California-based cybersecurity firm Ciphertrace’s Cryptocurrency Intelligence published its 2018 Q3 Cryptocurrency Anti-Money Laundering Report.
A 21-page report draws attention to the cryptocurrency thefts, which rose to $927 million in the first three quarters of this year, $166 million of it being in the third quarter.
According to the report, unregulated exchanges received 97% of direct criminal bitcoin payments. These exchanges are located where AML is weak or not enforced.
Also, top exchanges see crypto money laundering with high intensity of bitcoin transfers, around 380,000 bitcoins (approximately $2,5 billion).
The report assumes that global adoption of AML regulations will play a vital role to reduce laundering activities in the coming years.
With the regulated space, criminals also adapt and find new ways to fill their pockets, such as:
- Mass cyber extortion (remember the cyber attack on Midland, Ontario, Canada, where all municipal systems were hacked in the town of 16,000 people and criminals asked ransom in bitcoins)
- SIM swapping (recall the case of the 19-year old Xzavyer Narvaez and his accomplices who swapped SIM cards of victims over years until they got caught while buying a McLaren!)
- Cyber attacks on exchange personnel (Exmo Bitcoin exchange manager Pavel Lerner was kidnapped back in 2017 and was freed only after $1 million worth of bitcoins were paid for ransom)
The report quickly analyses the latest criminal acts at major cryptocurrency exchanges:
- Bithumb, $30 million stolen assets were on online (hot) wallets.
- Bancor, $24 million stolen due to the “security vulnerabilities” of the exchange.
- Geth, $20 million stolen by exploiting a vulnerability of the exchange platform
- Coinrail, $40 million stolen since assets were maintained on the servers, which means they were online.
- Bitcoin Gold, $18 million stolen by exploiting “51% vulnerability” meaning criminals obtained 51% of the network hash rate and manipulated blockchain.
- Zaif, $60 million stolen because exchange didn’t make necessary improvements which FSA recommended and warned earlier than the heist.
It is clear that exchanges need to up their game with the security and a better anti-money laundering supervision is required. For the latter, there are developments; the European Union’s AML5 directive is active since July and all member countries are required to adopt it till 2020.
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