Janet Yellen, former Chair of the Federal Reserve, shared her dislike of Bitcoin in a five-minute speech at CFA Montreal. The ex-central banker mentioned its little transactional volume, connection to terrorist activities as well as money laundering, and inefficiencies for the purpose of processing payments.

Janet Yellen Forgets USD, Tells Financial Analysts Bitcoin is Connected to Terrorism and Money Laundering

A video shared by Francis Pouliot on Twitter showed former Fed Chair Yellen ranting against Bitcoin to a number of attendees at the chartered financial analysts’ meeting CFA Montreal. Pouliot notes:

“Janet Yellen: “I am not a fan of Bitcoin. Let me tell you why”. Former Central-Banker-in-Chief proceeds to meticulous 5-minute rant against Bitcoin, robotically spewing scripted FUD talking points to Finance/Bank VIPs. They’re scared. Buy Bitcoin.”

Janet Yellen: "I am not a fan of Bitcoin. Let me tell you why".

Former Central-Banker-in-Chief proceeds to meticulous 5-minute rant against Bitcoin, robotically spewing scripted FUD talking points to Finance/Bank VIPs.

They're scared. Buy Bitcoin.https://t.co/kEvUlwUZfc

— Francis Pouliot (@francispouliot_) October 30, 2018

As she talked about Bitcoin’s role in money laundering, any CFA with some insight about cryptocurrencies would have realized the same can be said about fiat currency. But the volumes involved in fiat speak volumes about Yellen’s bias against digital currencies.

A report published by data security company CipherTrace concluded that cryptocurrency money laundering is expected to reach $1.5 billion in 2018. The figure is significant only within the digital currency world. Money laundering using fiat currency is another ball game. Danske Bank alone has allegedly laundered $234 billion worth of fiat from 2007 and 2015, an amount that is equivalent to the total market cap of cryptocurrencies.

The United Nations Office on Drugs and Crime has estimated that about two to five percent of global GDP is laundered every year. An amount ranging from $800 billion to $2 trillion in current U.S. dollars. Cryptocurrency money laundering would account to 0.075 – 0.18 percent of that sum. Bitcoin is only one of 2,085 digital coins and tokens available on secondary markets. Its role in money laundering would be even lower.

Yellen also told the audience Bitcoin is not a stable source of value because of its volatility issues.

Its true that the nascent technology has seen a boost in value throughout the years as Bitcoin emerged to the surface, and has just experienced the first full year without gains year-over-year. The instability issue is true to the point that many analysts expect Bitcoin to continue its bullish trend to reach $250,000 (Tim Draper), $280,000 (Tom Waterhouse), and $600,000 (Sam Blackmore).

But it may be only a question of perspective.

It is the BTC/USD rate that is under discussion. Many see the U.S. Dollar as the problem, and in risk of being solved. Lloyd Blankfein, Goldman Sachs CEO, said fiat money is valuable because central authorities force people to use cash. By that logic, if cryptocurrencies do emerge as the mainstream option, fiat currency may meet its end.

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Deutsche Bank has been raided today on the suspicion of money laundering. The German institution was stormed by 170 officials and, weirdly enough, no Bitcoin was found on the scene.

Deutsche Bank Believed to Have Handled $354 Million in “Dirty Money” in 2016

The way the mainstream media talks about Bitcoin in relation to financial crimes, anyone would think money laundering is a completely new phenomenon, only enabled by the revolutionary fintech innovation. Of course, this is not the case and the point has been beautifully highlighted by today’s news that Deutsche Bank AG has been raided based on allegations of concealing ill-gotten funds.

According to prosecutors based in Frankfurt, suspicion of money laundering at the bank dates back to the 2016 Panama Papers.

However, the subsequent investigation focuses on the period between 2013 and 2018. Two of the bank’s employees have been identified as the main suspects in the investigation. All that is known of the pair is their ages, 50 and 46. No names have been given yet.

During today’s raid, 170 German officials stormed Deutsche Bank buildings in Frankfurt. They seized documents – both electronic and physical – as part of the operation that took place just before 9 a.m. this morning.

The five-year investigation prompted by the Panama Papers has uncovered evidence to suggest that the German lender had been involved with the setting up of off-shore accounts for clients in various tax havens. The bank is also accused of failing to report suspicious accounts believed to have been used to receive illegally obtained cash. The investigation centres upon the British Virgin Islands branch of Deutsche Bank. According to a report in Bloomberg, the prosecutors state that over $354 million was processed by the unit in 2016 alone.

Deutsche Bank is one of the most fined financial institutions in all of Europe. In the last decade, it has spent more than $18 billion settling legal disputes and paying fines relating to financial offences. The only bank to have run up a higher bill is the Royal Bank of Scotland Group Plc. It has had to pay $100 million more than the amount racked up by Deutsche Bank.

An analyst at Independent Research, Markus Riesselmann, spoke about the bank’s current situation:

“Just when you thought Deutsche Bank had left its legal troubles behind it, there’s more… Investors really want to be able to focus on the bank’s operating business, so this noise around them is quite unhelpful for the mood.”

Related Reading: Deutsche Bank Veteran Jumps Ship, Joins Japanese Crypto Exchange

Money Laundering Did Not Start with Bitcoin

Despite the narrative in the mainstream media about Bitcoin being used to launder money, Deutsche Bank employees were able to commit their financial crimes without the use of the digital currency at all. Perhaps then, it is not Bitcoin that is the problem.

That said, many big names from the world of traditional finance continue to delight in denouncing Bitcoin for apparently playing a role in global money laundering operations. However, evidence suggests that in fact, less than 1% of Bitcoin transactions are used in connection with any crime – be it financial or otherwise.

Using the threat that something could be used for some nefarious reason as a reason to discredit it is frankly ridiculous. That said, it is nothing new. The internet was attacked early in its existence on the grounds that it would enable child pornography and terrorist organisations, for example.

Granted, the internet has helped facilitate these criminal acts.

However, it has also enabled folks to keep in touch with long lost friends, order just about any product imaginable from the comfort of home and levelled the playing field for content creators of all types. These benefits far outweigh the negative impacts of the technology.

Likewise, Bitcoin might be used by a tiny minority to launder money. However, the financial freedom it is bringing to the world is well worth this slight downside. Besides, as the Deutsche Bank raid today highlights, money laundering will continue with or without Bitcoin.

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The National Police Agency (NPA) of Japan has estimated that there were around 6,000 cases of suspected money laundering relating to crypto in the nation in the first three quarters of 2018. This figure is more than eight times that of the final nine months of the previous year.

Japan’s Crypto Exchange Required to Report Money Laundering Suspicions to Authorities

According to a report cited today by the Japan Times, the number of suspected cases of money laundering relating to cryptocurrency has seen an eight-fold rise in the last year and a half. The document was issued by the NPA and National Public Safety Commission earlier today.

It states that there were almost 6,000 reported cases of suspected money laundering relating to digital currency use during the period January to October this year. This compares to just 669 similar cases between April and December in 2017. The reason for this particular start date is that an update to the law relating to the prevention of criminal money transfers came into effect in April last year.

Naturally, officials are attributing the rise in reported cases to the growing familiarity with the process and understanding of what is required from exchanges under the amended legislation. An NPA spokesperson stated:

“We have seen some large-scale cryptocurrency thefts, and operators are believed to be scrutinising transactions more rigorously.”

The report issued today also highlights the government agency’s fears that digital asset use could be abused. It acknowledged that a lack of regulatory clarity in many jurisdictions around the world made it very difficult to police crimes associated with digital currency.

Since cryptocurrencies can travel quickly and stealthily, with zero acknowledgement of borders, they can be used with greater anonymity and efficiency than with traditional money transfer services.

Some of the examples mentioned in the report are of individuals falsifying identities to gain access to exchanges, and using the same documents or photographs for multiple accounts at the same trading venue. There has also been a suspected incident of a foreign visitor to Japan selling an exchange account to a local digital asset trader.

Related Reading: Japan Updates ICO Regulations While BitTrade Joins Huobi Family

Crypto is Just a Drop in the Money Laundering Ocean

Despite the seemingly rampant increase of suspected money laundering cases using cryptocurrency, the numbers for this new mode of committing a familiar financial crime pale in comparison to those associated with more traditional forms of value transfer.

The document goes on to state that there were a total of 346,139 cases of suspected money laundering involving any means of currency reported during the same January to October period mentioned above. Many of these involved banks or other large financial institutions.

Of course, none of this comes as a great surprise. Money laundering is nothing new and has been committed using every type of currency imaginable. Digital assets often come under intense fire from some in the financial industry for their role as an enabler of such financial crimes. However, figures suggest that Bitcoin transactions for any illegal purpose account for less than 1% all transactions occurring on the network.

The irony is that the biggest money launderers on the planet continue to be the largest banks. Just last week, NewsBTC reported on Deutsche Bank being raided for their involvement in the cleaning of many hundreds of millions of dollars of “dirty money.”

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Major banks are often spewing anti-crypto rhetoric over its potential to be used for money laundering. So it is a little ironic when one of the world’s largest banks gets fined for not doing enough to prevent or detect it.

$10 Million Fine For Morgan Stanley

An article in the Wall Street Journal yesterday reported that Morgan Stanley had been fined $10 million by Financial Industry Regulatory Authority in a probe into its anti-money laundering (AML) program. On Wednesday Finra said that the banking giant had “failed to adequately detect and coordinate the supervision of certain suspicious transactions within its anti-money-laundering program for more than five years.”

The regulator continued that Morgan Stanley’s automated AML surveillance program had not received the critical data required to detect tens of billions of dollars in wire transfers and foreign exchanges from high risk countries.

Finra added that the bank had not implemented procedures that would allow periodic reviews of its systems despite having found fault in them over a five year period from 2011 to 2016. The bank was found to have inefficiently monitored customer accounts for suspicious or heavy activity. Comments were made specifically about penny stock trading resulting in 2.7 billion shares deposited with subsequent sales of around $164 billion.

According to the WSJ the bank said it had accepted the fine without admitting or denying the charges, the official response was;

“We are pleased to have resolved this matter from several years ago. We continuously work to strengthen our controls and have been recognized by Finra for the extraordinary steps we have taken to expand and enhance our AML program,”

Major Banks Investigated For Money Laundering

Morgan Stanley isn’t the only bank to get into hot water over money laundering. Just last month Deutsche Bank was raided for money laundering as reported by NewsBTC. The investigation revealed that the bank is believed to have handled $354 million in ‘dirty money’ in 2016. Evidence suggested that the German banking giant had been involved setting up of off-shore accounts for clients in various tax havens in order to stealthily shift finances.

In September Danske Bank came under the spotlight for money laundering. The CEO resigned amidst allegations of potential money laundering of hundreds of billions of dollars, more than the entire cryptocurrency market cap at the time.

Morgan Stanley is just the latest to be implicated for potential dodgy dealings and failing to detect money laundering and it won’t be the last. The rabbit hole runs deep with big banks which are almost a law unto themselves. This is why most of them are so anti-crypto and also why it needs to become the new decentralized standard for financial activity as it was originally intended.

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The number of Bitcoin ATMs around the world continues to grow each year. For many, this signals a surging demand for real-world locations to trade Bitcoin – a sure sign of growing adoption, at least on paper.

Thanks to exorbitant fees, however, it is difficult to picture folks using the ATMs for the most common uses of Bitcoin today — retail and speculation. Unfortunately, the only economical use case for the machines that beats current options seems to be to launder money.

Just Who’s Using All These Bitcoin ATMs Anyway?

Bitcoin ATMs are being installed all around the world. With New York and Chicago adding new machines recently, the number of terminals according to CoinATMRadar now stands at almost 4,300. These machines are spread across a total of 75 countries. However, more than half of them are installed in the US.

It would be easy to look at the ever-swelling numbers of Bitcoin ATMs popping up around the world and simply draw the conclusion that this is evidence of increased adoption of the world’s most popular digital asset by market capitalisation.

However, when you consider that the average rate charged by one of the machines to make a purchase or sale of Bitcoin is in the region of 10 to 20 percent, it is difficult to imagine anyone using the terminals to take up a position in Bitcoin or to obtain some to make a quick online purchase. After all, who wants to pay an extra 10 to 20 percent to buy something or to make an investment? There are much cheaper ways to shop online and invest in Bitcoin.

Bitcoin ATMs: The Case for Adoption

That said, there is an argument to be made that the ATMs help to cement the idea of Bitcoin in the minds of the general public. For some people, a high-street presence is enough to convince them of the legitimacy of a predominately online service. The most popular and successful online bookmakers in the UK, for example, are those with prominent high-street locations.

There is also something to say for the speed and ease with which a Bitcoin transaction can be made using an ATM. If you just wanted to “see how this Bitcoin thing works” without going through the often-lengthy process of signing up to an exchange, an ATM represents a quick, simple way to buy just a small amount of BTC. This too is positive for adoption, although the huge fees make it unlikely that our hypothetical new Bitcoin convert will make subsequent purchases using such a machine. It therefore seems doubtful that those installing ATMs are doing so purely to drive adoption of the tech.

Bitcoin ATMs: The Consumerist Case

Another potential cause of the rising numbers of Bitcoin ATMs relates to the novelty of cryptocurrencies and their use at real-world terminals. A report on MarketPlace.org claims that business owners are installing Bitcoin ATMs to appeal to a wider range of customers than they might have typically drawn.

With the machines still being new and novel, the belief is that a younger, potentially better off group of people will visit the businesses installing them, simply to see one of the machines in action. Once inside the shop offering real-world Bitcoin trading, the visitor is much more likely to buy something.

This might well work out for the business owners. However, just like the above example of folks using the machines to experiment with the tech, it does not account for the huge sums of money moving through the machines, reported by Bloomberg in December last year. One firm offering the machines cited by the publication is believed to be generating around $35 million in revenue each year from machines.

Bitcoin ATMs: The Criminal Case

Although Bitcoin ATMs might well be driving adoption on a small scale (or at least familiarising people will the concept of crypto) and helping business owners attract a few extra customers, most of the evidence suggests that these terminals are being used for much more nefarious reasons.

Bitcoin ATM fee structures price many legal use cases out of the market.

The report in Bloomberg claims that many Bitcoin ATM providers blatantly disregard what scant financial regulation governs the fintech innovation. Arnold Spencer, a representative of Coinsource (one of the largest Bitcoin ATM operators in the world), believes that a huge number of Bitcoin ATMs are operating outside of the law and could be facilitating money laundering to the tune of up to $500 million each year.

Given the fact that most money laundering operations cost those involved around 30 percent of the total amount needing cleaning, a Bitcoin ATM provides a competitive solution for criminals. The speed and simplicity must also be appealing to those seeking to launder money too.

Owing to the fact that US regulators are still trying to get their heads around Bitcoin and have not the resources to tackle those terminals that illegally forgo identity checks and other regulative measures, it seems that the only real financial demand for the terminals is coming from criminals. This is clearly not a good look for the cryptocurrency given that those who champion it have spent much of its existence trying to distance the financial and technological innovation from its criminal past.

For the terminals to provide the kind of adoption many of us in the crypto space would love to see, the operators need to get real about their pricing structures. The machines themselves are not particularly expensive to buy outright – Bloomberg states that one can be picked up for a couple of thousand dollars. If those owning them were serious about Bitcoin, its adoption, and lessening the ratio of nefarious users to non-criminal ones, they need to drop the rates charged and fast.

Related Reading: Banks are Better than Bitcoin (When It Comes to Money Laundering)

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Strange things occur in the cryptocurrency market. Prices spike following negative news, and positive news is met with a strong sell-off. Cryptocurrency exchange founders are accused of faking their own deaths and making off with their customer’s assets. But not much is stranger than seeing someone pay over $300,000 in fees to send a mere fifteen bucks worth of Ether.

Recent transactions have been discovered on the Ethereum blockchain that show a transaction for 0.1 Ether, valued at approximately $14.80 at the time the transaction was sent by paying 2,100 ETH in fees.

Mysterious Ethereum Account Sends 0.1 Ether, Pays 2,100 ETH in Fees

The cryptocurrency community is running wild with speculation as to why a mysterious Ethereum wallet sent 0.1 ETH while paying an astronomical 2,100 ETH in fees. The fees total over $302,000 at today’s Ethereum price of $144, while the Ether itself that was sent is just a measly $14.40.

Someone just paid 2100 ETH for transaction fees.

That is over $300,000 spent to transfer $15.

Did they mistaken the fee with sending value? pic.twitter.com/Te1NKlcD6K

— Alec Ziupsnys (@AlecZiupsnys) February 19, 2019

At first glance, the sender appears to have made a user error, incorrectly swapping the transaction fee with the full value they were attempting to send. Crypto users commonly make mistakes when sending crypto to one address to another, occasionally even sending crypto to the wrong asset type or wallet address. It’s the reason it is always recommended users double- and even triple-check the receiving address before hitting send and signing a transaction.

Related Reading | Crypto Analyst: Investing in Ethereum Could Be More Profitable Than Bitcoin

Taking a journey down the rabbit hole of an Ethereum wallet, keen-eyed crypto users discovered that this wasn’t the only transaction like this example. In just one day, the wallet address sent 0.170000000000000002 ETH or roughly $24, for a total of 3990.00000000000004 ETH in fees. The fees total nearly $575,000 at today’s prices.

The account either has money to burn, is driven by a malfunctioning bot, or potentially has an ulterior motive. What that motive is, though, is yet to be understood, however, crypto sleuths everywhere are on the case.

Are the Strange Ethereum Transactions Tied to Money Laundering?

Some speculate that the high amount of fees are being used to launder money in some way. The Twitter account for the decentralized exchange Saturn Network explains how the transaction fees could be used to wash dirty funds so they appears as “honest miner income.”

that's money laundering. You do not broadcast this tx, you mine the block with this tx yourself. Once the block is included in the blockchain it is no longer dirty stinky stolen ether. It is honest miner income.

— Saturn Network (@SaturnProtocol) February 20, 2019

The transaction wasn’t publicly broadcasted, which could suggest that the block the transaction was in was mined by a complicit miner.

Related Reading | Etheruem Rally Takes a Break, Still Bullish Above $144

Whatever the case may be, the wallet is either sending these transactions on purpose for one reason or another – potentially to launder money – or is repeatedly making some extremely expensive mistakes. One thing is for sure: these transactions were sent with some of the fastest speeds the Etheruem blockchain has seen.

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Following a Spanish investigation into a gang’s recently-busted money laundering operation, the nation’s police force claim to have exposed gaps in the European Union’s regulations designed to prevent money laundering. The group reportedly exploited the lack of  rules regarding Bitcoin trading terminals, popularly referred to as Bitcoin ATMs.

Authorities believe the criminal group used the machines to “clean” more than $10 million. Eight suspects have now been arrested from Spain and South America.

Bitcoin ATM Money Laundering Gang Invites Scrutiny into EU AML Regulations

According to a report in American Banker, La Guardia de Civil, a division of the Spanish police force, claim the EU’s money-laundering regulations are not adequate. They argue that since the rules aimed at preventing money service providers from trading with non-verified clients don’t apply to operators of Bitcoin ATMs, the machines provide an easy way for criminals to launder money.

The claims come in the aftermath of a bust involving Spanish nationals and South American drug dealers. Authorities first announced that they had taken down a money laundering scheme involving Bitcoin ATMs in May of this year. Eight suspects have been arrested, hailing from Spain and South America.

According to an anonymous official from La Guardia de Civil, the gang had hired Bitcoin ATMs from unnamed (and unassociated) trading companies. They had them installed in a Madrid office that was fronting as an international remittance and cryptocurrency trading centre.

Bitcoin ATMs are springing up around the world.

The gang allegedly used the business to clean some $10 million for South American drug dealers. The nature of the company used provided the perfect justification for large amounts of money being sent between Spain and other nations without arousing suspicion.

As part of the investigation, the two Bitcoin ATMs, four cold wallets, and 20 online wallets were seized. The authorities are now working on proving a link between the wallets and the suspects.

The last few years has seen the number of Bitcoin ATMs around the world multiply rapidly. According to monitoring website, CoinATMradar, there are now more than 5,400. Most of these machines are located in the US. Earlier this year, NewsBTC reported on the city of Chicago receiving 30 new terminals.

For their proponents, and fans of Bitcoin in general, the ATMs are a great way to drive adoption and to familiarise the public with the technology. However, for regulators, the machines are clearly proving to be something of a headache as they represent an entirely new way for criminal networks to clean money. 

For now, most jurisdictions do not enforce as strict anti-money laundering regulations on Bitcoin ATM operators. However, this seems likely to change given the scale of the Spanish operation recently taken down.

Related Reading: Short The Bankers: Another Major Bank Ordered Closed for Money Laundering

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Silk Road, a dark web drug market founded by Ross Ulbricht under the pseudonymous nickname “Dread Pirate Roberts” has had a critical impact on Bitcoin. While it’s associated with the dark web marketplace has forever left a stain on the crypto asset, Bitcoin may also not be where it is today if it didn’t catch on as the currency of choice for Silk Road, due to the layer of anonymity it provides.

Silk Road has now been defunct for going on over five years now, yet its still harming the reputation of Bitcoin and crypto, and its use in a money laundering case that has ties to Silk Road couldn’t have come at a worse time for the industry, as politicians and financial regulators look to demonize the crypto asset for its use in illicit criminal activity.

Ohio Man Used Bitcoin to Launder $19 Million in Silk Road Proceeds

Silk Road, a dark web marketplace named after an ancient network of trade routes in the Asian-Pacific region, has been out of business since 2014 when its pseudonymous founder was arrested. But it’s long-term impact on a cryptocurrency founded by yet another pseudonymous creator is still being felt – both positive and negative.

While Bitcoin, created by the mysterious Satoshi Nakamoto may never have made it this far without it being used for its intended use – as a peer-to-peer digital cash system – it also continues to have its reputation damaged by Silk Road by association with the criminal activities that were found there.

Related Reading | Dr. Doom Roubini Fuels Criminal Crypto Concerns With Scathing Bitcoin Op-Ed 

Silk Road sold everything from humans to bombs, to drugs. And it was mostly bought and sold using Bitcoin. To this day, Bitcoin is called out for its use in money laundering, cybercrime, ransomware, and more – while fiat currency is treated like a saint. Drug addicts often roll up the paper currency and use it as a drug delivery vehicle, or pay for the said drugs with cash, yet even the United States own Secretary of Treasury believes that cash isn’t as associated with crime as Bitcoin is.

In this latest example of Bitcoin and its reputation being dragged through the mud at not fault of its own, an Ohio man named Geoffrey S. Berman is being accused of laundering more than $19 million in profits he generated from the proceeds of drug sales on Silk Road. Authorities claim that Berman claimed he earned the Bitcoin through his mining operations, but was later caught and all funds were seized.

Prosecutors say the arrest “should be a warning to dealers peddling their drugs on the dark web that they cannot remain anonymous forever, especially when attempting to legitimize their illicit proceeds,” suggesting that authorities are getting better and better at tracking Bitcoin transactions.

Related Reading | US Treasury Increases Regulatory Pressure on Crypto, Warns of Its Unlawful Uses 

Berman is charged with concealment money laundering and engaging in a financial transaction using illegally obtained funds, and is facing up to 30 years combined in prison for the two offenses should he be found guilty. With the current climate in Bitcoin, prosecutors may seek to make an example out of Berman, as they fear Bitcoin is used widely for such reasons.

Regulators across the globe and in the United States are taking a tougher stance on Bitcoin and other cryptocurrencies ever since the news broke that Facebook would be launching a crypto asset of their own, sparking widespread outrage and concern.

While power and privacy are the main concerns over Facebook’s libra crypto token, Bitcoin and the rest of the crypto market is being given a bad rap for its involvement in illicit crimes, such as ransomware, tax evasion, and money laundering. To further combat money laundering facilitated through crypto assets, 15 different countries have come together to create a crypto monitoring system.

FATF to Manage New Global Crypto System To Combat Money Laundering

Fifteen total countries, including G7 members, have pledged their support in creating a new system to combat crypto-based money laundering across the globe. The system is still quite a ways off and scheduled to roll out “a few years later” after “measures” are detailed by 2020, suggesting that the system won’t see the light of day until earliest 2023 – barring any major setbacks along the way.

Related Reading | North Korea’s Cryptocurrency Cyber Attacks May Further Fuel US Fear of Bitcoin 

The system would collect and analyze transactional data from individuals who use crypto assets to move funds around the world, and would be managed by the Financial Action Task Force (FATF).

The Financial Action Task Force is an intergovernmental organization founded in 1989 aimed at thwarting international money laundering and terrorism financing. As technologies advance, such is the case with crypto and blockchain, the systems FATF uses to prevent the crimes from occurring or gather evidence after the fact must improve as well.

Earlier in the year, FATF issued a controversial requirement that all “virtual asset service providers,” namely crypto exchanges and other crypto-buying and selling platforms, must pass along private customer data involving crypto transactions. The data required includes sender, beneficiary, account numbers, and other transactional data.

US To Support Initiative, Says Bitcoin Is Worse Than Cash For Money Laundering

Following additional meetings with G7 representatives this past month, United States Secretary of Treasury Steven Mnuchin used the shared concerns his peers had at a recent summit set to discuss crypto-based money laundering, to further bash Bitcoin and cryptocurrencies. The Secretary also made some stark warnings to crypto exchanges that don’t comply with the rules defined by FATF.

Related Reading | The United States’ Distrust in Facebook Libra Is Spilling Into Cryptocurrency

Mnuchin plans on holding crypto exchanges as accountable for following regulatory guidelines, much as traditional finance and banks are.

“We’re going to make sure that bitcoin doesn’t become the equivalent of Swiss-numbered bank accounts, which were obviously a risk to the financial system,” he said.

Mnuchin is hell-bent on blindly attacking crypto, as is evident by his refusal to entertain that US dollars – cold, hard cash – are used for money laundering as much or more than cryptocurrencies over the years.

A man who created his own Bitcoin ATM has pleaded guilty of money laundering and related crimes. Kunal Kalra, a resident of Westwood, California, used his machine and other means to clean as much as $25 million between 2015 and 2017.

Court documents claim that Kalra also exchanged Bitcoin for cash with a range of criminals. Amongst these are thought to be dark net drug dealers.

Bitcoin ATM Launderer Pleads Guilty of Operating an Unlicensed Money Transmitting Business

According to a report in TheNextWeb, the California-based Kalra goes by a few aliases. These include “kumar”, “shecklemayne”, and “coinman”.

Court documents reported by the publication state that his high value cash for Bitcoin trades constituted the operation of an unlicensed money transmitting business.

Kalra is thought only have only accepted transactions of more than $5,000 but would ask few, if any, questions about where the money had come from. The filings state that Kalra’s business was active between May 2015 and October 2017.

Bitcoin ATMs are springing up around the world.

With private clients, Kalra offered these high value cash for Bitcoin trades with scant background checks. We know this because during one of the many sting traps Kalra has fallen into he was even told that the money was involved in drug trafficking. On that occasion, in 2017, an undercover agent asked to exchange $400,000 of drug money into Bitcoin. He agreed to the deal.

As part of the money transmitting business, Kalra had a Bitcoin ATM that he reportedly made himself. The machine featured no know-your-customer or anti-money laundering checks. Kalra profited just as any other Bitcoin ATM operator would – by charging a commission.

The California man pleaded guilty to running an unlicensed money transmitting business. He also stated that he knew that many of the trades he facilitated involved the drug money of dark web dealers. He has yet to be sentenced but may face up to a maximum of life in prison.

As part of his operation, Kalra is thought to have used bank accounts in other people’s names, some of them fake business accounts. These provided him enough obscurity to launder money out of the gaze of law enforcement, for a time at least.

The court documents state that $889,000 in cash and 54.3 Bitcoin have been seized from Kalra, as well as a scattering of other crypto assets.

Given their instant Bitcoin-for-cash functionality, Bitcoin ATMs appear to have been a rather popular means of cleaning money for criminals. Earlier this year, NewsBTC reported on a ring of Spanish and South American drug traffickers using a machine in Madrid to clean money involved with the international cocaine trade. This prompted the police in Spain to call upon the European Union to overhaul its money laundering regulations to make them more suitable for an ever-digitising economy.

Related Reading: Are Bitcoin ATMs Driving Adoption, Criminality, or Consumerism?

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