Cybercriminals Use Bitcoin as One Method of Laundering Money | Part 1

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Bitcoin is one way cybercriminals launder money.
  • We are following the money to see what happens to the proceeds from cybercrime.
  • This research shows cybercriminals are money laundering through both familiar and unfamiliar channels.
  • Reserve your copy of the full report: Into the Web of Profit

In April of 2017, we started an independent, academic study into the macro economics of cybercrime and how cybercriminals launder and ‘cash out’ the profits of criminal endeavours. This is just part of the nine-month study we sponsored titled Into the Web of Profit. The full findings will be presented at the RSA Conference in April by Dr. Mike McGuire, Senior Lecturer in Criminology at Surrey University, England.

Today, in part one, we look at what might be considered the “conventional” approach to money laundering. Read part two and part three.

Read the press release.

Virtual currency could be the future of laundering – but only if it’s anonymous

According to the report, cybercriminal proceeds make up an estimated 8-10% of total illegal profits laundered globally.

  • According to the UN, between $800 billion – $2 trillion is laundered every year Virtual currencies have become the primary tool used by cybercriminals for money laundering
  • Cybercriminals are moving away from Bitcoin to less recognized virtual currencies, like Monero, that provide greater anonymity

Researcher and report author Dr. Mike McGuire, Senior Lecturer in Criminology at Surrey University reports, “It’s no surprise to see cybercriminals using virtual currency for money laundering. The attraction is obvious. It’s digital, so is an easily convertible way of acquiring and transferring cybercrime revenue. 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.”

Property purchases can now be virtual (the money, not the property!)

Many cybercriminals are using virtual currency to make property purchases which convert illegal proceeds into legitimate cash and assets. Websites such as Bitcoin Real Estate offer everything from penthouse suites and lavish mansions, to 160-acre private islands, all with the option to buy using bitcoins. Unlike cash purchases which are subject to regulation and scrutiny, properties purchased with cryptocurrency are not as closely scrutinised because cryptocurrencies aren’t regulated by any central banks or governments.

The study found that nearly 25% of total property sales are predicted to be in cryptocurrency in the next few years. This is concerning financial analysts who worry that allowing swifter, more covert transactions, many with criminal origins, will disrupt global property markets.

What’s Bitcoin worth today? Check out this Bitcoin ticker.

Our research comes at a time when the G20 summit is poised this week to discuss digital currencies. While there is some mention of money laundering, it seems it’s not yet the focus on banking leaders. That’s likely because today digital currencies are less 1% of the worlds’ GDP, reports Charles Bovaird, Forbes Contributor. Despite the upturn, Bovaird cautions, “Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.”

We need to work together to disrupt cybercrime

Into the Web of Profit explains how law enforcement agencies are now monitoring Bitcoin, causing many cybercriminals to look for alternatives. Information on bitcoin transactions can leak during web transactions – typically via web trackers or cookies. This means that connecting transactions to individuals is possible in up to 60% of Bitcoin payments.

We’ve been reporting on “The Cyber Drug Wars” since early last year, in an attempt to pull together best practices that change the way cybersecurity is used today. We see that end users are often held accountable as the last line of defense – at the endpoint – and that approach isn’t working. From security pros admitting they have paid ransoms and bypassed security protocols to CISOs feeling stuck in the middle between locking down access to prevent breaches to being chastised for throttling innovation. With application isolation supported by micro-virtualization, we’re able to protect without detection. If you’d like to learn more about protecting email, phishing links, and documents, let us know.

Read Part 2: Go!

About Dr. Mike McGuire

Dr. Michael McGuire joined the Department as Senior Lecturer in Criminology in September 2012. Dr McGuire read Philosophy & Scientific method at the London School of Economics where he acquired a first-class BSc Econ and he completed his Ph.D., at Kings College London. He has subsequently developed an international profile in the study of technology and the justice system and has published widely in these areas.

Want to interview Mike? Please let us know.

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