TRM Weekly Roundup | August 29, 2024
Happy last week of August ?? and welcome back to another edition of ?The Weekly Roundup??— your source for the latest news on crypto regulation, compliance, and investigations, straight from the policy experts at TRM Labs.
This week, Ari Redbord , Isabella Chase , and Angela Ang walk us through the details of these top stories:
???? Argentinian authorities arrest Russian national for laundering hacked and stolen funds
Last week, authorities from the Argentine Federal Police (PFA) arrested a Russian national for money laundering and seized millions of dollars in assets from his Argentinian-based operation. The San Isidro Specialized Fiscal Unit in Cybercrime Investigations (UFEIC) identified the subject and led the investigation.
TRM Labs is proud to collaborate with UFEIC in its continued effort to discover and disrupt the illicit use of crypto in Argentina.
The subject accepted illicit cryptocurrency proceeds from illicit actors (such as North Korea’s Lazarus Group), child sexual abuse vendors, and terrorist financiers. The subject would then exchange the illicit crypto for laundered, clean cryptocurrency and fiat currency.
Prosecutor Musso brought the case before Judge Yadarola, who approved the arrest and seizure based on blockchain intelligence, writing:
“Through the tools provided by the private cryptocurrency mapping company TRM Labs, it was learned that [the subject] would have received other suspicious transfers from accounts that would be linked to holders who would operate with sexual material for child abuse, as well as terrorist financing.”
?? Learn more about the case here.
?? Volume of illicit activity involving crypto ATMs is double that of overall industry
German authorities, led by the Federal Financial Supervisory Authority (BaFin), recently announced the seizure of 13 Bitcoin ATMs across the country that were operating without the required licenses and facilitated money laundering and other illicit activity. The multi-agency operation, which spanned 35 locations, also involved Germany’s central bank, the Federal Criminal Police Office, and other local law enforcement agencies. In addition to the seizure of the ATMs, authorities confiscated EUR 250,000 (USD 279,000) in cash.
Germany’s recent ATM crackdown is not an isolated incident, as law enforcement and regulators globally have been concerned about the use of crypto kiosks for scams and other illicit activity. According to TRM’s analysis, the cash-to-crypto industry—which is dominated by crypto ATMs—has processed at least USD 160 million in illicit volumes since 2019. Last year, illicit volumes in the cash-to-crypto industry stood at 1.2% of total volume, double the 0.63% for the overall crypto ecosystem.
While illicit actors look to cryptocurrencies to move funds faster cross-border, crypto ATMs face additional money laundering vulnerabilities due to the use of cash and lack of face-to-face communication or account open controls. As with any virtual asset service provider, proper compliance infrastructure is critical in addressing the risks. In addition, TRM analysis shows that the vast majority of illicit transactions going through cash-to-crypto services are linked to scams and frauds. According to TRM, in 2023, of all cash-to-crypto illicit volume, over USD 30 million, went to known scam and fraud addresses.
?? For much more on the crypto ATM landscape, read our blog post here.
???? OFAC sanctions 400, including UAV company which has received crypto, in effort to intensify pressure on Russia
Last week, the U.S. Department of the Treasury 's Office of Foreign Assets Control (OFAC)?sanctioned?nearly 400 individuals and entities in their ongoing effort to intensify pressure on Russia amidst their ongoing invasion of Ukraine. These measures aim to decrease Russia’s ability to rely on transnational networks and business operations for sanctions evasion. Today’s designation included sanctions against entities and individuals involved in Russia’s technological base, Russia’s metals and mining sector, and Russia’s financial technology sector.
A key aspect of the designation targeted Russia’s domestic war economy, including independent and state-owned enterprises that provide materials in and services for Russia’s ongoing war effort. Included in this was Vostok Design Bureau, a Russia-based company involved in UAV development for military use. Most notably, Vostok Design Bureau manufactures the “Scalpel” UAV, which has been used as a loitering munition by Russian troops in Ukraine. Vostok Design Bureau’s website includes a section titled “Support Us,” where the crypto address in today’s designation can be seen.
According to TRM, the designated address for Vostok Design Bureau has sent over USD 36,000 in funds to intermediary addresses, which have sent and received significant volumes from global exchanges and Garantex, the Russian exchange that was sanctioned on April 5, 2022.
Following the designation, reports suggest that Russia is moving closer to establishing at least two new crypto exchanges and a stablecoin designed with the express intent of helping the country circumvent sanctions on trade transactions.
领英推荐
?? Read our full blog post on this topic here.
???? Telegram founder arrested in France for money laundering and other crimes
Late last week, Pavel Durov, the 39-year-old founder and CEO of Telegram—the global encrypted messaging app—was arrested at Le Bourget airport in France.
Durov, a French-Russian national, was detained by the Air Transport Gendarmerie (GTA) upon his arrival from Azerbaijan. Accompanied by a bodyguard and a woman, his arrest was facilitated by a French search warrant issued by the Office of the French National Judicial Police Directorate (OFMIN). This warrant, applicable only within French territory, enabled his arrest upon landing. French authorities had listed Durov in the Wanted Persons File (FPR) due to severe allegations tied to Telegram's platform.
French investigators have accused Durov of refusing to cooperate with law enforcement, and his failure to moderate illicit content on Telegram has led to allegations of complicity in these crimes.
Following his arrest, Durov was taken into custody by investigators from the National Anti-Fraud Office (ONAF). He now faces a range of serious offenses, including terrorism, drug trafficking, complicity, fraud, money laundering, and involvement in child abuse content.
Within an hour of the arrest becoming public, TON's price dropped by 16%, reflecting growing concerns among investors about the future of Telegram and its related projects. This uncertainty is exacerbated by fears of increased regulatory scrutiny and potential instability stemming from Durov's legal battles.
The legal proceedings against Durov will have broader implications for digital privacy, security, and regulatory practices worldwide as the case highlights the ongoing tension between the protection of free speech and the necessity to combat illegal activities online.
?? Treasury’s FinCEN officially withdraws controversial “unhosted wallet rule”
In December of 2020—in the closing days of the Trump administration, and infamously over the Christmas holiday— Financial Crimes Enforcement Network, US Treasury dropped a proposed rule imposing KYC requirements on unhosted wallets. The proposed rule was arguably the first piece of regulation to galvanize the crypto industry, as many believed it would be impossible for individual users to comply with the regulation.
The proposed rule, reportedly driven by then-Treasury Secretary Mnuchin, sparked a debate on the what-is-possible, and the what-is-fair when it comes to virtual assets regulation—and really was the first time the crypto industry was galvanized against a specific proposal.
This week, the Treasury Department formally withdrew the proposal.
Michael Mosier, the former acting director of FinCEN, told Coindesk that the withdrawal "shows that public servants see value in first collaboratively engaging risk/opportunity through innovation and empowerment around the financial equivalent of mobile phones, rather than rushing to limit people to landlines, switchboard operators, mailed checks, and everyone’s home address in a public phone book to keep them 'safe.'”
???? Singapore payments and crypto license hopefuls will need legal opinions and external audits, and adhere to rules of engagement
On August 26, the Monetary Authority of Singapore (MAS) amended Guidelines for Licensing of Payment Service Providers came into effect.
The amendments detail expectations on how payments and crypto license applicants should engage with MAS. Notably, all applicants will now be required to submit an external legal opinion on their business and how it falls within scope of regulated services under Singapore’s Payment Services Act. They will also be required to obtain an external auditor’s assessment on their compliance with AML/CFT and consumer protection requirements.
MAS also detailed the rules of engagement for applicants, explaining that applicants will be expected to act as if they are “already a regulated financial institution.” Failure to do so could constitute “potentially significant deficiencies” and result in application rejection. Expectations include meeting response deadlines, providing comprehensive and considered responses to information requests rather than "rushing out a hasty response in the hopes of speeding up the review," showing up for licensing interviews, and refraining from verbal abuse of their MAS case officer.
The amendments also provide further clarity on MAS' expectations in key areas such as fitness and propriety, competency of key individuals, minimum compliance arrangements, and more.
?? While the introduction of hard requirements on external audit and legal opinions may increase upfront costs for applicants, it could help to establish more consistency in the standard of applications and have a positive effect on application processing times. The Hong Kong Securities and Futures Commission (SFC) has a similar requirement for external assessment reports to be submitted by virtual asset trading platforms with their license applications.
Detailing the rules of engagement and outlining potential consequences for poor behavior could also make it more straightforward for MAS to quickly turn away such applicants and focus limited resources on more deserving candidates.
Global Head of Policy and Government Affairs at TRM Labs
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