Europol's 2017 Virtual Currencies Money Laundering Typologies Paper (Interesting read)

https://www.docdroid.net/skgahxn/virtual-currencies-money-laundering-typologies.pdf

EDIT: NEW MIRROR

VIRUSTOTAL: https://www.virustotal.com/#/file-analysis/YTAyMTFlZjEwMWZlYzcxNmM1NGRjNzIwNTg4N2E4Mjk6MTUxNjA1NDY4Mg==


Comments


[5 Points] ForLOLSerious:

Interesting read

What's it say?


[2 Points] qemist:

Europol Unclassified \Gamma Basic Protection Level

Europol Unclassified \Gamma Basic Protection Level Page 2 of 13

Table of Contents LIST OF ABBREVIATIONS ........................................................................................... 3 I

\Gamma INTRODUCTION .................................................................................................... 4 II

\Gamma CONVERTIBILITY ................................................................................................. 4 III

\Gamma CURRENT LEGISLATION ..................................................................................... 5 IV \Gamma OPPORTUNITIES VS VULNERABILITIES ............................................................... 5 V \Gamma DETECTED TYPOLOGIES ......................................................................................... 6 VI

\Gamma CONCLUSION .................................................................................................... 12

Europol Unclassified \Gamma Basic Protection Level

Europol Unclassified \Gamma Basic Protection Level Page 3 of 13

LIST OF ABBREVIATIONS
ATM Automated Teller Machine AMLD Anti-Money Laundering Directive BTC Bitcoin BTM Bitcoin Teller Machine CDD Customer Due Diligence EU European Union EUR Euro FATF Financial Action Task Force FIU Financial Intelligence Unit ID Identity Document IP Internet Protocol LEA Law Enforcement Agency KYC Know-Your-Customer ML Money Laundering MSB Money Service Businesses OCG Organised Criminal Group STR Suspicious Transaction Report TF Terrorism Financing VC Virtual Currency

Europol Unclassified \Gamma Basic Protection Level

Europol Unclassified \Gamma Basic Protection Level Page 5 of 13

They act as brokers between the virtual and the real world and offer a way in which one can buy or sell virtual currencies for a variable fee. A virtual currencies exchange works like any other currency exchange: Customers can convert a fiat currency into a virtual one or the other way around. An increasing number of exchanges also allows for users to perform exchanges between the different types of virtual currencies. Virtual currencies exchanges are not regulated in a harmonized way in the EU and since they

constitute the intersection between unregulated virtual currencies and the regulated fiat currency financial system, they represent a potential strategic point for intervention by law enforcement authorities in order to mitigate the risk of money laundering.

III \Delta Current legislation The EU decided that regulatory efforts should especially focus on virtual currencies exchanges: \Theta Transactions with virtual currencies benefit from a higher degree of anonymity than classical financial fund transfers and therefore entail a risk that virtual currency may be used by terrorist organisations to conceal financial transfers. There is no reporting mechanism equivalent to that found in the mainstream banking system to identify suspicious activity. Possible further risks relate to the irreversibility of transactions, means of dealing with fraudulent operations, the opaque and technologically complex nature of the industry, and the lack of regulatory safeguards\Lambda 3. Currently virtual currencies are not regulated at EU level. However this does not imply that

they are unregulated in all Member States as national legislation may exist. As such, the European Commission put forth a proposal to amend the current 4th Anti-Money Laundering Directive (AMLD) with specific provisions dedicated to the prevention of the misuse of virtual currencies for money laundering and terrorism financing (TF) purposes. In July 2016 the Commission proposed to include virtual currency exchange platforms and custodian wallet providers4 as obliged entities under the AMLD.

It is thus expected that in the near future virtual currencies exchanges and virtual currencies "wallet providers" will have to apply Customer Due Diligence (CDD) when conducting their activities. They will also be obliged to implement preventive measures, to monitor and to report suspicious transactions to their FIU.

IV

\Delta Opportunities vs Vulnerabilities From a law enforcement perspective, virtual currencies exchanges are a substantial source of

information on individual clients - typically storing name, contact details including verified email and phone number, IP logs, activity logs comprising all transactions on the exchange as well as deposits and withdrawals, all bitcoin and other cryptocurrency addresses used by the client, personal messages, payment information, proofs of ID, sometimes complemented by a self-generated image of a person holding the ID and proofs of home address. Europol maintains an updated list of contact points from all major virtual currencies exchanges and provides these contacts to Member States upon request. Most exchanges cooperate with law
3 Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and amending Directive 2009/101/EC, 2016/0208 (COD), 05.07.2016, European Commission, p. 10 4 A wallet provider is an entity that provides means (software application or other mechanism/medium) for holding, storing and transferring bitcoins or other virtual currency (FATF Report on Virtual Currencies).

Europol Unclassified \Gamma Basic Protection Level

Europol Unclassified \Gamma Basic Protection Level Page 6 of 13

enforcement authorities and respond to their enquiries either directly to a request coming from LE email address or upon presentation of a court order. Even though the clear majority of virtual currencies exchanges already requires identification and conducts CDD, there are still a few that aligned their services towards the needs of criminal clients by enabling the purchase and sell of virtual currencies without requiring a proper form of identification or verifying the provided identities.

Additionally, criminals using legitimate exchanges opt to apply various techniques to circumvent pre-set verification processes and also take advantage of the payment methods offered by exchanges. Fake identity documents are available online and via Darknet markets enabling criminals to

stay anonymous. Some exchanges have already upgraded their CDD requirements and are now putting in place Skype verification calls or require customers to produce self-generated images holding their ID and papers with a random text written on it. However criminals will almost certainly find new ways to bypass the current verification processes. Virtual currencies exchanges offer different payment methods to buy or sell virtual currencies,

predominately bank transfers and credit or debit card payments. Some also offer the use of Money Service Businesses (such as Western Union and MoneyGram), PayPal, bank cheques and even cash (i.e. cash deposits, cash in mail). Money laundering vulnerabilities associated with the use of cash are commonly known. The use

of cash is widely recommended by criminals discussing in online forums as a simple means of avoiding tracing or detection. Suspects can engage in bitcoin to cash transactions either with their associates or with third parties they encounter on localbitcoins.com or on various bitcoin events, such as regular bitcoin meetups in larger cities.

Another simple way to stay anonymous is the use of prepaid credit and debit cards which can be bought in supermarkets, stores or online.
At 247exchange.com and Cex.io customers can buy bitcoins with a prepaid credit and debit cards instantly without the need to supply any proper form of identification. V

\Delta Detected Typologies A number of investigations carried out in 2017 demonstrate how virtual currencies are used to

conduct money laundering operations, most of them, via the abuse of virtual currency exchanges and at times with their complicity.

                      

Europol Unclassified \Gamma Basic Protection Level

Europol Unclassified \Gamma Basic Protection Level Page 7 of 13

Operation AVARICIOUS A virtual currencies exchange complicit with money laundering activities. Following an investigation led by US authorities a Russian national operating one of the largest virtual currency exchanges in the world5 BTC-e was arrested in Greece in July 2017. According to the publicly available indictment6 against BTC-e the operator \Delta \Theta \Lambda \Xi -e was an exchange for cybercriminals worldwide, and one of the principal entities used to launder and liquidate criminal proceeds from digital currencies, including Bitcoin, to fiat currencies, \Pi \Sigma \Upsilon \Phi \Psi \Omega \Pi \Sigma ff fiflffifl \Omega ffl\Phi \Phi ij' ^\Psi jffl' i\Sigma \Omega *\Psi _\Phi *`fl ,ssae \Theta \Lambda \Xi -e facilitated crimes, including computer hacking, ransomware, fraud, identity theft, tax refund fraud schemes, public corruption, and

drug trafficking. BTC-e lacked basic anti-money laundering controls and policies [such as Know-Your-Customer] and, as such, was attractive to those who desired to conceal criminal oejffl\Upsilon **\Omega `flo/


[1 Points] pymmit:

it's gone?


[1 Points] pymmit:

This was an awesome release to look at.

To the people talking shit, this probably won't ever have any effect on your life. Vendors however would be wise to read this article to help adapt to changing landscape.


[-2 Points] None:

[deleted]