AML Weekly – 23 August 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.

10X, SEC, RFJ, BINANCE, EL SALVADOR, HAWALA AND ASIC

As the BTC price seems to be on the gaining track this week, 10X issued a report finding that the first half of 2021 has seen a 22% increase in phishing attacks on crypto exchanges. These attacks target information that could then be used to access bank details or crypto exchange accounts and as rightfully put by LaCour, the founder and CTO of PhishLabs “any place where money is flowing in, hackers will follow.” On the DeFi front, the US Securities Exchange Commission (SEC) has warned that where participants of projects are rewarded with incentives or digital tokens, they might be subject to SEC regulation. The US State Department’s Rewards for Justice (RFJ) program has now expanded to include bounties to web informants in crypto. The program will offer up to $10 million for the “identification or location of any person who, while acting at the direction or under the control of a foreign government, participates in malicious cyber activities against U.S. critical infrastructure.”

Binance has filled its position for Global Money Laundering Reporting Officer (GMLRO), with Greg Monahan, a former US Treasury Criminal Investigator. This comes after a great push by the exchange to grow its international compliance team and a snowballing clampdown by regulators in various jurisdictions. De Nederlandsche Bank (DNB) has also issued a warning against Binance as the exchange was operating without the required registration of DBN. A list of all the crypto service providers that are registered with the DNB can be found here. Binance has, however, come back and tightened its customer verification requirements in response to the heightened regulatory scrutiny.

El Salvador’s finance minister has now in an about turn revealed that the use of BTC will not be compulsory which is contra to the Bitcoin Law passed in June which requires all economic agents to accept BTC as payment. New guidance to Hawala providers and financial institutions has been issued by the UAE Central Bank to help combat money laundering and financing of terrorism. The Australian Securities & Investments Commission (ASIC) has issued a warning for individuals trading in crypto assets through unlicensed entities. The Commission has also stressed the benefits of dealing with a licensed entity and that customers must confirm whether the entity holds an Australian Financial Service (AFS) licence or an Australian Market Licence (AML) licence prior to securing engagements.

BRAZIL’S “OPERATION COMPLIANCE”, POLLY, VASPS CHINA, LIQUID, NFTS AND COMPASS

In Brazil, the Federal Police has launched a new probe against crypto-currency-related money laundering coded “Operation Compliance.” This is probe is not the first of its kind as the Brazilian police have seized more than USD$33m is a similar occasion. Brazilian government also disclosed a National Treasury ransomware attack where containment measures were immediately applied and the Federal Police was called, the investigation is still to be finalized. Following the USD$600m hack, the Polly Network has now extended an olive branch to hackers who find and report vulnerabilities in their code and will pay up to USD$500,000.00 for bugs found.

Virtual Asset Service Providers (VASPs) are currently being regulated by a stringent top-down approach in China, despite its clamping down, those who firmly believe in BTC and the accompanying benefits, especially miners, are moving to more crypto friendly jurisdictions. Only time will tell whether the stringent regulation will in fact protect customers, decrease money-laundering and China’s carbon footprint. Japanese crypto exchange Liquid has been compromised and more than USD$97m in cryptocurrencies have been received by the hackers. The compromised wallets are being transferred to four different wallets and have already been converted to ETH through decentralized exchanges to avoid the crypto being frozen.

The Cointelegraph took a deeper look at nonfungible tokens (NFTs), how they are forming part of the money-laundering sphere and how musicians are benefiting from this technology by selling their talents on the principle of deep-fake. Compass Mining, a Delaware-based bitcoin mining and hosting firm has all its bank accounts shut down by JP Morgan without any warning. Whit Gibbs, Compass’ CEO has since taken to Twitter and stated that “Shoutout to Chase for shutting down Compass Mining accounts for doing our part to replace the old guard with self-sovereign, future-focused supporters of hard money.” Chase has not yet provided comment hereon.

BUSTS, ARERSTS, SEIZURES, CHARGES, AND SENTENCING

264 tons of illicit tabaco was destroyed by the Illicit Tobacco Taskforce (ITT) of the Australian Border Force (ABF). The US has frozen The UK Serious Fraud Office (SFO) has charged 5 individuals with bribery and money-laundering. The charges are centered into suspected payment of bribes to win contracts within the UK construction sector. The National Crime Agency (NCA) has extradited an alleged money launderer to the Republic of Ireland to face charges there. The man is wanted in connection with his arrest at Belfast International Airport in May 2018, when more than 180,000 Euros was found in his luggage

In the US, an Ohio man has pleaded guilty to operating darknet-based BTC ‘Mixer’ named Helix from 2014 – 2017, which laundered USD$300m. As part of the plea, it was agreed to forfeit more than 4,400 bitcoin, valued at more than $200 million at today’s prices, and other seized properties that were involved in the money laundering conspiracy – sentencing is still pending. Staying with the DOJ, James Leonard Smith was sentenced to 14 years in prison for his role in an investment fraud scheme which defrauded its victims of USD$5.7m between 2014 – 2017.

AML TAKE HOME

Bounties to informants, paying hackers and NTFs for deep-fake tech, are but a few of the exciting things this we report on this week. Despite ever-evolving tech regulators are clamping down harder than ever as warnings are issued and sentences handed down on bad actors.

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