A 24-year-old man from Amsterdam and a 27-year-old man from Utrecht were arrested, last February, for laundering €2.4 million worth of Bitcoins. This so-called “Basset investigation” was not an isolated case: this same year, two other major arrests were made in the Netherlands. A broader international investigation involved a major money-laundering organization, code-named IJsberg. The main suspects will be brought to court in February 2018, says the Openbaar Ministerie.
The third case, called the Nocis investigation, involves the prosecution of three suspects. They are accused of buying Bitcoins (worth around 10 million euros) and selling them for a higher price (at regular and legal bitcoin exchange offices), even though they knew – or should have known – that these Bitcoins came from illegal activities.
When contacted by Eurobsit, the Public Prosecutor’s office in Mid-Netherlands, in charge of the Nocis investigation, didn’t give precise numbers but confirmed that they “see more and more criminal laundering activities involving Bitcoins”. These three cases illustrate this reality but are not enough to show how serious of a threat these cryptocurrencies are considered to be, by governments and law enforcement agencies all around the World. A report published by the European Strategic Intelligence Company in 2011 even calls them a “pillar of the economy of black markets. “When did they become such a big deal?
The Bitcoin’s ancestor
Liberty Reserve, a centralized digital currency service founded in 2006, was very popular in the beginning of the 2010’s. It used to describe itself as the “oldest, safest and most popular payment processor”. Indeed, it was very simple: you just had to register and you could transfer money to other users with only a name, an e-mail address and a birth date. Deposited funds were then “converted” into Liberty Reserve Dollars or Liberty Reserve Euros, with no limits on transaction sizes. Soon, it came to public knowledge that the website was actually used by criminal networks, from drugs trafficking to child pornography, to launder billions of dollars.
Arthur Budovsky, founder of Liberty Reserve, was arrested in 2013. At the press conference following his arrest, the head of the Internal Revenue Service’s criminal investigation division in Washington, Richard Weber, said that the case heralds “the cyber age of money laundering,” in which criminals “are gravitating towards digital currency alternatives as a means to move, conceal and enjoy their ill-gotten gains”, reported the New York Times. “If Al Capone were alive today, this is how he would be hiding his money,” Mr. Weber added. “Our efforts today shatter the belief among high-tech money launderers that what happens in cyberspace stays in cyberspace.”
“If Al Capone were alive today, this is how he would be hiding his money”
Richard Weber, Head of the Internal Revenue Service’s criminal investigation division in Washington.
Arthur Budovsky was charged with conspiracy to commit money laundering, conspiracy to operate an unlicensed money-transmitting business, and operating an unlicensed money-transmitting business. He was sentenced last year by the Manhattan Federal Court to 20 years for laundering 6 billion dollars over seven years. It was believed by law enforcement officials to be “the largest online money-laundering case in history”.
This opened the path to a new way of thinking about money laundering in the virtual world. After the fall of Liberty Reserve, digital currency services tried to take its place in the online black markets. But one rose above them all: the Bitcoin. Thanks to the blockchain system, it took a step further into anonymity. Not only is this money virtual, it is also encrypted.
Still harder to track down
This new cryptocurrency was created in 2009, following the financial crisis of 2008 and the loss of trust in the financial institutions. Since then, it has reached a certain importance: one bitcoin now represents €11,288 which can also be broken into “Satochis” for smaller amounts. Bitcoins are generated by complex chains of interactions among a huge network of computers. They are not backed by any government or central authority, unlike traditional currencies. Therefore, Bitcoins can cross international borders instantly, without any bank or authority intervening.
All transactions are recorded using blockchain, a decentralized (peer to peer) public ledger. The identities are encrypted: a pair of public and private keys are made up randomly (letters and numbers). But if Mr. X remits to Mr. Y, then their identities will be revealed to one another by virtue of exchanging addresses to send and receive the Bitcoins. « The Onion Router » (TOR) can be used to hide a user’s IP address, granting him or her anonymity. The online activity is hidden by sending securely encrypted messages through a distributed network of random proxy servers before they are delivered to their final destination.
According to the website coinmarketcap.com, on the 7th of November 2017, Bitcoins represented 60.60% of the total market capitalization of cryptocurrencies worldwide, in front of the other currencies Ethereum and Bitcoin Cash. Even if these are the most used, over 200 other cryptocurrencies exist online. In fact, anyone can create their own currency, as an individual, a company or even a State. Most of them are derived from the open source software published by Satoshi Nakamoto, the creator of Bitcoins.
They all ensure the principles of anonymity, global reach and non-repudiation (the transactions are final once they’re done). The only weakness of the currencies for now is its speed – they are trying to become as fast as Visa card payments. But cryptocurrencies require the agreement of multiple servers (mining) to agree on each transaction – which takes time.
In each parallel economy, the non-traceability of the streams of money is a priority. That’s mostly why cryptocurrencies seem to be “the best choice for cyber criminality”, as Europol wrote in a report from 2016. Julian Russell is the Director of Pacific Risk, a consultancy specialised in the resolution of complex business issues such as anti-money-laundering, financial crime, and multinational business intelligence projects. According to him, there is no doubt that “cryptocurrencies make it easier to launder the money”. Not only is this money made to guarantee anonymity – its users have also invented numerous creative tools to blur their traces even more.
 On January 15th, 2018 – https://bitcoin.fr/cours-du-bitcoin/