Cryptocurrency: Criminals and Buyers Turn to Virtual Value for Muddy Money Trail
Cryptocurrency is a digital currency that is increasingly coveted by criminals for its pseudo-anonymous and almost untraceable nature.
Examples include Bitcoin, the world’s most popular cryptocurrency, Ethereum, and Dogecoin.
Cryptocurrencies are used by traffickers to buy advertisements and by sex buyers to purchase premium subscriptions on review board websites.
These are member-only platforms where users of illicit sex operations – whether individual sex worker or, say, illegal massage parlor – rank will, depth of depravity. and the price of workers.
In a growing number of cases, trafficking groups are combining several laundering techniques to make it as difficult as possible for individual banks, prepaid card operators, virtual money exchanges and law enforcement investigators to bring them all together. elements of the financial network and related money laundering. cycles.
For example, some traffic networks will buy prepaid open-loop cards – like a gift card that acts and looks like a debit or credit card for a payment processor – just below the ID thresholds, essentially making them anonymous.
The group will then use them to buy virtual currencies and move more of their value through exchanges with weak anti-money laundering (AML) controls and in jurisdictions plagued with corruption and historically lax compliance defenses. fight against crime.
To this end, FinCEN has issued warnings regarding traffickers using multiple layers of payment as well as cryptocurrency to protect their identity, as a recent case study shows.
Case Study: Welcome to the Video – The Financial Networks Behind Child Exploitation
Human traffickers and other groups who find and share illicit images of exploited children earn at least hundreds of thousands of dollars a year by selling the acts themselves and enjoying the images and videos – vile media that is even illegal to own in most countries. .
The “Welcome to Video” website, which was a platform for child sexual abuse material (CSAM) on the dark web, managed membership through a cryptocurrency-based points system.
To ensure users had a stake in the effort – and to avoid possible law enforcement infiltration – in order to view more videos, members had to either upload their own new content (earn points for the number of views of other members), or pay for new videos using Bitcoin.
Federal authorities shut down the site in 2018, but many other sites subsequently developed as replacements.
To fight against traffickers, protect children, country FIUs unite
More broadly, banks are trying to come together to better identify transaction patterns related to the exploitation of children, particularly related to online streaming.
This is one of the goals set by the Egmont group of Financial Intelligence Units (FIUs), which includes many of the world’s largest countries.
The group, in a joint project by Austrac, Australia, UKFIU, UK and AMLC, Philippines, is working with INTERPOL and FIUs around the world to better understand the financial and banking components of online streaming. child sexual abuse and exploitation material (CSAE).
To view the group’s findings which have just been published, click on here.
The Egmont Group report also noted the potential involvement of organized crime in such exploitation networks.
“In disadvantaged communities, online streaming offers a financial incentive to criminal networks, which creates a commercial element for the CSAE,” according to the group.
“The illicit business models associated with this activity, where offenders pay to view CSAE material online, mean there is a trail of money in the form of payments and profits. “
Although it is noted that a lack of significant profits means that the large-scale involvement of organized crime groups (OCGs) is likely to be limited, there is “evidence of criminal business structures in developing countries exploiting business opportunities presented by CSAE’s online broadcast. . “
Case Study: West Side City Crips and Payments Stratification Via Prepaid Crypto
Beyond international organized crime groups, low-level street gangs have also used online advertising, and the added complexities of virtual value, to monetize skin and sin.
In April 2016, federal investigators discovered members of the West Side City Crips gang in Phoenix, Arizona, who trafficked women at a motel in El Paso, Texas.
Homeland Security Investigations found evidence via a gang member’s cell phone and Bitcoin wallet that the group was buying Vanilla Visa prepaid credit cards, using those prepaid cards to buy Bitcoin, and using those bitcoins to buy coins. Sexual ads on the now defunct online classifieds site, Backpage.
Federal agencies seized and shut down Backpage and its affiliated websites in April 2018, with the founders and five others charged with federal charges of facilitating prostitution and using foreign banks to hide income.
The bust roughly coincided with pressure from the US government and the President’s signing of a pair of laws – the Fight Online Sex Trafficking Act (FOSTA) and the Stop Enabling Sex Traffickers Act (SESTA) – which added tougher penalties for sites knowingly supporting prostitution or sex trafficking. .
By some estimates, the specter of the new laws and the exit of dominant player Backpage from the market led to a more than 80% drop in online sex ad revenue – a chasm that was nearly bridged a few months later with revenue rebounding by around 75%, based on law enforcement scans and industry estimates.
Likewise, banks have had to adapt quickly, knowing that when criminals lose one way to sell sex, they quickly find another.
With the fall of Backpage, other sites, such as “Skip the Games” among others, have seen an increase in their use, allegedly by groups of organized criminals, traffickers and sex workers, according to media reports. reports.
The site advertises itself as a dating platform, although it is full of photos of scantily clad women, some cheeky enough to detail the sexual services they are willing to engage in – not to mention the prices.
Prosecutors say the site benefits greatly from sex, while company officials say they cannot always control the infiltration of illicit trafficking groups due to limited resources and, on the contrary, help and respond regularly. requests for information and assistance from the police.