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The Power of Service Providers in Intercepting the Proceeds of Crypto Crime

This extended FT piece on the multi-year saga surrounding the London arrest of a China-born British citizen and seizure of £1.4 billion in bitcoin presents a familiar picture to anyone managing AML risk in the crypto environment.  Coordinated international networks of online investment scammers engaged in 'pig butchering' and related fraud schemes have stolen tens of billions of dollars from many thousands of victims over the past few years.  The proceeds are often aggregated, converted into BTC and stablecoin via networks of accounts on crypto exchanges, then fed into tumblers and/or off-ramped into cold storage, where the keys to billions in virtual currency can be kept on a thumb drive. The operators of these global networks rely on a protective layer of low-profile intermediaries - some willing, some willfully blind, and many others forced via human trafficking to play this role - and falsified KYC documentation to fly under the compliance radar and insulate them from criminal prosecution.  It is a classic organized crime scenario, digitalized and expanded to a huge scale.

In this case, the breakthrough for law enforcement came at the integration stage, as the network attempted to convert BTC into tangible assets such as real estate.  The apparent tip that cracked this case underscores the vital role third party facilitators such as lawyers, accountants, and real estate agents - particularly those in major market centers - play in this process and how their vigilance can interrupt the flow of illicit funds. Critical thinking about basic questions such as sources of funding, be it during account opening or deal closing, can help short-circuit future laundering attempts. 

Over WhatsApp, Wen and Zhang discussed collecting evidence to prove where the money had come from. “We have to show something,” Wen wrote to Zhang.


compliance, anti-corruption & fraud investigation, fraud investigation services, monitorship & independent investigations, third party agents & intermediaries, americas, asia-pacific, europe middle east & africa, cryptocurrency-related services