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LATAM Exposes ‘The Dark Side’ of Cryptocurrencies

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To have a clear picture of the world’s worst money laundry schemes, new cybercrime frontiers, and organized crime, perhaps Latin America (LATAM) is the best specimen for you. 

In the midst of a major economic downturn, Latin American countries are facing the worst money laundering schemes as a result of the increase in cryptocurrencies and unregulated P2P exchanges, according to a new report by threat intelligence firm Intsights and Ciphertrace.

According to the report, organized crime groups and drug cartels in LATAM countries use cryptocurrencies such as bitcoin; to cover up their tracks or fund their evil schemes.

The study has deepened into the crime scene in Latin American nations, exposing the challenges faced by law enforcement to curb the threat.

In particular, one way for criminals in LATAM nations to use digital currencies is through ‘ mixing services ‘ to confuse tainted digital currencies with others. Once criminals clean crypto through mixing, they trade in different exchanges and earn further income.

As part of money laundering schemes, criminal groups and cartels are taking advantage of inadequate KYC and AML standards by local exchanges and global P2P networks such as LocalBitcoin.

In fact, the report argues that a massive amount of illicit digital currencies around the globe ends up in LATAM cryptocurrency exchanges. Researchers at Intsights have found that exchanges in the Latin part of the world are usually denoted by indulgent regulations.

The report relates to the big money laundry case involving the payment processing firm Crypto Capital. The Panama-based crypto company was involved in a money laundry case worth up to $350 million.

Panama-Based Crypto Capital Money Laundry Saga

According to reports, Ivan Manuel Molina Lee, President of Crypto Capital, was detained by the law enforcement authorities on the grounds that he was directly involved in the scheme.

Crypto Capital has been able to mislead one of the biggest exchanges in the world, Bitfinex. Colombian drug cartels used cryptocurrencies to launder at least $350 million.

Additionally, criminals in Latin America take advantage of the leniency of P2P platforms; such as LocalBitcoin and Paxful to compound their interests. As per the report, this is the most preferred way for LATAM criminals.

The LocalBitcoin P2P platform has the highest trading volumes in Latin America. This is mainly due to the lack of or minimal regulations such as lack of AML and little KYC requirements. The report reads:

“Threat finance is evolving in Latin America as organized crime groups turn to cryptocurrency to launder large amounts of money and dive into the dark web to find hackers for hire…criminals are taking advantage of unregulated exchanges that do not require registration information and proof of identification for tracking purposes. These illegal exchanges are appealing to criminal groups that are looking to move large amounts of money through untracked channels.”

At Least 70% of the LATAM Population is Online

Furthermore, the report notes that 69 percent of the Latin American population is online, a significant percentage. Majority of Internet users come from Colombia and Brazil. The rapid digitization capped by political and economic precariousness; has resulted in increased hacking, fraud, money laundry, drug cartels and other crimes in the region.

In Conclusion,  this massive hornet’s nest is unlikely to be resolved soon anytime; due to the lack of anti-money laundry legislation in place and the poor state of law enforcement at LATAM.

However, the report suggests that firms or agencies willing to thwart the problem; should  “collect, monitor, and analyze cybercrime intelligence,” to learn and adopt the best security protocols.

 

 

Disclaimer note: This article is based on the writer’s opinions/research and does not necessarily represent the views and opinions of Tron Weekly. 

US Treasury to Introduce New Cryptocurrency Regulations

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The US Treasury plans to introduce new rules and regulations  on Digital currencies intended to crack down on its use to facilitate money laundering and other illicit activities

Steven Mnuchin, the treasury secretary told a Senate Finance Committee that the Financial Crimes Enforcement Network will soon announce new rules on digital payment and cryptocurrency. The primary concern with digital currency adoption is the issue of scams, opacity and ambiguous trade-offs that seem unconventional to traditional finance. Mnuchin hopes the new rules to improve transparency in order to stop money laundering and will prevent the use of cryptocurrencies as a “secret bank accounts”.

The US administration has expressed concern about the increased use of crypto in the execution of anonymous and illegal transactions. Additionally, the lurking potential of evading American Sanctions by nations like North Korea and Iran remains a huge threat to the blockchain. 

He did not hesitate to suggest that the framework was a representation of the government’s support for the new technology; as well as caution of avoiding digital currencies becoming the equivalent of the ancient Swiss Secret number banking. Nonetheless, the charing did not provide further details entailing the new regulations. However, the Treasure Secretary highlighted they would offer improved transparency for law enforcement; and a guide for the enforcement to track where money was going and prevent laundering. 

President Trump was not hesitant to express skepticism about digital currencies. Last year, the president told Twitter followers that he is “not a fan” of Bitcoin and other cryptocurrencies. Adding to the note, he described cryptocurrencies as volatile and based on thin air. Furthermore, he would warn Facebook that they should seek a banking charter and adhere to banking regulations; if they were to issue a digital currency. 

Mr. Mnuchin’s efforts to closely monitor cryptocurrency saw the relocation of the Secret Service towards the treasure Department, rather than Homeland Security. In the White House Budget proposal released this week, the administration cited the efficiency of policing cryptocurrencies through the treasury department and the secret service. White House has identified how cryptocurrencies are used as an emerging threat.

Nevertheless, the United States Federal Reserve stated in a separate hearing; that it was exploring how a US digital currency would look like. The Federal Reserve said it had studied the costs and benefits of implementing the digital currency. As well as the implications of the same in the global economy. However, Mr. Mnuchin had stated on Wednesday that he didn’t believe a digital dollar was even necessary. 

But the Secretary said it was also a project to consider somewhere down the road. For instance, Jerome Powell noted that a Federal Reserve digital currency also posed the threat of low privacy and high fraud. The Chair of the Federal Reserve, Mr. Powell stated: 

“There’s a lot to weigh and a lot to work on there. Every major central bank in the world right now is doing a deep dive on digital currencies, and we think it is our responsibility to be at the very forefront of knowledge and thinking about a central bank digital currency.”

The creation and deployment of one such government-issued digital currency would need approval from congress. 

FinCEN Warns Social Media Companies Eyeing on Cryptocurrency 

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  • FINCEN’s Jamal El-Hindi warns companies building cryptocurrencies about illegal transactions.
  • FinCEN will have a close look at all the illicit transactions happening across Social Media.
  • FinCEN sees Social Media, Messenger applications as the top infected platforms for money laundering and terrorist financing.

Speaking during the Anti-Money Laundering conference, the deputy director of the Financial Crime Enforcement Network (FinCEN), Jamal El-Hindi remarked that the Social media networks and messaging platform with crypto activities must look at the anti-money laundering acts. 

FinCEN appointed Jamal El-Hindi in May 2015 to oversee several tasks required to safeguard United States’ financial system from illicit transactions, money laundering activities and other transactions that are associated with criminal acts in a country. 

20th SIFMA Anti-Money Laundering and Financial Crimes Conference

Noticeably, the report comes in the wake of Jamal El-Hindi’s presence at the 20th conference of Securities Industry and Financial Market Association (SIFMA) which was held in New York on February 06, 2020. SIFMA is a non-profit trade association, representing financial firms of all sizes including investment brokerage firms, securities brokerage firms and other investment entities in the United States. 

While delivering the talk on the illicit transactions fostering the Money Laundering and Terrorist Financing, Jamal El-Hindi stated that the social media companies, especially those who are building cryptocurrencies must guard their system. He elaborates that these companies must be careful and vigilant about any illegal transactions. 

Undeniably, Facebook’s plan of launching Libra is under fire following continued regulatory push backs – however, reports also note that the prepared remark of Jamal El Hindi neither had any highlight about Facebook nor about Libra. 

Nonetheless, FinCEN will maintain a bird’s eye on every entity striving to enter the global financial system. Furthermore, they will review whether or not the companies entering the financial system with the approach of cryptocurrency adhere to laws set in place including – preparing a report on money laundering, terrorist financing, and other impermissible activities.

It was also reported that FinCEN is working closely with two the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to deal with the issues concerning digital assets. More so, FinCEN is reportedly focusing on the web and mobile application of social media platforms as they perceive these applications tend to attract money laundering and terrorist financing.