AML Weekly – 27 September 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.

SUSHISWAP, pNETWORK, VEE VINANCE, BTC.ORG, COINBASE, BINANCE, AND BANK OF VENEZUELA

SushiSwap’s Minimal Initial SushiSwap Offering (MISO) suffered a USD$3m hack earlier this month as the “attacker inserted their own wallet address to replace the auctionWallet at the auction creation.” pNetwork was also affected by a different hack as the BSC-based cross-chain platform reported that an attacker was able to leverage a bug in the system and stole 277 BTC, roughly USD$12,7m. The platform has offered USD$1,5m bounty if the funds are returned. Vee Finance, a protocol on Avalance was the third entity to be hit with a hack totaling USD$35m. The hack consisted of the attacker getting access to 8,804 ETH and 214BTC and in an attempt to restrict further loss, the platform paused services including smart contracts. The open source project, Bitcoin.org was also compromised by advertisement of crypto giveaway – a total of USD$17,800 was received by the unidentified hackers.

Yet another US State Department has reached out to Coinbase in an effort to utilize its blockchain tech – this time the Immigration and Customs Enforcement branch of the U.S. Homeland Security is enlisting blockchain analytic software for a whopping USD$1,6m. Coinbase has also posted a blog on the overview of the use of cryptocurrencies in terrorist financing focusing on an “holistic overview of terror funding using cryptocurrencies across the entire industry and is not limited to Coinbase.” Following the Justice Department (DOJ) and the Internal Revenue Service (IRS) investigations into Binance, the Commodity Futures Trading Commission (CFTC) has also started a separate investigation into the group for insider trading and market manipulation. Moving away from the DeFi space, the Bank of Venezuela has also left its customers without service for 5 days following a terrorist attack.

IRS, STABLE COINS, RANSOMWARE, OFAC, TRUEPIC, ROBINHOOD, CRYPTOSHARES AND MUSK SCAM

The IRS is now seeking powers from lawmakers powers to compel financial institutions to report accounts that process transactions worth USD$600 or more. The US Treasury Department is also preparing a report on stable coins and their potential risk on the financial system – the report will delve into lack of federal regulation and investor protection. The Biden administration is actively targeting ransomware threats in a new drive through imposing sanctions on bad actors. U.S. Treasury’s Office of Foreign Assets Control (OFAC) has taken its first steps against crypto exchanges and issued ransomware an advisory and bitcoinpoliticians.org is a new interesting development that is a crowdsourced data project to track politicians who have skin in the BTC game. The aim of the project is to reveal which American Politicians own BTC and create “more transparency around bitcoin ownership.”

Robinhood is looking at enabling investors of its platform to send and receive cryptocurrencies in and out of the Robinhood app, this comes after the spike in growth in the BTC business. Truepic, a camera tech startup has concluded its USD$26m funding round aimed at development of Software Development Kit (SDK) which could assist devs in identifying deepfakes and image fraud. The  Cryptoshares bitcoin pyramid scheme founded in Zimbabwe has tumbled down as Martin Mhlanga disappeared with USD$6m. Various agencies have issued warning against the new “Musk” scam that is prompted through email campaigns.

AML BUSTS, ARERSTS, SEIZURES, CHARGES, AND SENTENCING

A South London firm has been fined £27,500 over inadequate client due diligence on the two transactions between August 2018 and January 2019. The State Committee for National Security (SCNS) of Kyrgyzstan have busted more that have been operating illegally by attaching unauthorized electrical connections to a distribution company. A Florida businessman and CFO of Russian natural gas company has been arrested on tax charges related to USD$93m hidden in offshore accounts.

COVID cash fraud is rife throughout the globe and another case has been reported where Italian police have seized US$12.89m. The Directorate of Revenue Intelligence (DRI) in India has seized USD$2,7b in heroin and arrested two men. A Money launderer has been ordered to pay £213k by the Bristol Crown Court after selling students places at fake Bath college. Richard Hajjar who is the CFO of Alden Shoe Co., previously pleaded guilty to wire fraud, unlawful monetary transactions, filing a false tax return and embezzling USD$30m. He has now been sentenced to 6 years in jail. A karate teacher in the UK has been sentenced to 4 years in jail by the Inner London Crown Court running a fraudulent business which sold counterfeit goods worth more than £500,000.

TAKE HOME

This week’s report showcases a substantial increase in security breaches and attacks on DeFi platforms where a significant amount of virtual asset platforms were compromised. We also see some creative scams doing the rounds and regulators leaning on private entities such as Coinbase to leverage their tech services in order to better understand and regulate virtual assets.

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