Thursday, October 28, 2021

Rise in bitcoin ATM create opportunities for money launderers

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Cryptocurrency ATMs have seen a surge in interest amid this year’s Bitcoin frenzy, fuelling concerns the machines could be exploited by “money mules” looking to wash criminal cash.

Installed in shops, petrol stations and even strip clubs, the machines swap cash for cryptocurrencies or cryptocurrencies for cash, often in exchange for a hefty fee.

As the price of one Bitcoin surpassed $51,000 (£36,800) this month, cryptocurrency ATMs hit their own milestone, totalling more than 15,000 worldwide for the first time, according to Coin ATM Radar.

That compares to the 6,759 cryptocurrency ATMs there were globally this time last year.

Ben Phillips, President and COO of RockItCoin, said the company increased the number of cryptocurrency ATMs it has installed across the US by 400pc last year, in response to increased demand. The company now has 900 machines across 39 states.

“It just appears that more people are using Bitcoin for the first time and obviously more people are continuing to come back and use the machines,” said Phillips.

“We do add that element of privacy where users can feel secure, like they’re dealing just with us,” he said. “They’re not putting any bank information in, they’re not putting any credit card information in.”

The surge in interest, especially from people using the ATMs to protect their privacy, has intensified concerns the machines could be leveraged by money launderers.

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Anton Moiseienko, research fellow at RUSI’s Centre for Financial Crime and Security Studies, said the machines were being used by “money mules”, people who move cash around at the direction of criminal groups.

“Crypto ATMs are where the world of untraceable cash overlaps with the world of pseudonymous crypto so it’s not a huge surprise that there would be money laundering risks involved,” he said.

Last month, Australian police said they had arrested a 21-year-old over his alleged role in a money mule network suspected of laundering more than AUD $3.5m (£1.95m) stolen from Australian bank accounts using a cryptocurrency ATM.

The investigation alleged that in one instance, $18,000 in stolen money was transferred into the man’s bank account. After taking a five per cent commission, he withdrew the cash, converted it to Bitcoin using a Bitcoin ATM in Sydney before transferring it offshore.

ATMs collect only the minimal information required about their users, making it harder to flag suspicious behaviour early in the same way as a bank, says Moiseienko.

“If you have very little information about your users, then even if you think that something is suspicious it’s very difficult for you to file a high quality suspicious activity report that will actually lead to an investigation,” he says.

However RockItCoin’s Philips calls allegations of large-scale money laundering through cryptocurrency ATMs “misinformation”.

“The software in the machine really does a good job of capturing who the user is, we verify their identity both digitally and visually with the information they present; their government issued identification,” he said.

Regulators are beginning to act.  Since last month, all firms operating cryptocurrency ATMs in the UK – where there are currently 218 – have been required to take “appropriate steps” to prevent their machines being used as conduits for money laundering.

That means many machines that used to offer their services without ID checks have either shut down or had to change the way they work.

In response to the new rules, those who had come to rely on Bitcoin ATMs for anonymous transactions are scrambling for alternative ways to avoid ATMs’ Know Your Customer (KYC) anti-money laundering policies.

On the social network Reddit, one user wrote:  “It wasn’t like this before in London. I purchase [sic] without ID before in previous years from ATM. But I heard that now there is [a] limited number of the Bitcoin ATMs in London/UK accepting to sell Bitcoin without ID.”

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Another simply asked: “What’s the best way to convert 300k to bitcoin cash without KYC?”

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