Europol and INTERPOL agree to take action against digital currency mixers/tumblers

Maria Nikolova

The agencies agree to take action against digital currency mixers/tumblers used to anonymise transactions, which burdens the work of law enforcement agencies to detect and trace suspicious transactions.

A recently held workshop organized by Europol, INTERPOL and the Basel Institute on Governance has seen the agencies agree on stepping up their efforts to combat the misuse of cryptocurrencies by criminals and terrorist financiers to launder money and support other criminal activities.

In particular, the participants agreed to:

  • Increase information sharing in the field of money laundering and digital currencies through the use of channels such as Europol, INTERPOL, the Egmont Group and FIU.net.
  • Regulate digital currency exchangers and wallet providers under current anti-money laundering and counter-terrorism financing legislation in line with obligations already pending with the financial sector.
  • Adopt a clear definition of concepts such as cryptocurrencies, digital currency exchanger, wallet provider and mixer for them to be included in the EU legal framework.

In addition, the enforcement agencies voiced their intentions to take action against digital currency mixers/tumblers. The latter are designed to anonymise transactions, which burdens the work of law enforcement agencies to detect and trace suspicious transactions.

With cryptocurrencies increasingly used to finance criminal activities including terrorism, Europol aims to continue to coordinate across EU Member States and beyond in an effort to effectively respond to this rising threat. In July 2017, two of the largest criminal Darknet marketplaces, AlphaBay and Hansa, which had accepted Bitcoin, Monero, and Ethereum, were shut down with the support of Europol. In addition, Europol has carried out specialised training to assist law enforcement in identifying organised crime networks within the Darknet and their use of cryptocurrencies.

Many European countries remain vigilant when it comes to cryptocurrencies. Earlier this week, the Dutch central bank (DNB) struck a cautious note with regard to Bitcoin and its likes adding, however, that it sees the technologies behind cryptocurrencies as promising. In a Position Paper, the Dutch regulator said that it does not see cryptocurrencies as posing a risk to the financial system stability, as the outstanding value of the cryptocurrency market is small compared to markets of fiat currencies like the euro and the dollar. But the bank noted that sudden depreciation of the value of cryptocurrencies and certain tokens (the result of ICOs) may lead to a significant harm to consumers and warned that there is no safety net against such losses.

The UK government has voiced its concerns about the role of digital currencies for enabling cyber crime. These concerns were highlighted in a report entitled “National risk assessment of money laundering and terrorist financing 2017”.

According to the report, the role of digital currencies in directly enabling cyber-dependent crime is apparent in three areas:

  • Digital currencies often facilitate victim payments to cyber criminals. This includes malware attacks such as ransomware, and cyber crimes-as-an-extortion, in which victim ransom payments are predominantly requested to be paid in Bitcoin.
  • Digital currencies boost the growth of cyber crime-as-a-service. They constitute the primary method of payment for criminal-to-criminal payments and for the purchase of illicit tools or services sold online in the cyber criminal marketplace.
  • Digital currencies play a vital role in laundering the proceeds of cyber-dependent crime, directly facilitating cyber criminal financial flows.

The report also refers to an analysis of suspicious activity reports (SARs) submitted between May 2016 and July 2017. The analysis shows 1,584 of these reports referred to digital currencies, with the number of reports increasing month-on-month. Of these SARs, a number indicated that the suspicion was raised because of the involvement of digital currencies, rather than any suspicion of money laundering or terrorist financing.

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