Virtual currencies have become the primary tool used by cyber-criminals for money laundering, according to research by the University of Surrey.
Drawing from first-hand interviews with convicted cyber-criminals and data from international law enforcement agencies, the study shows that many cyber-criminals are using virtual currency to make property purchases. This converts illegal proceeds into legitimate cash and assets.
Websites such as Bitcoin Real Estate offer properties, all with the option to buy using bitcoins. Unlike cash purchases, properties purchased with cryptocurrency are not as closely scrutinized because they are not regulated by any central banks or governments.
However, the study also finds that while law enforcement agencies are on top of tracking bitcoin, this has encouraged criminals to use less-recognized currency such as Monero. This allows them to stay under the radar. With nearly 25% of total property sales predicted to be in cryptocurrency in the next few years, financial analysts are concerned.
Researcher and report author Dr. Mike McGuire, senior lecturer in criminology at Surrey University, said: “Anonymity is also key, with platforms like Monero designed to be truly anonymous, and tumbler services like CoinJoin that can obscure transaction origins. Targeted organizations must do more to protect their customers.”
Rafael Amado, strategy and research analyst, Digital Shadows added: “Virtual currencies provide a layer of anonymity that can be leveraged by criminals to evade law enforcement – for example, virtual currency users usually mask their real identities behind aliases, and funds can be transferred across international borders to intermediaries that are also hidden.
“These transfers are done as easily as sending a WhatsApp message or email, so it’s clear to see how this can quickly veer into the realms of illicit behavior.”
Cyber-criminals have also been found spending “considerable time” converting stolen income into video game currency or in-game items like gold. These are converted into bitcoin or other electronic formats.
The report comments that “Games such as Minecraft, FIFA, World of Warcraft, Final Fantasy, Star Wars Online and GTA 5 are among the most popular options because they allow covert interactions with other players that allow trade of currency and goods.”
Dr. McGuire added: “Gaming currencies and items that can be easily converted and moved across borders offer an attractive prospect to cyber-criminals.
“This trend appears to be particularly prevalent in countries like South Korea and China – with South Korean police arresting a gang transferring $38 million laundered in Korean games, back to China.”
The final method in the study, collected from data in online forums and interviews, indicate that an estimated 10% of cyber-criminals are using PayPal to launder money. Methods like ‘micro laundering’, where thousands of small electronic payments are made through platforms like PayPal, are increasingly common and more difficult to detect.
Dr. McGuire said: “Digital payment systems are most effective when combined with other digital resources, like virtual currencies and online banking. This hides the money trail and confuses law enforcement and financial regulators.”
The findings are part of a larger nine-month study titled Into the Web of Profit, sponsored by Bromium. The full findings will be presented at the RSA Conference in April 2018.