How Digital Payment Systems Like PayPal Are Used for Money Laundering | Part 3

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Digital currency is used for micro money laundering.
  • Covert data collection found that PayPal and other digital payment systems are employed by cybercriminals to launder money
  • Digital payment systems laundering often involves the use of micro-laundering techniques where multiple, small payments are made so laundering limits aren’t triggered
  • The financial industry is looking at digital payment methods and how that might impact global banking.

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 three, we discuss micro-laundering using sites like PayPal and eBay to clean the cash. Read part one and part two.

How are you using digital currency?

Covert data collection in online forums and interviews with experts and cybercriminals indicate that an estimated 10% of cybercriminals are using PayPal to launder money. A further 35% use other digital payment systems, including Skrill, Dwoll, Zoom, and mobile payment systems like M-Pesa.

Reserve your free copy of the report: Into the Web of Profit

Methods like ‘micro laundering’, where thousands of small electronic payments are made through platforms like PayPal, are increasingly common and more difficult to detect. Another common technique is to use online transactions – via sites like eBay – to facilitate the laundering.

Dr. McGuire concludes, “The growing use of digital payment systems by cybercriminals is creating significant problems for the global financial system. Revenues that previously would have flowed within proven and well-established banking systems and could be traced are now outside of its jurisdiction.

“Digital payment systems are most effective when combined with other digital resources,” he explains, “like virtual currencies and online banking. This hides the money trail and confuses law enforcement and financial regulators.”

Traditional banking is working to embrace cryptocurrency

While the global financial markets are extremely aware of money laundering, some experts believe there needs to be an organized approach to moving mainstream banking to a digital alternative. In a new paper presented earlier this month at the Shadow Open Market Committee, Professor Michael Bordo of Rutgers University explains the merits of launching a central bank digital currency (CBDC), drawing on his joint research with Professor Andrew Levin of Dartmouth College (summary of their research).

While the financial industry is working to get their arms around crypto currency in a way that falls in line with global economic regulations and practices, due to the complexity and how cryptocurrency has no borders, we aren’t likely to see a solution in the near term.

The Cyber Drug Wars – what you can do to fight crime

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.

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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Laundering Via In-Game Currency and Goods is on the Rise | Part 2

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