Report: Gangs Use Crypto In Money Laundering

Gangs in Latin America are increasingly turning to cryptocurrency to operate illegal trades of drugs, guns, sex and people, Reuters reported.

“Both Mexican and Colombian [transnational criminal organizations (TCOs)] are increasing their use of virtual currency because of the anonymity and speed of transactions,” Michael Miller, spokesman for the U.S. Drug Enforcement Agency, told Reuters. “It is believed the use of virtual currency will only increase in the future.”

While the amount of bitcoin used in these illegal transactions remains a small percentage of the roughly $25 billion that organized crime makes in Mexico per year, authorities are noticing larger illegally gained sums running through cryptocurrency, according to the report.

Criminals deposit cash in small amounts in different bank accounts and then use it to buy bitcoin. They can then send the currency anonymously to other members of their criminal ring around the world, according to Reuters.

In other news, cryptoasset analytics firm Elliptic reported Wednesday (Dec. 9) that 13 percent of illicitly-gained digital currency is sent through private wallets, up from 2 percent in 2019, the firm said in a blog post.

“As the technology evolves and new regulations come into force, our research shows that criminals are seeking new ways to launder dirty cryptoassets” said David Carlisle, head of Policy and Regulatory Affairs at Elliptic, in the post. “The most significant trend we observed was the increasing use of privacy wallets.”

However, while private wallets do make it difficult to trace the funds they process, crypto exchanges can do their part to confirm the source of a user’s assets, the blog noted.

“When it comes to cashing out, crypto exchanges can use blockchain analytics tools like Elliptic’s to identify the use of privacy wallets by their customers, to help ensure that they aren’t depositing proceeds of crime,” said Dr. Tom Robinson, chief scientist at Elliptic, in the post.

Meanwhile, Fidelity Digital Assets will now allow customers on the platform to use bitcoin as collateral in transactions, the investment company announced in a press release.

Additionally, institutional customers of crypto lending platform BlockFi can now use bitcoin as collateral in risk-managed loan agreements executed on Fidelity Digital Assets, the release stated. The move is Fidelity’s first push into digital asset financing and will help institutions expand further into the market.

“The business and market momentum we’ve seen this year have reinforced our belief that institutional investors are looking for a more comprehensive offering in the digital assets space,” said Christine Sandler, head of Sales and Marketing for Fidelity Digital Assets, in the release.

Fidelity said in the release that it expects demand for crypto financing offerings to grow, adding that 36 percent of firms the company surveyed invested in digital assets.

“We continue to see demand for increased capital efficiency from institutions that maintain long bitcoin positions, and with this collateral agent capability, our customers seeking that efficiency can access more opportunity with the capital that they trust us to keep safe,” said Sandler.

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