Cryptocurrencies become preferred money laundering tool for Latin American criminals

Mar 3, 2020 | 0 comments

By Helen Partz

Amid a major economic downturn, countries in Latin America (LATAM) are increasingly suffering from money laundering through cryptocurrencies, a new report says.

Cryptocurrencies like Bitcoin have become a major tool of organized crime groups and hackers in LATAM countries, according to a Feb. 27 report issued by threat intelligence firm IntSights.

Titled “The Dark Side of Latin America,” the report claims that LATAM countries top the list of the world’s worst money laundering nations, while local crypto-related firms apparently lack Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.

To issue the report, IntSights partnered with major global blockchain security firm CipherTrace and LATAM-focused cybersecurity startup Scitum.

According to the study, threat finance has been on the rise in LATAM countries as criminals in the region turn to cryptocurrency to launder large amounts of money. As part of the increased crypto-based money laundering in LATAM, criminals purportedly take advantage of insufficient KYC and AML regulation of local crypto services as well as global peer-to-peer (P2P) crypto exchange services like LocalBitcoins, the report notes.

Specifically, the IntSights’ data claims that the vast majority of world’s illicit crypto funds tend to end up in Latin American crypto exchanges. According to the report, LATAM-based exchanges are typically characterized with “extremely lax” regulations. The study reads:

“Researchers estimate that after cryptocurrencies have been cleaned on exchanges, 97 percent end up in countries that have extremely lax KYC/AML regulations, with Latin American economies topping the charts.”

As an example, IntSights cited a major money laundering case with Panama-based payment processing firm Crypto Capital, which involved at least $350 million. As reported by Cointelegraph, Crypto Capital’s president Ivan Manuel Molina Lee was arrested in October 2019, with enforcement authorities claiming that the seized $350 million was directly tied to money laundering for Colombian drug cartels using cryptocurrency. As reported, Crypto Capital allegedly managed to mislead Bitfinex, one of the world’s biggest Bitcoin exchanges.

However, lack of regulation on local crypto platforms is apparently not the only loophole for criminals in Latin America, IntSights emphasized. The firm outlined that popular Finland-based P2P platform LocalBitcoins saw record surge in transaction volumes across the region and especially in Venezuela and Argentina.

According to the research, P2P platforms like LocalBitcoins and Paxful are often associated with significant lack of regulations. The study reads:

“P2P exchangers typically lack AML programs and perform little or no KYC due diligence, which entices criminal actors to utilize P2P versus traditional cryptocurrency exchanges.”

In late January, LocalBitcoins was reportedly suspending user accounts in some countries with no warning, subsequently citing “enhanced due diligence process.”


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