Category: Digital Currencies

Crypto Exchange Chatex and Russian Nationals Indicted for Roles in Ransomware Operations

Digital Currencies, Sanctions
Today, the Department of Justice (DOJ) and U.S. Treasury’s Office of Foreign Asset Control (OFAC) announced joint indictments, arrests, and sanctions designations against organizations and individuals associated with ransomware attacks against U.S. companies. Telegram bot-based P2P cryptocurrency exchange Chatex, which shares a founder with recently sanctioned OTC service Suex, has now been added to the Specially Designated Nationals and Blocked Persons (SDN) List, thereby prohibiting Americans from doing business with the company. Additionally, three other companies were sanctioned for their role in setting up key infrastructure Chatex relied on to operate. It’s important to remember that unlike violations of anti-money…

Moscow’s Tallest Tower Is a Cybercriminal Cash Machine

Digital Currencies, Financial Crime
The crown jewel of Moscow’s business district, a 97-story glass tower known alternately as Federation Tower East or Vostok, is a tribute to Russia’s post-Soviet economic influence and national strength. Promotional materials for the building, which was the tallest in Europe when it was completed in 2017 and is now No. 2, boast of its highly paid staff and its supposed fortification against “missiles and explosions.” Its apartments are rented and owned by high-ranking government officials and C-suite executives. Residential units sell for upwards of $36 million. The building has also been home to more than a dozen companies since 2018…

Cryptocurrency fraud continues to plague UK

Digital Currencies, Fraud
So far in 2021, news reports reveal that cryptocurrency fraudsters have cheated over £146m ($200USD) out of victims in Great Britain. City of London police informed Bloomberg that since the start of this year, losses have mushroomed by 30% up on the number for the whole of 2020. The UK’s national fraud and cybercrime reporting centre is based within City of London police, where officials say that over 50% of the 7118 victims in this year to date are aged between 18 and 45. Detective chief inspector, Craig Mullish, said: “Reports of cryptocurrency fraud have increased significantly over the past…

Crypto Crime Landscape Shifts to Bigger Threats Targeting Smaller Numbers

Digital Currencies, Money Laundering, Terrorism
The use of cryptocurrencies for illicit activities from ransom money, money laundering and funding for terrorist activities continues unabated. The tightening regulation does not appear to be making enough of a difference yet. Over the past eighteen months, the Covid crisis appears to have made matters worse as the authorities shifted their focus to fighting the pandemic. While the Financial Action Task Force (FATF) continues to warn about illicit use of virtual currencies, even the task force’s member nations – including some of the leading G20 economies – have failed to transpose the latest FATF Standards into their domestic regulation.…

Police Seize $2.7m of Crypto From a British Teenager in a Credit Card Fraud Scheme

Digital Currencies, Financial Crime, Money Laundering
Police in England seized more than $2 million worth of crypto from a 17-year-old involved in a credit card scam. Lincolnshire Police said seized 48 bitcoin and other cryptocurrencies after discovering money-laundering links in the case. The teenaged boy was charged with false representation and money laundering. Police in an English county said they’ve seized more than $2 million worth of cryptocurrency from a 17-year-old boy who obtained the coins through online fraud. Detectives from the Lincolnshire Police’s cybercrime unit took possession of the digital currency in a case centered on an unnamed boy involved in an April 2020 credit…

How Governments Around the World Regulate Cryptocurrency

Digital Currencies, Regulation
In the early days of blockchain technology, cryptocurrencies operated in a gray area of the economy, their applications as unique as they were unregulated. But since then, as financial institutions have entered the industry and adoption has soared, the risk calculus has changed for regulators. While governments around the world have taken major steps to combat cybercrime and protect the users of cryptocurrencies, many believe the work is far from over. For this reason, it’s critical for investors, businesses, and institutions in the industry to understand both how governments regulate cryptocurrencies and how industry leaders can push the conversation forward.…

FATF Releases Updated Guidance on Virtual Assets

Digital Currencies, FATF
The FATF has issued its finalized guidelines providing clarifications on its previous crypto regulation recommendations. Key Takeaways Today FATF issued updated regulatory guidance on virtual assets and virtual asset service providers. It clarifies that NFTs or crypto-collectibles generally fall outside its virtual asset definition but may be considered such if used for payment or investment purposes. Developers, owners, and operators that “maintain control or sufficient influence” over DeFi protocols could be regulated as VASPs. VASPs are subject to various KYC, AML/CFT, licensing, and transaction reporting requirements depending on the jurisdiction. Today the global Financial Action Task Force (FATF), an independent…

Everything You Need to Know About OFAC’s New Sanctions Guidance for Cryptocurrency Businesses

Digital Currencies, Sanctions
On October 15, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) released Sanctions Compliance Guidance for the Virtual Currency Industry. This guidance follows the recent designation of Russia-based cryptocurrency Over The Counter (OTC) broker Suex, as well as an updated Advisory on ransomware payments, which we wrote about in our blog. The newly-released brochure reiterates OFAC’s previous guidance and outlines best practices in one comprehensive document. Specifically, OFAC’s guidance covers: Sanctions-related compliance requirements for cryptocurrency businesses Consequences for non-compliance and examples of how timely reporting can mitigate those consequences Best practices for building a risk-based compliance…

Cartels and Crypto

Digital Currencies, Organised Crime
If the massive spike in traffic across the U.S.-Mexico border continues at its current pace, total border arrests in 2021 will be the highest since 2000, when nearly 1.7 million illegal border crossers were apprehended by U.S. authorities. Down in Texas’ 23rd District, which encompasses 40 percent of the total southern border, residents are no strangers to the dangers that come with illegal border crossings, specifically those connected to cartel activity. A worrisome new technological development has arisen that can potentially lay the groundwork for these criminal elements to increase their drug and human smuggling operations exponentially. Latin American cartels…

Scammers Tricked Dating App Users Into Investing $1.4m in Fake Crypto Apps

Digital Currencies, Fraud
Despite tough App Store moderation, scam apps can still make their way onto iOS. But it requires a lot of social engineering work. It’s said that love makes people do illogical things. Apparently, those things include investing money into shady cryptocurrency apps that then steal your money, as that’s what scammers reportedly were able to do to victims on dating apps including Tinder and Bumble. Cybersecurity firm Sophos released a report recently documenting “CryptoRom,” a scam that led to $1.4 million being stolen from victims across the United States and Europe. Cryptocurrency-related scams are on the rise as more people…

Founders of Crypto ICO Plead Guilty to Tax Evasion After Raising $24m from Investors

Digital Currencies, Prosecutions, Tax Evasion
The owners of a cryptocurrency company have pleaded guilty to tax evasion, announced Acting U.S. Attorney for the Northern District of Texas Chad E. Meacham. Bitqyck founders Bruce Bise, 60, and Samuel Mendez, 65, were charged with tax evasion in August. Mr. Bise pleaded guilty on Sept. 9; Mr. Mendez pleaded guilty this morning. According to plea papers, Mr. Bise and Mr. Mendez admitted that Bitqyck raised approximately $24 million from more than 13,000 investors. Instead of fulfilling their promises to these investors, the defendants used Bitqyck funds on personal expenses, including casino trips, cars, luxury home furnishings, art, and…

An Overview of the Use of Cryptocurrencies in Terrorist Financing

Digital Currencies, Terrorism
By Heidi Wilder, Senior Associate, Coinbase Special Investigations Team Following the fall of the elected Afghan government and rise of the Taliban in its place, many speculated that the group had or may turn to cryptocurrencies as a way to finance its operations. As part of our compliance program, Coinbase tracks these types of transactions and often works with law enforcement agencies around the world on interdiction and enforcement efforts. A quick step back With institutional and consumer interest in crypto at an all-time high, alongside the continued rise of DeFi, 2020 and 2021 have seen cryptocurrency achieve the mainstream…

Why Cryptocurrency Matters in the AML World

Digital Currencies, Money Laundering
Since Bitcoin’s launch in 2009, cryptocurrency has driven new markets, spurred advancements in financial infrastructure and driven innovative thinking in how to meet the world’s economic needs. However, many stakeholders, including regulators, compliance professionals and law enforcement, still do not understand cryptocurrency or its anti-money laundering (AML) impact. That needs to change as cryptocurrency adoption continues to grow. While research indicates that the vast majority1 of cryptocurrency transactions are for legitimate purposes, cryptocurrency’s place outside the traditional financial system gives it a special appeal to cybercriminals and other bad actors. As such, it is essential for those in the AML…

Chinese Regulators Unite Forces to Crack Down on Crypto

Digital Currencies, Regulation
The Chinese central bank is setting up a “coordination mechanism” with state agencies to continue battling crypto. The Chinese government is getting more serious about cracking down on the cryptocurrency industry as state authorities are bringing forces to combat crypto operations in the country. The People’s Bank of China (PBoC) officially announced on Friday a set of new measures to fight against crypto adoption in China, including promoting stronger inter-departmental coordination in cracking down crypto activity. 10 Chinese state authorities, including the PBoC, the Cyberspace Administration of China and the Ministry of Public Security, have established a “coordination mechanism” to…

U.S. Sanction Crypto Exchange over Ransomware Attacks

Digital Currencies, Sanctions
For the first time ever, U.S. authorities imposed sanctions against a virtual currency exchange for its role in facilitating financial transactions for ransomware actors, the Department of the Treasury’s Office of Foreign Assets Control (OFAC), said in a statement Tuesday. “All property and interests in property of the designated target that are subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them,” read the statement. OFAC claims that SUEX OTC enabled transactions involving at least eight ransomware variants’ illegal proceeds, and that a study revealed that illicit actors were involved in more…

Behind Suex.io: the first sanctioned cryptocurrency exchange

Digital Currencies, Sanctions
This morning, OFAC sanctioned SUEX.io, a concierge cryptocurrency exchanger incorporated in Czechia but operating in Russia. This action comes as OFAC and the US Government writ-large try to tackle the festering problems posed by ransomware, and the criminal syndicates using it to extort billions of dollars out of victims around the world. SUEX filled an essential niche in the ecosystem of underregulated exchanges that, either through willful ignorance or witting cooperation, facilitate the conversion of illicit crypto ransoms into real-world currency. SUEX largely communicated with its clients on the Telegram app and accepted new customers on a system of referrals…

29 Crypto Exchanges Meet Registration Deadline But Face Challenges

Digital Currencies, Regulation
Twenty-nine of Korea’s 66 cryptocurrency exchanges met a legal deadline to put themselves under regulatory supervision, but they still face challenges, market insiders said Sunday, such as risks from legal breaches and an inability to convert coins into Korean won. The Financial Services Commission said Saturday that 29 exchanges submitted applications to register their businesses by Friday and will process them within three months, legitimizing their status as market players but also subjecting them to regulatory monitoring and supervision. The registration brings them out of local legal blind spots, but the exchanges now have to abide by global rules on…

London Court Orders Binance to Trace Cryptocurrency Hackers

Digital Currencies, Financial Crime
London’s High Court has ordered Binance, one of the world’s largest cryptocurrency exchanges, to identify hackers and freeze their accounts after one user said it was the victim of a $2.6 million hack. In a judgment made public this week, a High Court judge granted requests by artificial intelligence (AI) company Fetch.ai for Binance to take steps to identify the hackers and track and seize the assets. While involving a relatively small sum, the case is one of the first public ones involving Binance and will be a test of the English court system’s ability to tackle fraud on cryptocurrency…

Cryptocurrency is Better for Anti-Money Laundering Than You Might Think

Digital Currencies, Money Laundering
Cryptocurrencies are a haven for fraud, money laundering, and all sorts of criminal activity —this has been a truism since the first days that cryptocurrencies became a topic of conversation in regulatory circles. This perceived risk carried through to compliance functions in banks across the country, where account closures were common for anyone found to be buying Bitcoin. This mindset shifted in recent years, with FinCEN, FATF, and other regulatory bodies acknowledging that blockchain technology carries significant potential worth exploring. They began developing new frameworks to manage the risks presented by the many novel aspects of blockchain technology without stifling…

Dark Web Drug Dealer Indicted for Laundering $137 Million in Bitcoin From Prison

Digital Currencies, Money Laundering
A drug dealer, jailed since 2018 over drug charges, has been indicted for laundering 2,933 Bitcoin while in prison. In brief Maryland’s “Xanaxman” had to forfeit 4,000 Bitcoin in November 2018. That would be worth $187.2 million today. But he allegedly continued his Bitcoin dealings while in prison. He is now indicted for laundering 2,933 Bitcoin, worth $137 million. A dark web drug dealer from Maryland known as Xanaxman is accused by a Maryland federal court of laundering $137 million worth of Bitcoin from prison. Xanaxman, real name Ryan Farace, was imprisoned three years ago for selling Alprazolam, a form…

American Pleads Guilty To Laundering Over $300 Million In Bitcoin

Digital Currencies, Money Laundering
A man in Ohio pled guilty on Wednesday to laundering over US$300 million in bitcoin through his cryptocurrency service accessible on the Darknet. Larry Dean Harmon, 38, admitted to having orchestrated the operation through his bitcoin “mixer”, known as Helix. Helix allowed users, for a fee, to transfer bitcoin, whilst concealing their identity, according to the U.S. Department of Justice. At its core, Helix gave customers the means to conceal their illicit transactions from law enforcement. The service could be accessed through a Darknet search engine known as Grams, which was also run by Harmon. Over 350,000 bitcoin found their…

Binance Crackdown: Regulators Tussle with the “Wild West” World of Crypto

Digital Currencies, Regulation
Changpeng Zhao’s company Binance is everywhere and yet based nowhere. The cryptocurrency exchange has processed trillions of dollars in trades this year as it transfers digital and conventional money around the world through a constellation of affiliates. And yet it has no headquarters. Incorporated in the Cayman Islands, the company has grown at extraordinary speed into a leading player in the fledgling industry. But the 44-year-old Canadian-Chinese mogul’s business empire is now attracting intense scrutiny from global watchdogs as they grapple with new financial entities that act in many jurisdictions but are rooted in none. Binance has led a peripatetic…

Binance CEO ‘Responds to Global Regulatory Pressure Calling Compliance a Journey’

Digital Currencies, Regulation
“We are seeing wider adoption of cryptocurrencies globally and the need for clearer regulatory frameworks in different countries,” said CZ. Binance CEO Changpeng “CZ” Zhao has likened the recent pressures by regulators against his exchange business to that of the initial development of the car. In an open letter on Wednesday, CZ said the adoption and development of crypto contained many parallels to regulations around automobiles in that “laws and guidelines were developed along the way.” “We are seeing wider adoption of cryptocurrencies globally and the need for clearer regulatory frameworks in different countries,” said CZ. “More regulations are, in…

AML Compliance Mandatory for Foreign Crypto Exchanges, says Korean Regulator

Digital Currencies, Regulation
South Korea’s strict crypto regulatory oversight is now extending to overseas exchanges that offer cryptocurrency trading services denominated in the country’s currency. Eun Sung-soo, chairman of South Korea’s Financial Services Commission (FSC), said that foreign crypto exchanges that deal in the Korean won must comply with the country’s Anti-Money Laundering (AML) standards. According to The Korea Herald on Tuesday, Eun made these comments while fielding questions from lawmakers about the FSC’s plans to regulate crypto exchange giant Binance. Eun reiterated the need for overseas exchanges offering won-denominated crypto trading pairs to comply with the same Anti-Money Laundering standards as platforms…

FinCEN has turned its attention to crypto

Digital Currencies
The U.S. Financial Crimes Enforcement Network (FinCEN) has identified cryptocurrencies as one of the anti-money laundering and countering the financing of terrorism (AML/CFT) priorities. In the agency’s first list of government-wide priorities published Wednesday, FinCen has highlighted eight priorities; corruption, cybercrime and relevant virtual currency considerations, terrorist financing, fraud, transnational criminal organization activity, drug trafficking, human trafficking and proliferation financing. Currently, the list of priorities is not connected to any policies, however the agency will issue regulations at a later date specifying guidelines on how financial institutions should incorporate these Priorities into their risk-based AML programs. The priorities comes in…

U.K. financial watchdog bans cryptocurrency trader Bianance

Digital Currencies
The Financial Conduct Authority (FCA) has prohibited Binance Markets Limited (BML) from undertaking any regulated activity in Britain. The company is part of the Binance Group, which terms itself as operating the world’s leading cryptocurrency exchange. The FCA said: “No other entity in the Binance Group holds any form of UK authorisation, registration or licence to conduct regulated activity in the UK. The Binance Group appear to be offering UK customers a range of products and services via a website, Binance.com,” it added. In a series of tweets, the company responded by saying: “BML is a separate legal entity and…

Biden proposes more stringent regulations to catch crypto tax evaders

Digital Currencies, Tax Evasion
Biden’s Fiscal Year 2022 Revenue Proposal aims to catch crypto tax evaders by reinforcing existing information reporting rules and information sharing agreements between jurisdictions. What is Information Reporting? Information reporting is the primary way that regulators like the IRS knows about your crypto activity. Cryptocurrency exchanges are required by law to collect your personal identification information (name, address and social security number) and report your annual activity to the IRS by using forms such as 1099-K, 1099-B and 1099-MISC. If exchanges fail to report this information correctly, they get subject to hefty penalties. Expanded 1099-K Reporting Currently, crypto exchange users…

FCA: Many Crypto businesses fail to meet regulations

Digital Currencies, Money Laundering
A ‘significantly high number’ of cryptocurrency firms have failed to comply with the U.K.’s trading standards and are struggling to meet anti-money laundering rules, Britain’s financial regulator said last week. Since January 2020, crypto firms operating in the U.K. are required to register with the Financial Conduct Authority (FCA) and comply with local money laundering, terrorist financing and transfer of funds regulations. Additionally, last December the agency granted a temporary registration for existing firms that will allow crypto businesses to continue operating while their applications are still under assessment. The FCA has said many businesses have failed to meet the…

U.K. Police seize $160 Million In cryptocurrency In Money Laundering investigation

Digital Currencies, Money Laundering
British detectives seized around £114 million (around $158 million) worth of cryptocurrency as part of an ongoing money laundering investigation, the U.K.’s Metropolitan Police force announced Thursday, marking the largest ever seizure of crypto assets in the U.K. and one of the largest in the world. Key facts The force, which did not reveal what cryptocurrencies had been confiscated, said the seizure was carried out by detectives in its Economic Crime Command “on the back of intelligence received about the transfer of criminal assets.” Criminals must hide the origin of ill-gotten money or else risk it being taken by law…

South Korean authorities seize $47 Million in cryptocurrency from tax evaders

Digital Currencies, Tax Evasion
Cryptocurrency worth millions of dollars has been seized by South Korean authorities More than 53 billion Korean won ($47 million) in cryptocurrency assets were seized from 12,000 people accused of attempting to hide money from the government In order to comply with upcoming industry regulations, a number of digital asset platforms have begun to delist high-risk coins Thousands of tax evaders have been identified by South Korean authorities as part of a growing crackdown on tax dodging among cryptocurrency investors. The government is said to have seized cryptocurrency worth millions of dollars after a lengthy investigation. It was the largest…

Binance Holdings is under investigation by the Justice Department and Internal Revenue Services

Digital Currencies, Money Laundering, Tax Evasion
[NEW YORK] Binance Holdings is under investigation by the Justice Department and Internal Revenue Service, ensnaring the world’s biggest cryptocurrency exchange in US efforts to root out illicit activity that’s thrived in the red-hot but mostly unregulated market. As part of the inquiry, officials who probe money laundering and tax offenses have sought information from individuals with insight into Binance’s business, according to people with knowledge of the matter who asked not to be named because the probe is confidential. Led by Changpeng Zhao, a charismatic tech executive who relishes promoting tokens on Twitter and in media interviews, Binance has…

Dutch Central Bank reverses decision on tighter checks for crypto withdrawals

Digital Currencies, Law, Regulation & Guidance
The Dutch Central Bank, DNB, has reversed its decision to enforce stricter measures for withdrawing cryptocurrencies from exchanges, according to Dutch crypto exchange Bitonic. In January, the central bank set out rules that required crypto exchanges to collect additional data from their users when they withdraw cryptocurrencies. Namely, users had to add the recipient address — where they are sending funds to — to their whitelist and provide a photo to “prove” that they indeed owned the address. Crypto exchanges in the region, such as Bitstamp and Bitonic, swiftly started enforcing the requirements. The central bank’s reversal on the policy…

Former Australian head of world’s largest crypto exchange calls for more regulation

Digital Currencies, Law, Regulation & Guidance
The former Australian head of the world’s largest cryptocurrency exchange Binance has called for greater regulation of crypto trading platforms as more institutional and retail investors begin to eye off digital assets such as bitcoin and ethereum. Jeff Yew, who resigned as Binance Australia’s chief executive officer in April, said he believed while Australia was more advanced with its regulation compared with other economies, much more still needed to be done to prevent everyday investors from being exploited by dodgy operators. “It really hurts me to see players exploiting that lack of [regulatory] clarity with users,” he said. “That’s not…

Hong Kong to Bar Retail Investors from Crypto Trading

Digital Currencies, Law, Regulation & Guidance
Hong Kong’s FSTB has issued consultation conclusions on the new licensing regime for VASPs and a new registration regime for precious metals dealers. Hong Kong’s FSTB (Financial Services and the Treasury Bureau) has published consultation conclusions setting out the new AML/CTF requirements that will be introduced for the VASP (virtual asset services provider) and DPMS (dealers in precious metals and stones) sectors. In November 2020, the FSTB issued a consultation on legislative proposals to introduce a new licensing regime for VASPs, as well as a two-tier registration regime for the DPMS sector, among other amendments. The consultation received 79 submissions,…

FATF’s Proposed Updated Guidance for Cryptocurrency Regulation

Digital Currencies, Regulation
On March 19, 2021, the Financial Action Task Force (FATF) released proposed updates to its 2019 guidance for how member jurisdictions should regulate and supervise the cryptocurrency ecosystem. If adopted by FATF and implemented by member jurisdictions, the new guidance would expand the definition of Virtual Asset Service Providers (VASPs) to include many non-custodial cryptocurrency businesses, making them subject to AML/CFT regulations. While Chainalysis is in favor of regulations that effectively prevent financial crime, we believe parts of the proposed guidance overreach by placing an unreasonable regulatory burden on new and emerging cryptocurrency markets where no evidence of criminal activity…

Terrorists still raise money through crypto but the impact is limited

Digital Currencies, Money Laundering, Terrorism
Evidence suggests crypto’s role in terrorism remains relatively minor: “It has not yet become a primary means of terror financing.” We’re living today “amidst an explosion of risk related to fraud, money laundering, terrorist financing, and data privacy,” said United States Treasury Secretary Janet Yellen in February — and she specifically cited cryptocurrencies as a “tool to finance terrorism.” Yellen appeared to be flagging an important new turn in the war against terror, and it begged some questions: Is crypto in the hands of terrorists a real, present danger to governments and society? If so, should the cryptocurrency and blockchain…

Ireland stops anonymity in trading of cryptocurrency

Digital Currencies, Regulation
BUYERS and sellers of Bitcoin and other cryptocurrencies are no longer able to trade virtual assets anonymously in Ireland under an expanded anti-money laundering regime. As of today, cryptocurrency service providers in Ireland will have to comply with money laundering rules and other basic regulations for the first time. This means that they must register with the Central Bank and carry out due diligence on their customers, which entails accounting for the origin and destination of client assets. The Central Bank has warned all companies that exchange or transfer virtual assets like Bitcoin, as well as those that provide financial…

Ireland to enforce AML checks for digital currency firms from April in line with 5AMLD

Digital Currencies, Money Laundering, Terrorism
Ireland will impose anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements for digital currency firms starting April 2021. With the new regulations, the Irish central bank will have more oversight over the industry. Buyers and sellers of digital currencies will no longer be able to transact anonymously, local daily Irish Independent reports. Digital currency firms, also known as virtual asset service providers (VASPs), will now have to complete due diligence on their clients. This is after the European nation adopted the EU’s Fifth Anti Money Laundering Directive (5AMLD). 5AMLD is the EU’s latest legal framework for combating…

AFME calls for regulatory certainty on the treatment of crypto assets

Digital Currencies, Money Laundering, Terrorism
The Association for Financial Markets in Europe (AFME) has called for UK authorities to provide regulatory certainty on the treatment of crypto assets in its response to HM Treasury’s consultation on the UK approach to crypto assets and stable coins. AFME has also pushed for a review of existing financial services legislation to identify and address obstacles to distributed ledger technology (DLT) innovation. The association has recommended a more “granular crypto-asset taxonomy” to clarify the treatment of existing use cases that will support the UK approach to fulfil regulatory objectives and encourage innovation. This will support greater certainty on which…