Cryptocurrency becomes mainstream option for money laundering and funding of terrorism, Austrac says

Australia’s financial intelligence agency has warned Russian paramilitary groups are soliciting cryptocurrency donations to buy weapons and that Australians have donated to terrorist organisations overseas.

Senior executives at Australian Transaction Reports and Analysis Centre (Austrac) also said cryptocurrency has become a “standard part of the money-laundering tool kit” for organised crime groups in Australia.

The agency’s deputy chief executive and head of intelligence, John Moss, said crypto was no longer considered a “niche option” for criminal activity and had become more mainstream.

“We are now seeing more traditional money laundering being displaced into cryptocurrency, particularly to send money offshore,” he said.

Moss said Russian groups have been soliciting digital currency donations on social media to buy weapons, drones and armour for the conflict in Ukraine.

In July, global consultants Chainalysis estimated approximately $2.2m in cryptocurrency had been sent to Russian paramilitary groups, which have posted images of arms bought on social media.

“This shows how easy it is to use crypto as a fundraising source and when you mix it with social media, you get a big reach. You’ve got a technology that’s easy to use and if you’re flexible in the type of cryptos you take, you can do quite well out of it,” Moss said.

Austrac’s national manager of intelligence operations, Michael Tink, said this level of crypto-fundraising does exist in Australia although “it is not large scale”.

“We have seen evidence of Australians sending money to offshore cryptocurrency accounts linked to al-Qaida, linked to Isil, and this is largely organisational support for travel, training, the salaries of fighters and uniforms,” Tink said.

“It doesn’t take a lot of money to have an impact on a terrorist organisation in a conflict zone and small amounts of money can buy weapons and result in attacks, so it’s still a significant risk”.

Moss also raised concerns that criminals are making use of regulated crypto-ATMs that are growing in number.

“These machines are not seen in places like the UK. When you look at the reporting, you see lots of fraud victims. Very vulnerable people putting large amounts of cash into these ATMs, which is essentially immediately gone offshore,” Moss said.

There are 10 digital currency exchanges operating crypto-ATMs in Australia, although the number of machines is growing quickly.

Earlier this year, the UK’s Financial Conduct Authority (FCA) ordered all bitcoin ATMs to be shut down due to concerns about background checks.

“One of the key vulnerabilities for a crime group laundering money is the placement stage of the money-laundering cycle, so that’s trying to get cash into crypto currency. [These ATMs] are good way to do that,” Tink said.

“There is a perception that if you are putting money through a hole in the wall, or a box in a shopping centre, that it will be more anonymous.”

Tink said crypto-exchange providers in Australia were regulated for anti-money laundering and counter-terrorism financing purposes, but acknowledged that’s not the case everywhere.

“If you look at parts of eastern Europe, it’s not difficult to cash out crypto-currencies there and fly under the radar,” Tink said.

“The biggest risk for crooks is at the Australian end and that placement stage of the money-laundering cycle.”

Tink said the crypto exchanges in Australia were “the first line of defence” against money laundering and praised the quality of suspicious matter reporting from the sector.

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