasury plans to regulate bitcoin and other cryptocurrencies to bring them in line with anti-money laundering and counter-terrorism financial legislation. Traders will be forced to disclose their identities, ending the anonymity that has made the currency attractive for drug dealing and other illegal activities.

Under the EU-wide plan, online platforms where bitcoins are traded will be required to carry out due diligence on customers and report suspicious transactions.

Last week, London’s Metropolitan Police publicly warned that drug dealers at all levels were using Bitcoin ATMs to stash their profits out of sight.

 In October, Stephen Barclay, the economic secretary to the Treasury in the UK, responded to a parliamentary inquiry with a written plan that would amend anti-money laundering and counter-terrorism regulations to include cryptocurrencies. “The government supports the intention behind these amendments, he wrote. “We expect these negotiations to conclude at EU level in late 2017 or early 2018.”

How seriously these bodies pursue individual cryptocurrency users remains to be seen. It would certainly cause headaches for Bitcoin and alt-coin users because anonymity is one of the most attractive features of cryptocurrency. But the fact is, with Bitcoin and variations like Monero, if a user wants to be anonymous, there’s little that a government can do to stop them. Regulating exchanges will be easier, but if someone wants to bypass an exchange, they could certainly do so. Still, criminalizing the use of cryptocurrencies without attaching identification would certainly be a deterrent, and individuals who don’t take every step to hide their identity could be targeted.

Last week, White House Press Secretary Sarah Huckabee Sanders said that Tom Bossert and the Homeland Security team was “monitoring” cryptocurrencies. It’s unclear whether the US considers Bitcoin to be a security issue, or if the White House was just improvising an answer to a question it hadn’t really considered.

But not all governments are taking the view that cryptocurrencies are a threat.

For Venezuela, they could be an opportunity to find relief from the economic struggle that was only exacerbated by recent sanctions. According to Reuters, Venezuela’s President Nicolas Maduro announced on Sunday that his government would issue its own digital currency called the “Petro.”

 It’s a fitting name because the Petro will be backed by oil, gas, gold and diamond reserves, Maduro said in a television broadcast. While it makes sense that Venezuela would try a drastic economic measure at a time when its monthly minimum wage has fallen to just $4.30, it’s not yet clear how the Petro would actually work. Bitcoin and its imitators are decentralized currencies that mostly use algorithms and public interest to determine their supply and value. Maduro didn’t offer many specifics, mostly making vague proclamations like saying that this initiative will help Venezuela “advance in issues of monetary sovereignty, to make financial transactions and overcome the financial blockade.”

For cryptocurrency evangelists, decentralized money has always been considered a potential option in countries where the people can’t trust their government to properly manage the economy. One could imagine, in theory, that an anonymous currency could help citizens get around economic sanctions and avoid the rapidly depreciating Venezuelan bolivar. But it appears that the Petro will simply be tied into Venezuela’s central bank, an untried strategy for a major country.

On top of that, The Washington Post reports that a third of Venezuela’s citizens don’t have an internet connection. Throw in the fact that digital currency has a bit of a learning curve, and that there’s no infrastructure set up for taking payments, and the plan seems at least a little bit half-baked. Angel Alvarado, an opposition lawmaker and economist, told Reuters that the move has no credibility. “It’s Maduro being a clown,” he said.

 Speaking of clowns, Mark Zuckerberg’s former rivals the Winklevoss twins recently became Bitcoin billionaires, according to The Telegraph, as their combined $11 million investment in the cryptocurrency in 2013 is now worth 10 digits. The last thing the world needs is more dimwitted billionaires. Maybe making this all illegal isn’t such a bad idea.

Crackdown On Bitcoin In UK Over Money Laundering, Tax Evasion

The Treasury of the UK has announced plans to strongly regulate the transfer of cryptocurrencieswith a view to cracking down on money laundering and tax evasion. The regulations have not been stipulated with specificity, but will certainly include anti-money laundering (AML) and know your customer (KYC) details.

The regulation is intended to take force before the end of 2017, or just at the beginning of 2018. The increased regulations, in line with the directives in the EU, are intended to limit the amount of anonymity possible for cryptocurrency traders. According to John Mann, one of the Treasury committee:

“These new forms of exchange are expanding rapidly and we’ve got to make sure we don’t get left behind – that’s particularly important in terms of money-laundering, terrorism or pure theft. I’m not convinced that the regulatory authorities are keeping up to speed. I would be surprised if the committee doesn’t have an inquiry next year. It would be timely to have a proper look at what this means. It may be that we want to speed up our use of these kinds of thing in this country, but that makes it all the more important that we don’t have a regulatory lag.”

Other regulations

Other regulations have been threatened around the world, as Bitcoin price soars. With adoption exploding, and massive influx of institutional capital via futures and other contracts, Bitcoin is becoming far more of a financial reality that it has ever been before. China, Russia, and other countries have made it clear that the digital currency will be off-limits, while other countries like Switzerland and Malta are seemingly far more open.

ICE Agent: Cryptocurrencies Increasingly Used in Money Laundering

By: Nikhilesh De

Criminal organizations are increasingly using cryptocurrencies to launder money or otherwise pay for illicit activities, according to one U.S. Immigration and Customs Enforcement agent.

Child exploiters, drug smugglers, illegal firearm sellers and intellectual property rights violators are all beginning to use cryptocurrencies for their transactions, said Matthew Allen, ICE’s special agent in charge of Homeland Security Investigations (HSI).

Allen testified to the Senate Judiciary Committee on modernizing anti-money-laundering laws to limit both laundering and terrorist financing on Nov. 28, explaining that virtual currencies are the newest major method for hiding criminal proceeds.

In his testimony, he said:

“HSI agents are increasingly encountering virtual currency, including more recent, anonymity enhancing cryptocurrencies (AECs), in the course of their investigations. AECs are designed to better obfuscate transaction information and are increasingly preferred by [transnational criminal organizations].”

Some exchanges are beginning to design services specifically to thwart tracking by use of mixers that anonymize virtual currency addresses, making it even more difficult to determine which user conducted a particular transaction, Allen said.

Drug arrests

The department has had some success in identifying criminals who use bitcoin, however. Allen pointed to the November 2016 arrest of Utah resident Aaron Shamo, who allegedly ran a Xanax and fentanyl manufacturer group.

Shamo allegedly took his profits in bitcoin, and HSI seized approximately $2.5 million from him at the time.

Another alleged fentanyl vendor, Pennsylvanian Henry Koffie, was arrested this past July and had $154,000 seized. Allen said Koffie sold nearly 8,000 orders of the drug, “most of it paid for with bitcoin.”

JPMorgan busted for money laundering after accusing bitcoin of doing the same

The Swiss subsidiary of US bank JPMorgan Chase has been sanctioned by Switzerland’s financial regulator FINMA for money laundering and “seriously violating supervision laws,” according to the local weekly Handelszeitung.

The sanctions are reportedly related to breaches of due diligence in connection with money laundering standards. That literally means the Wall Street banking giant assisted in money laundering.

The ruling was reportedly issued on June 30, but the regulator did not make it known as JPMorgan has been actively trying to prevent the publication. The Federal Administrative Court has since dismissed an appeal by the bank.

It is two months since JPMorgan CEO Jamie Dimon slammed bitcoin, the world’s leading cryptocurrency, labeling it a fraud. According to Dimon, bitcoin could be useful “if you were a drug dealer or a murderer.”

Dimon also compared bitcoin to the 17th-century Dutch tulip mania bubble. At the time, the CEO predicted the eventual demise of the digital currency and pledged to fire any trader trading bitcoin for being stupid.

“A fiat currency is when a government says this is your legal tender, you have to give it and accept it, and of course the central bank can misuse it and inflate it. But what is the use case for bitcoin? You’re in Venezuela, North Korea, you’re a criminal. Great product!” he said during a news conference in Washington.