Posted on Jul 15, 2021, 1:30 PMUpdated on Jul 15, 2021, 1:49 PM
The British police have just hit organized crime in the wallet. It seized on Tuesday a record amount of 210 million euros in cryptocurrencies (or cryptos). A month earlier, 133 million euros in cryptos had been recovered as part of their fight against money laundering by the authorities.
The UK has been along with the US and South Africa, one of the leading countries for laundering money earned from crypto scams in 2020, according to Chainalysis’s annual report. These fake investment scams made it possible to extract $ 2.7 billion from the victims. To erase the traces of traceable and transparent cryptos like bitcoin, criminal groups have recourse to companies which, for a fee, cover their tracks, by multiplying the addresses (“PO boxes”) to which the bitcoins are sent. Anonymity guaranteed in theory.
Illicit activities only represented a very small part (0.3%) of the volumes carried out on bitcoin (which is worth 32,500 dollars or 27,430 euros) and cryptos in 2020. But in absolute amount, they reached 10 billion of dollars last year.
Four countries – Russia, China, Ukraine and the United States – capture the bulk of crypto flows from platforms specializing in the sale of drugs online.
The other big purveyors of dirty money are the online supermarkets of illegal products (drugs, false documents, stolen personal data, medicines…). In 2020, they generated record revenues of $ 1.7 billion in crypto. Four countries – Russia, China, Ukraine and the United States – capture the bulk of crypto flows from platforms specializing in the sale of drugs online. They are followed by Venezuela, the bridgehead for the South American cartels, and Vietnam. China and Russia, for their part, are the world leaders in terms of money laundering arising from trafficking.
This lucrative and highly competitive global market is managed by criminal groups and cartels with the same financial and economic logic as those of large groups in the traditional economy.
Diversification and consolidation
Due to the Covid crisis (problems of supply and transport of drugs), transactions fell by almost 20%, but they were of a higher average value. The market has consolidated around a few large hubs, with the disappearance of small platforms. “As in the technology industry, this sector has seen a consolidation due to intense competition,” notes Chainalysis. The pandemic has also offered an opportunity for diversification, with the sale of fake Covid tests and vaccine certificates.
The Shadow Market Hydra
Hydra, the main platform, captured three quarters of the income from the informal economy. Born in 2015 and specialized in drugs, it has gradually diversified into the full range of illegal products and services. Based in Russia, it targets customers based in Eastern Europe. She pocketed $ 1.4 billion, down from less than $ 10 million in 2016.
But when a market becomes too important, it concentrates all the attention of the various police forces on the planet, as was the case for SilkRoad, closed at the end of 2013. After the life sentence of its founder Ross Ulbricht, a myriad of new platforms had taken over. However, joint operations by several countries have since resulted in the closure of many of these drug exchanges and the arrest of many traffickers.
Last January, Europol brought down DarkMarket, which had 500,000 customers and 2,400 sellers. 140 million euros in cryptos were then seized in bitcoin and monero, a currency much more suited to the informal economy, because it offers anonymity to its holder. The two popular cryptocurrencies on the shadow web, Monero (27e world rank) and ZCash (63e), respectively weigh 3.9 and 1.3 billion dollars.
Despite its characteristics of transparency and traceability, bitcoin remains the most used crypto in the informal economy because it is the most liquid, which makes it easily sellable on hundreds of platforms. Some, which pay very little attention to the regulations on the origin of funds, allow accounts to be opened without verifying the identity of clients. Criminal groups can sell their bitcoins there and collect cash which will then be reinvested. In 2012, 30% of bitcoins were used as a means of payment for online drug supermarkets, compared to less than 1% today. The majority of bitcoin flows are now more about investment and financial speculation.