AMLi NEWS UPDATE: Criminals using multiple channels to transfer dirty crypto profits to cash; expert claims action is needed to ‘modernise’ ways of stopping it - AML Intelligence
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AMLi NEWS UPDATE: Criminals using multiple channels to transfer dirty crypto profits to cash; expert claims action is needed to ‘modernise’ ways of stopping it

By Dan Byrne for AMLi

AUTHORITIES NEED to upgrade their methods if they are to compete with the pace of online crime and transfer dirty money from crypto to cash, one expert has said.  

As the pandemic rages on, the accelerated migration of organised crime to digital platforms continues, with much of the dirty profits being generated or moved via cryptocurrencies.  

But head of cyber security strategy at VMware and US Secret Service cyber investigations advisory board member Tom Kellermann has warned that this is where authorities need to get tougher.  

Lan enforcement “need to modernise forfeiture and asset freezes,” so that they can seize dirty crypto profits from exchanges in time, he told the Financial Times.   

These exchanges are the critical junctures connecting criminal activities to the end goal of successfully masking the resultant profits.   

Given the rapid pace of change in digital crime, methods of moving dirty money through the digital space are changing quickly. When the time is right the crypto profits will be converted to cold hard cash – eliminating much of the chances that they will ever be recovered.   

One of these cash conversion methods is the use of “Treasure Men,” whose job it is to literally conceal money at a given location for a client to pick up.   

“They will literally leave bundles of cash somewhere for you to pick up,” Dr Tom Robinson, co-founder of crypto transaction analysis group Elliptic, told FT.  

“They bury it underground or hide it behind a bush, and they’ll tell you the coordinates. There’s a whole profession.”  

Services like Treasure Men are widely available on the dark web – particularly the marketplace known as Hydra, dubbed the largest of its kind based on revenues, which is only accessible using specialised software.  

Other ways of exchanging bitcoin that are offered through Hydra include turning crypto into gift vouchers or prepaid debit cards – the kinds of payment methods that will widely work yet have little ID or security checks.  

These methods matter more now as the traditional methods of cashing out crypto becoming less attractive for criminals.  

At one point in time – given the lax security – criminals would simply use mainstream crypto exchanges, but this becoming far less plausible as major jurisdictions like the US and EU set tougher KYC rules for them.  

Other methods becoming more common include over-the-counter brokers, crypto ATMs, and investment in online gambling wallets.  

While authorities and private sector analysis firms ramp up efforts to track and trace bitcoin exchanges, their prowess is matched on the other side by new technology from criminals – presenting law enforcement with a problem.  

The prospect of having a more collaborative approach – for example an alert system based on “shared blacklists of wallets” – has been touted as a possible solution by Kemba Walden, assistant general counsel at Microsoft’s Digital Crimes Unit. 

These data-sharing measures had been proposed in the past but, “perhaps now is a better time to reconsider some of those policy initiatives,” she told the FT. 

Exactly how these measures would harmonise with strict data-privacy regulations – particularly in the EU – is a question that may well spark debate if concrete proposals ever materialise.   

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