LONDON POLICE PROACTIVE AGAINST ALLEGED CRYPTOCURRENCY MONEY LAUNDERING

By Austin Kennedy

After a warning from European law enforcement agency Europol earlier this year that billions of pounds are being laundered through cryptocurrencies, City of London officials have decided to take matters into their own hands.

Transactions made in Bitcoin and other cryptocurrencies are notoriously complicated to trace due to the fact that users can generally generate unlimited numbers of wallets without providing any identifying information. Nevertheless, law enforcement agencies seem to have no trouble tracking down cybercriminals dealing in cryptocurrencies — as evidenced by the recent indictment of Russian intelligence officers who used Bitcoin to fund their interference with the 2016 U.S. presidential election.

Earlier this year, Europol officials arrested 11 individuals and identified 137 others allegedly involved in a large-scale network for laundering drug money with cryptocurrencies as a part of its Tulipan Blanca operation. The agency warned that there is currently three to four billion pounds ($4.1 to $5.5 billion) worth of digital currencies being laundered in Europe alone, though little evidence was provided to back this claim.

In contrast, the Hong Kong Financial Services and Treasury (FSTB) admitted in its “Money Laundering and Terrorist Financing Risk Assessment” report that it sees no evidence of Bitcoin or other cryptocurrencies being used to launder money or fund terror organizations whatsoever.

Still, accusations of crime in the cryptocurrency world persist.

The Deputy Governor of the Bank of England, Sam Woods — who is candidly wary of cryptocurrencies — wrote letters to the executives of financial institutions claiming (without evidence) that digital currencies “appear vulnerable to fraud and manipulation, as well as money-laundering and terrorist financing risks.”

LONDON POLICE GETTING PROACTIVE

To stay ahead of the future generation of cybercriminals, the City of London Police Department is implementing a new cryptocurrency fraud course at their Economic Crime Academy beginning this fall, according to The Telegraph. A City of London Police spokesperson commented:

On successful completion of this course, participants will understand how to detect, seize and investigate the use of cryptocurrencies in an investigative context… It will be the first of its kind and has been developed in response to feedback from police officers nationally who felt there wasn’t enough training available in this area.

While Bitcoin cannot be blamed for financial transgressions any more than SMS can be blamed for infidelity, a select bunch of computer literate criminals has taken a liking to the new technology and it is to the advantage of law enforcement agencies and financial authorities around the world to keep their staff educated on the latest blockchain trends — whether they are being used to clean dirty money or not.

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.

Europol Busts Cryptocurrency Drug Money Laundering Ring

A joint operation between global law enforcement agencies and Europol has put an end to a criminal ring that used cryptocurrencies including bitcoin to launder drug money through a Finnish crypto exchange.

The operation, dubbed Tulipan Blanca, saw authorities from Finland, Spain, the United States and Europol arrest 11 individuals related to an organized crime ring that saw drug money laundered from Spain to Colombia using credit cards and several cryptocurrencies, a statement revealed.

A total of 137 individuals were investigated in the criminal ring wherein, initially, drug money was split into small quantities deposited as cash in hundreds of bank accounts. Criminals then acquired credit cards linked to these bank accounts before traveling to Colombia with to make cash withdrawals from the bank accounts using those cards.

A total of 174 bank accounts were used, the investigation revealed, with deposits over €8 million in cash between them. It wasn’t long before the criminals turned to cryptocurrencies, according to the statement.

An excerpt from the statement revealed:

Once the criminals realised that cash withdrawals and bank operations were easy to track, they changed their laundering methods and turned to cryptocurrencies, mainly bitcoin.

The investigation, which saw guidance from Finnish law enforcement, revealed that the criminals had used an unnamed local cryptocurrency exchange to convert their cash into bitcoins before subsequently converting them to Colombian pesos.

Europol, the European Union’s criminal intelligence agency, established a working group alongside Interpol to combat money laundering through cryptocurrencies, last year. With its announcement this week, the agency stressed it would continue to fight against criminal elements using (abusing) cryptocurrencies.

“With cryptocurrencies increasingly used to finance and carry out criminal activities, Europol will continue to coordinate across EU Member States and beyond, to effectively respond to this rising threat,” the agency said. “Europol has organised specialised training courses to assist law enforcement officers in identifying the use of cryptocurrencies by organised crime networks.”

Europol Director: Fight Against Money Laundering Lacking

By Alex Cooper

https://www.occrp.org/en/27-ccwatch/cc-watch-briefs/7870-europol-director-fight-against-money-laundering-lacking

The outgoing Europol director, Rob Wainwright, says that Europe’s work to curb money laundering is insufficient as illegal cash moves too easily through its banking system.

Europol Headquaters, the Hague (Photo Credit: OSeveno By CC 3.0)“Professional money launderers—and we have identified 400 at the top, top level in Europe—are running billions of illegal drug and other criminal profits through the banking system with a 99 percent success rate,” Wainwright said in an interview with Politico.

The European Union agency has became more prominent as a result of terrorist attacks across Europe, yet financial crimes have not faced the same scrutiny even though dirty money plays a significant role in financing these operations.

Money laundering is understood as a country by country issue instead of being tackled as it flows: transnationally. An issue Wainwright acknowledges.

Communication to combat it becomes derailed since the EU lacks an organization capable of providing the needed lines of data sharing to appropriately deal with this illegal cash. Crime groups then maintain their shady wealth and expand their operations.

“While structures exist to facilitate cross-border cooperation between national units, significant barriers in international cooperation and information exchange remain, revealing the urgent need for supranational overview in increasingly global markets,” Wainwright said in September 2017 when Europol released its report on anti-money laundering efforts.

The report said that communication between financial intelligence units across the EU had increased since 2014. However, only two EU countries, the United Kingdom and the Netherlands, received 65 percent of total suspicious transaction reports. Then, only ten percent were investigated after being collected.

Europol’s money laundering assessment urged supranational cooperation and reporting as well as recommending countries address possible uses of new technologies in cyber-related financial crimes.

Wainwright leaves Europol in May after almost ten years to join Deloitte’s Cyber team in its European cyber security practice.