It appears the global fight against Bitcoin money laundering has turned up a notch.
Last week, more than 400 financial investigators from money laundering, cybercrime and financial intelligence units, as well as experts in asset recovery and relevant private sector representatives, met at the Global Conference on Countering Money Laundering and Digital Currencies in Qatar.
Held from January 16 to 18, 2017, the event was organized by the Working Group on Virtual Currencies. This is a joint initiative of Europol, the law enforcement agency of the European Union; Interpol, an intergovernmental organization facilitating international police cooperation; and the Basel Institute on Governance, an independent not-for-profit competence center specializing in financial crime.
According to the Basel Institute on Governance, the conference “aimed to provide law enforcement agencies and the private sector with the tools and understanding necessary to detect, counter and investigate criminal uses of virtual currencies.”
As a concrete result, attendees agreed on a list of shared recommendations.
Cracking Down on Bitcoin
Several of the recommendations specifically refer to Bitcoin and digital currencies, while others concern money laundering in general. If the recommendations are followed, they would significantly increase regulation of the digital currency space worldwide and make anonymous use of the digital currency much more difficult.
Perhaps most importantly, the recommendations suggest that bitcoin exchanges and wallet providers should be regulated in much the same way as the financial sector. While the digital currency space is still not officially regulated in many countries, background and identity checks through Know Your Customer (KYC) and Anti-Money Laundering (AML) regulation could become mandatory for anyone who wants to buy, sell or store bitcoin.
Additionally, bitcoin mixing services — which exchange bitcoins for different bitcoins to break the path to any particular piece of currency — are subject to several recommendations.
“All countries are advised to take action against Digital Currencies Mixers/Tumblers,” per a release from the Basel Institute on Governance. “Such services are designed exclusively to anonymize transactions and to make it impossible for Law Enforcement Agencies to detect and trace suspicious transactions. The existence of such companies should not continue to be tolerated.”
The recommendations also suggest that law enforcement agencies should cooperate across borders in identifying “suspicious Bitcoin addresses that threaten economic stability” and even that “unexplained wealth” should be considered a crime.
Connection to Cybercrime
The Working Group on Virtual Currencies was established in September of last year, in response to the popularity of digital currencies like bitcoin for illegal purposes.
In a 2015 report, Europol wrote that bitcoin was becoming the “common currency” for cybercriminals, accounting for over 40 percent of all identified criminal-to-criminal payments.
“Bitcoin is no longer used preferentially within Darknet marketplaces but is increasingly being adopted for other types of cybercrime as well,” the agency noted.
Examples include cryptoware like CryptoLocker and Curve-Tor-Bitcoin (malware that locks computers and demands a ransom to unlock it), DDoS extortion, commercial distribution of child abuse, credit card fraud and more.
See the full list of recommendations from the Working Group on Virtual Currencies here.
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