Crypto Crime: Money Laundering Now And Then

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In January 2017, Deutsche Bank agreed to pay US$ 625 million to US and UK financial authorities to settle charges that it helped Russian investors launder up to US$ 10 billion. According to an OCCRP report, Germany’s largest bank paid US$ 425 million to New York’s Department of Financial Services (DFS) and 163 million pounds (US$ 202 million) to the UK’s Financial Conduct Authority (FCA) to settle money laundering allegations. It was the largest fine ever imposed by the FCA for a money laundering offense of a bank. These incidents happened before the dawn of cryptocurrencies.

The FIAT Money Laundering Scheme

In the money laundering scheme around Deutsche Bank, Clients would purchase Russian stocks in Rubles through the bank’s Moscow office and then sell the exact same stock for US dollars through its London office, sometimes on the same day. Russian customers used the branch to transfer more than US$ 6 billion from Russia to overseas accounts including in Cyprus, Estonia, Latvia. In its investigation, Deutsche Bank found more than US$ 10 billion in suspicious transactions that were not properly vetted for money laundering, reported OCCRP.

Such so-called mirror trades are identical transactions made from two or more separate accounts controlled by one party and structured to move funds between jurisdictions or launder money.

The FCA said the Moscow branch of the bank executed more than 2,400 pairs of trades that mirrored each other between April 2012 and October 2014. The bank also facilitated another 3,400 “suspicious ‘one-sided'” trades worth US$ 3.8 billion the FCA said involved the same clients that were conducting the mirror trading.

The US and the UK financial regulators accused Deutsche Bank managers of “failing to maintain an adequate anti-money laundering (AML) control framework” that would have stopped the long-running “mirror-trading scheme” facilitated by the Moscow branch. 

“The purpose of the mirror trades was the conversion of Rubles into US Dollars and the covert transfer of those funds out of Russia, which is highly suggestive of financial crime,” the FCA statement said.

The Crypto Money Laundering Scheme

You don’t need stocks or other real-world assets anymore to launder money in the crypto age. New and highly fungible crypto assets such as cryptocurrencies or tokens replace those real-world assets. Over the last couple of years new asset disposition systems emerged with blockchains, and cryptographic technologies. It took the regulators and governments a few years to grasp the total picture. The public just saw the ICO & crypto hype in 2017 but missed the deep impacts of crypto for the financial establishment.

It is well known that you do not need a bank or bank accounts to buy and sell cryptocurrencies. This is still the case today in most regulatory regimes. It was and is often difficult for crypto companies to open a bank account, but with the right relationships, this is not a problem. For the big crypto exchanges, bank accounts were no more a problem than for the big OTC traders like Circle Trade, itBit, Genesis or CoinBase. In this respect, Bitcoins & Co have been used massively for money laundering since 2016. What the shares were in Deutsche Bank’s scheme are now the cryptocurrencies.

The Russians, for example, have invested billions of dollars in Bitcoins in recent years. It is easy to buy Bitcoins with roubles in Moscow, transfer them to London or an offshore country and sell them there again. In 2017 many lawyers and bankers got involved in these transactions and brokered Bitcoin transactions for their clients. FinTelegram is aware of “dark crypto transactions” that often amount to hundreds of millions of dollars. In most cases, these transactions have taken place “off blockchain”. Wallets were simply sold and bought or traded between the parties.

It was not only via OTC trades how money was laundered in the crypto environment. According to CoinSchedule some $30 billion have been raised in ICOs between 2016 and 2018 in more than 1,500 officially recognized ICOs. As a matter of fact, there have been conducted much more ICOs than those recorded in the official statistics. CoinMarketCap currently lists 2,096 coins and tokens which have been issued in token placements. Most of them are not backed by projects and some of them have only been conducted to launder money with listed crypto.

Sports Sponsorships Went Crypto

Not only Russians were involved in those money laundering schemes. FinTelegram has received information that shows that the sports sponsoring industry deployed cryptocurrencies for sponsoring and hidden payments to players. FinTelegram is aware of sports sponsoring agencies that deployed cryptocurrencies to pay players and events. Some of the large sports sponsoring agencies turned into a sort of OTC traders.

We assume, the massive flow of dark money into the cryptocurrencies, along with the ICO hype, was partly responsible for the enormous price increase in 2018.

Report Money Launderin

FinTElegram is working closely with enforcement agencies and anti-money-laundering agencies. If you are aware of money laundering please share your information with FinTelegram using our whistleblower system. We will check and share them with the respective authorities and the applicable jurisdictions.

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