Tens of billions of dollars laundered every year! How to break the black market of virtual currency money laundering

王阳策略 · 2023-10-17T03:40:34.000Z
The “virtual currency” that scares people. Take Bitcoin as an example. Ten years ago, 10,000 Bitcoins could only buy one pizza. And now, in 1202, which is even more magical than 2020, from January to April, Bitcoin "cheated all the way", breaking through the US$30,000 mark per coin and then soaring to a historical high of more than US$64,000. The market value It once reached US$1.2 trillion, surpassing the world’s three largest banking giants, JPMorgan Chase, Bank of America and The total market value of ICBC (US$1.08 trillion) is equivalent to more than 10% of the entire physical gold market. From zero to $1 trillion, Bitcoin took less than 10 years, 3.6 times faster than Microsoft.
The "virtual currency" that people are terrified of. Take Bitcoin as an example. Ten years ago, 10,000 Bitcoins could only buy one pizza. But now, in 2020, which is even more magical than 2020, from January to April, Bitcoin "has been on a roll", breaking through the $30,000 mark per coin and soaring to a record high of more than $64,000. Its market value once reached $1.2 trillion, surpassing the world's three largest banking giants, JPMorgan Chase, Bank of America and
The total market value of ICBC (US$1.08 trillion) is equivalent to more than 10% of the entire physical gold market. It took Bitcoin less than 10 years to go from zero to US$1 trillion, 3.6 times faster than Microsoft.
(Picture from the Internet)
However, it is not only investors who are enthusiastic about Bitcoin, but also criminals who use Bitcoin to launder money. Seeing the golden Bitcoin market, Master Goose has no other thoughts but four words in his mind: technology for good. Now, let Master Goose take you into the unknown "virtual currency money laundering" black industry chain.
1
More and more criminals are choosing virtual currencies such as Bitcoin to launder money
In the past few years, domestic virtual currency money laundering crimes were not common, but they have suddenly increased in recent years. Mr. Goose searched the domestic virtual currency-related money laundering cases on the judgment document website. The number of cases in 2020 was significantly higher than the number of cases before 2019, and the number of cases from 2021 to date has exceeded the whole of 2019.
(The number of money laundering cases, such as money laundering, concealing and hiding criminal proceeds, and assisting in information network criminal activities, has increased year by year)
Among virtual currencies, Bitcoin is a must-have option for most criminals to launder money. The amount of funds in this black industry chain of money laundering with Bitcoin is staggering. Compared with 2019, the number of Bitcoin addresses that transferred illegal funds in 2020 increased, and the proportion of each transaction with a value of tens of millions or even hundreds of millions of dollars also increased. In other words, billions of dollars were transferred to Bitcoin addresses for illegal funds each year in 2019 and 2020, which is tens of billions of RMB.
(Image taken from Chainalysis 2021 Crypto Crime Report)
Why are criminals suddenly turning to Bitcoin for money laundering? The reasons behind this are very complicated. There is the background of the gradual maturity of the Bitcoin market and the worsening global epidemic. Mr. Goose believes that the main reason for the intensification of this shift in China is the "card-cutting operation" that began at the end of 2020. The traditional money laundering model that relies on domestic bank card withdrawals has been severely impacted, and criminals have to change their strategies. "Bitcoin money laundering" naturally becomes a more cost-effective choice.
2
Why do criminals favor Bitcoin for money laundering?
To answer this question, we have to start with the nature of Bitcoin itself. Although Bitcoin is called a "coin" or "virtual currency", it has never been a real currency in my country. A Bitcoin is essentially just a string of 64-bit code, a special solution in the digital ocean of blockchain. Unlike all currencies, Bitcoin does not rely on a specific monetary institution to issue it. It is generated through a large number of calculations based on a specific algorithm, and the total amount is always kept at 21 million. The Bitcoin economy uses a distributed database composed of many nodes in the entire P2P network to confirm and record all transactions, and uses cryptographic design to ensure the security of each link in the circulation.
(Picture from the Internet)
Due to the nature of the above-mentioned digital technology, Bitcoin has "decentralization" (no centralized issuer, point-to-point transmission), "high scarcity" (the total amount is limited), and "high liquidity" (use without geographical restrictions, cross-border Convenient transmission) and "anonymity" (the key is unique and transactions have non-linear causality), which are called "future currency". However, in the eyes of criminals, these digital characteristics of Bitcoin have become a weapon for money laundering. First, the relative anonymity of Bitcoin transactions makes tracing difficult. All that is required to open an account on most overseas Bitcoin platforms is a mobile phone number or email address, which hardly includes the provision of any personal identity information, let alone a real-name system.
Even though anti-money laundering regulatory requirements are becoming increasingly stringent, the ability of various exchange platforms to conduct KYC (know-your-customer) real-name verification is uneven. Some platforms simply do not have the ability to verify whether the ID number, address and other information filled in by users when registering is true. Users often use false identity information to conduct money laundering activities, and KYC real-name verification is often ineffective.
(Picture from the Internet)
As a typical application of blockchain, every transaction information of Bitcoin will be pushed to all nodes in the network, but it only discloses the electronic wallet address and the transfer amount. Who is behind the Bitcoin address? It is difficult to identify with traditional technical means. Like the "landing" of IP addresses, it is an eternal topic for punishing cybercrime. Although it is impossible to directly obtain identity information, it is technically possible to piece together the last piece of the puzzle through transaction behavior, objects, amounts, and capital flows. Therefore, it is relatively anonymous. What kind of technology is there? Master Goose will talk about it below. Secondly, Bitcoin circulates quickly and cross-border circulation is unrestricted. Compared with traditional currencies, Bitcoin circulates faster and more conveniently. There is no foreign exchange control and no limit. As long as there is a network, it can be quickly transferred and circulated. Money laundering in the world is difficult to break only by speed. "Black money" can flow from China to foreign countries in a very short time with the help of Bitcoin, which makes it very difficult for the police to investigate and collect evidence. Finally, the recognition of the value of Bitcoin is getting higher and higher. Money laundering gangs convert huge amounts of black money into Bitcoin assets, and then what? How do they withdraw cash? Assets are in the Bitcoin system and are not easily affected by inflation. In the current investment context, they even have huge speculative value, and they are absolutely confidential. They are almost the natural "safe" for black money. From being the "top spot" in virtual currency transactions on the dark web, to more and more countries and businesses recognizing the value of Bitcoin, Bitcoin ATMs are spread all over the world, and even Musk has announced that customers will be allowed to purchase Teslas with Bitcoin.
(Picture from coin.dance, countries in the green area recognize the legality of Bitcoin)
Black industry gangs are happy to be unregulated. Unless they need it urgently, they generally will not easily withdraw cash and come to the traditional financial system to "cause trouble." Even if they withdraw cash, due to the existence of the platform's risk control system, they will not withdraw large amounts of cash, and they can even "have three burrows" to disperse assets again in the Bitcoin system to various accounts, cross-border to countries with weak supervision, and withdraw cash in batches without leaving any traces. However, is it really that easy to launder money with Bitcoin? Obviously not. Regulatory authorities are not just there to eat dry rice. Anti-money laundering supervision is constantly increasing, and trading platforms are gradually increasing verification costs and upgrading KYC real-name verification capabilities. From uploading ID cards to facial recognition, it is no longer easy to impersonate someone. As long as criminals dare to show their heads and withdraw cash, it is impossible not to show their fox tails, and they are blockchain-style fox tails that can be checked on the entire network. However, in order to fight against supervision, virtual currency running points have begun to rise again.
3
What is virtual currency scoring?
I believe that friends who often follow Goose Master must be familiar with the term "running points". Using some seemingly "harmless" disguises such as "e-commerce brushing orders" to collect QR codes, payment codes and even bank card accounts from "melon-eating masses" from the public, top up points, and withdraw points - it sounds like a "profitable" business, but it also has a name that doesn't sound so good: money laundering. Based on the payment method and capital turnover platform adopted by "running points", "running points" can be divided into "second-party payment running points" (using banks), "third-party payment running points" (using large-scale online payment platforms such as WeChat Pay and Alipay), and "fourth-party payment running points" (using aggregated payment platforms).
(Picture from the Internet)
Using these payment methods, various platforms that ordinary people would never think of have also been linked to money laundering crimes: game point cards, phone recharges, live broadcast rewards... and now, the business of running points has been upgraded to virtual currency running points. Typical virtual currency running points are very similar to QR code running points. Both require a deposit to the running points platform. The difference is that the deposit is replaced by a mortgaged virtual currency. The most common one is "USDT running points". However, due to the large number of such running points, many running points platforms have evolved into pyramid schemes. If the timing is not right, they will run away with the currency, which has seriously cheated the runners. Therefore, this virtual currency running points model has become less and less popular with runners. In practice, there are more atypical running points in the form of proxy purchases. Both are essentially "taking money from others and eliminating disasters for others", confusing the public and delaying time for criminals, and taking the risk of real-name tracing instead.
(Typical USDT running points)
Money laundering by buying coins on behalf of others can be divided into two stages: the first is to exchange black money for virtual currency. The second is to launder virtual currency into legal currency. In the first stage, the money laundering gang hired runners to register and open an account on a virtual currency exchange. The runners then bought virtual currency on the exchange's over-the-counter (OTC) platform, making KYC verification in name only. In the second stage, OTC currency dealers were commissioned to match transactions and then converted into legal currency. OTC currency dealers generally do not have the ability to verify real names, and often cash out black money. Last year, two citizens were sanctioned by the U.S. Treasury Department for helping the North Korean Lazarus hacker team launder money.
(Picture from the Internet)
The above two stages are repeated, and funds are transferred back and forth, forming an extremely complex transaction network. To build this huge network, there must be a steady stream of people to run points. Studies have shown that 55% of illegal funds are transferred to only 270 Bitcoin addresses. What does this mean? It means that a group of people with these 270 digital addresses have begun to specialize in Bitcoin money laundering, occupying half of the money laundering industry.
(Image taken from Chainalysis 2021 Crypto Crime Report)
In addition to "running points", there is another relatively rare way to launder money, which is to conduct Bitcoin transactions on the black market, bypassing the Bitcoin exchange, and directly using "black money" to purchase Bitcoin "peer to peer" from Bitcoin holders or potential holders (such as "miners" who obtain Bitcoin through "mining") in the form of first-party payments. Money laundering gangs no longer need to bother stealing an account to act as a "shill" and can directly "launder money seamlessly in one stop."
On March 19, 2021, the Supreme People's Procuratorate and the People's Bank of China jointly released typical cases of punishing money laundering crimes. In the "Chen Mouzhi Money Laundering Case" involving "Bitcoin Money Laundering", after her ex-husband Chen Moubo was investigated by the public security organs for suspected fund-raising fraud and fled abroad, Chen Mouzhi, knowing that the upstream funds were proceeds of financial fraud, transferred the stolen money to a Bitcoin "miner" in exchange for the Bitcoin key obtained from his "mining". The key was then sent to Chen Moubo, using this direct and hidden money laundering method.
4
"On-chain risk control + legal regulation" jointly builds the "Anti-Money Laundering Great Wall"
Money laundering and anti-money laundering is an eternal struggle of "the higher the righteousness, the higher the devil". In the face of the rampant Bitcoin money laundering crimes that are still under attack, the anti-money laundering "on-chain risk control" technology and related legal regulations are also constantly improving. When it comes to risk control measures in the field of Bitcoin, "Chainalysis" is the most mature. As a software that tracks transaction records on the public blockchain, "Chainalysis" connects personal identities with the virtual currencies they hold through big data analysis to achieve "on-chain risk control". Although there are still certain technical difficulties in currency tracking at present, this risk control technology measure is undoubtedly a good deterrent start for the fight against Bitcoin money laundering crimes. Some domestic platforms such as OKLink have also opened functions such as "On-chain Sky Eye", combining "address monitoring" and "transaction monitoring" to use artificial intelligence to draw transaction maps, greatly improving the ability to combat Bitcoin money laundering crimes.
(Picture from OKLink website)
my country's legal regulations on money laundering are also constantly improving. The 1997 Criminal Law first stipulated the crime of money laundering in a special article. Since then, with the development of social economy, the scope of upstream crimes of money laundering has been continuously expanded, and the intensity of the bottom-up crackdown has been continuously strengthened. The Criminal Law Amendment (XI) has even included "self-laundering", which was originally considered an unpunishable act, as a crime.
On April 15, the judicial interpretation of the crime of concealing and hiding the proceeds of crime and the proceeds of crime was revised and officially implemented. The most important revision is to delete the amount standard in the prosecution standard and replace it with the circumstance standard. Virtual currency money laundering no longer needs to identify the value of virtual currency, but needs to comprehensively consider the nature of the upstream crime and the circumstances and consequences of concealing and hiding the crime. It is more conducive to the judicial organs to apply this crime and to comprehensively combat money laundering crimes. At present, the Supreme People's Procuratorate is still studying and revising the judicial interpretation of money laundering in conjunction with the Supreme People's Court. It is foreseeable that the judicial organs will strengthen their anti-money laundering punishment. At almost the same time, the People's Bank of China stated that it is studying the regulatory rules for Bitcoin and stablecoins. As Li Bo, deputy governor of the People's Bank of China, said, "In the future, if any stablecoin hopes to become a widely used payment tool, it must be subject to strict supervision like financial institutions such as banks or quasi-banks."
Previously, due to the ambiguity of the nature of Bitcoin itself, crimes in related fields were still in a gray area, and the platforms were under competitive pressure and did not have strong supervision. However, when the attributes of Bitcoin were officially determined to be "virtual commodities", when the perpetrators purchased Bitcoin and other virtual currencies for money laundering, if the platform where they purchased the virtual currency was aware of the perpetrators' money laundering, they should bear joint liability, and the platform also joined the "united front" to combat virtual currency money laundering. So far, judicial organs, financial institutions, and platform parties have all begun to take action. In the future, virtual currency supervision will only become stricter and stricter. So, in the process of building the "Great Wall of Anti-Money Laundering", what can we ordinary people do? How to prevent ourselves from being involved in "Bitcoin money laundering"? Mr. Goose has a few suggestions: 1) Do not be greedy for small profits, and do not easily believe in false advertisements such as "participate in running points, earn 300 yuan a day" and "mining with rewards"; 2) Do not accept others' requests to "buy" virtual currency at will, so as to avoid becoming a tool for criminals to commit crimes; 3) Keep your own QR code, payment code and other related information to avoid being used by people with ulterior motives; 4) Do not use your own account to withdraw money for others, so as to avoid leaving a stain on your credit or even a criminal record; 5) If you are deceived, report it to the platform or relevant departments in time, and actively cooperate with the tracing of money and the provision of relevant information. "Technology is innocent, people are guilty." Bitcoin is essentially a means of payment based on the new blockchain technology. Technology has brought new changes to society, but it has also brought new challenges when it is used by people with ulterior motives, such as Bitcoin money laundering. Technical problems need new technologies to solve, and people's guilt needs stricter supervision to investigate. As long as we adhere to the "two-pronged approach" of "technical risk control" and institutional supervision, and at the same time enhance the awareness of prevention, the black production chain of virtual currency money laundering will eventually be completely cut off.