AML Weekly – 19 July 2021

In this report we observe and track all relevant events that have unfolded in the Anti-Money Laundering (AML) and digital asset space in the past seven days.

RANSOMWARE – USA ONE STOP SHOP, FBI WARNINGS, MITIGATING ENDORSEMENTS AND IT’S NOT BITCOIN’S FAULT

This week we look closer at ransomware as it continues to dominate the anti-money laundering news specifically in the digital asset space. In a great initiative, the US has launched a new website to combat the threat of ransomware StopRansomware.gov. The aim of the resource is reduce ransomware risk by providing a one-stop hub of ransomware resources for individuals, businesses and other organizations. The White House also announced the incorporation of a US based ransomware task force that will assist individuals and organizations to be informed on the topic of ransomware; assist with possible security breaches and offer rewards for information / whistle-blowers.

Earlier this month, the Federal Bureau of Investigation (FBI) issued a warning to the relevant stakeholders in the digital asset space as there has been a substantial increase in virtual assets attacks that may lead to significant financial losses. As there are numerous documented methods of how cybercriminals, hackers and ransomware attackers operate, the FBI has outlined the following as common methods to obtain unauthorized access to accounts: bypassing two-factor authentication; impersonating exchange support staff in phone calls; and SIM swap attacks. In order to curb the occurrence of cybercriminals obtaining account details the FBI advised crypto users to enable multi factor authentication; screen phone calls and emails for spoofed addresses; and keeping sensitive information confidential to guard against SIM swap fraud. In working with INTERPOL participants of Project Gateway has endorsed the following recommendations to disrupt and mitigate the impact of ransomware: raise awareness,  create partnerships and circulate information; aim for pre-exploit disruption of ransomware; provide in-event emergency support against ransomware attacks; and ensure post-event support following ransomware attacks.

In another interesting report, it seems that gone are the days where ransomware attackers operate in solo as lone wolves. It seems as if ransomware operations weigh more than one man can carry, as some cybercriminals have no alternative but to hire extra hands. The areas these specialists cover include but are not limited to: providing or acquiring code for the attack; infecting and spreading an attack; maintaining access to and harvesting data from infected systems; and monetizing the fruits of the attack. As the frequency of ransomware attacks increase and authorities attempting to stay ahead of the curve by educating and training stakeholders, there have been mounting calls to ban bitcoin or provide increased surveillance on blockchain networks. The Coindesk team weighs in on the topic, discusses the real threat of ransomware and why banning crypto outright will not solve the problem as there is no data to support this theory.

SOUTH KOREA REGS, FCA CEO AND PICASSO

South Korea is standing its ground on the recent regulations imposed which requires exchanges to join forces with banks to ensure that the trading accounts of their users are in fact being held by human beings. The deadline also comes with the obligation on exchanges to actively disclose their risk management and acquire a security certification to operate as a virtual asset service provider from the South Korean Internet Security Agency. The stringent regulation has now threatened the existence of more than 60 of the countries exchanges as only a handful has managed to obtain the relevant certificates and banking relationships with the final deadline for compliance imposed as 24 September 2021. Not complying with the new regulations does not mean that the exchanges may not operate, the deterring effect will be that non-compliant exchanges may not trade in Won which is South Korea’s currency.

The Financial Conduct Authority (FCA)’s CEO last week in delivered a speech in which he outlined how the regulator will become more proactive by focusing on innovation; assertiveness, adaptiveness and measuring it’s success. This is a motivating stance to take in the everchanging digital asset space. There will always be a first and this time it will be a first for ownership rights in for artwork  sold on a public blockchain by a regulated bank. Fillette au béret (Young girl with a beret) is being sold via the blockchain by Sygnum, the digital asset-focused Swiss bank, shares will be open from end July 2021 in aggregate of USD$4.35m.

BUSTS, ARERSTS, SEIZURES, CHARGES, AND SENTENCING

Hong Kong customs has shutdown a local money-laundering syndicate that used cryptocurrency to process illegal funds totaling USD$155m and arresting the suspected ringleader and other members in the first operation of its kind in the city. UK authorities have moved the mark as it arrested a 39-year-old woman and seized a record-breaking amount digital assets roughly valued at £180m. The MET’s Economic Crime Command unit made the seizure last week on the back of intelligence received about the transfer of criminal assets. Authorities have seized 8,000 kilograms of tabaco, 454,0000 cigarettes, 7 weapons, 24 vehicles and €216,000 in Spain and Portugal. The seizure comes after a joint effort between Spanish and Portugal authorities who in collaboration with Europol who recently created the European Financial and Economic Crime Centre (EFECC) dismantled an organized crime group  involved in excise fraud and the smuggling of tobacco products. Spanish authorities also joined forces with Albanian police and EURPOL to dismantle an organized crime group involved in migrant smuggling and document fraud. The co-op led to 18 arrests and seizure of counterfeited documents, financial documentation, records of the illegal activities, electronic equipment, cash and various drugs.

An ex-Malaysian-lawmaker has been charged with 106 counts of money laundering amounting to USD$2,605,401. Datuk Mansor Musa was charged for money laundering between September 2011 and August 10, 2020 at the Sessions Court in Butterworth and has been granted bail for the duration of trial. In Austria, a former vice chancellor is standing trial for changing a law in order to accommodate the owner of a private hospital in exchange for a donation to his party and a weekend on the hospital owner’s yacht. It is alleged that Heinz-Christian Strache accepted a USD$11,800 donation to push through legislation that will enable clinics to apply for more government funding. Should he be found guilty, a maximum sentence of five years may be imposed.

Roger Nils-Jonas Karlsson, a Swedish national has pleaded guilty and sentenced to 15 years in prison for securities fraud, wire fraud and money laundering charges that defrauded thousands of victims of more than USD$16m. As part of his fraudulent money-laundering scheme, Karlsson induced victims to purchase shares in the crypto scheme called “Eastern Metal Securities” using cryptocurrency such as Bitcoin and other online payment platforms. Instead of actually investing the moneys for the benefit of his clients, the funds were transferred to Karlsson’s personal bank accounts, and he then used proceeds to purchase expensive homes, a racehorse and a resort.

AML TAKE HOME

This week we focus on ransomware attacks, who they target, and what steps to take to reduce your risks though guidance by INTERPOL. We also look at what are the effects of South Korea’s anti-money laundering regulations and an announcement on Picasso’s Fillette au beret. One thing is for certain, the more the crypto space develops, the more intricate the AML playfield becomes.

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