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OSCE hosts workshop aimed at crypto regulation in Eastern Europe

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The OSCE’s recent workshop brought together regulators from Ukraine, Moldova, and Armenia to address the urgent need for crypto regulations in the face of rising financial risks.

Eastern Europe is doubling down on regulatory measures for crypto exchanges as the Organization for Security and Co-operation in Europe hosts a workshop aimed at enhancing compliance and mitigating financial risks in the digital asset space.

In an Oct. 11 press release, the OSCE revealed that from Oct. 9 to Oct. 11, it convened a workshop in Vienna aimed at bolstering the regulatory framework for Virtual Asset Service Providers across Ukraine, Moldova, and Armenia.

The event, organized by the Office of the Co-ordinator of OSCE Economic and Environmental Activities, focused on enhancing participants’ ability to “mitigate money laundering and terrorism financing risks within the evolving digital asset ecosystem,” according to the press release. Led by OSCE financial regulation experts, the workshop featured a mix of discussions and interactive sessions designed to engage participants in practical compliance challenges.

“This workshop is a vital step in building the capacity of financial regulators to address the growing risks posed by virtual assets.”

Vera Strobachova-Budway, acting head of the economic governance unit at OCEEA

Key modules addressed pressing issues in VASP compliance, including anti-money laundering measures and counter-terrorism financing strategies. Participants also received “hands-on tools for supervising VASPs and analyzing suspicious activity,” equipping them with advanced skills in identifying and mitigating risks, per the press release.

OSCE elevates standards for crypto regulation

The workshop marks another step in the OSCE’s effort to formalize best practices in crypto regulation, fostering collaboration among regional regulators and financial experts. The initiative is part of a broader project aimed at regulating crypto businesses, supported by Germany, Italy, and the United States, among others.

Earlier in August, the OSCE also conducted a three-day training in Warsaw to enhance crypto investigation skills for Armenian and Georgian law enforcement. This specialized session on “countering blockchain obfuscation techniques” was part of ongoing efforts to combat illicit activities facilitated by cryptocurrencies.

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Cash, not crypto remains criminal’s preferred tool for illicit finance, study says

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Despite widespread misconceptions, cash remains the dominant tool for illicit finance, while blockchain offers greater transparency and traceability, a new study reveals.

Cash remains the preferred tool for criminals engaging in illicit finance, despite the popular perception that cryptocurrencies dominate unlawful transactions, a new study by Crypto ISAC reveals. While blockchain transactions create an immutable record, making crypto more traceable, cash transactions leave no digital footprint, complicating efforts to track illicit activities.

“The scale of money laundering and terrorist financing through conventional banking channels, as reported by regulatory bodies and law enforcement agencies, dwarfs the volume of similar activities observed in the cryptocurrency space.”

Crypto ISAC

Though cryptocurrencies have been tied to crime in high-profile cases, including exchange collapses and thefts, these account for a small portion of total crypto volume. Crypto ISAC notes that while it is impossible to track the exact amount of illicit activity in the traditional finance space, the estimated amount of money laundered globally in one year is 2-5% of global GDP, or $800 billion-$2 trillion.

Illicit share of all crypto transaction volume | Source: Crypto ISAC

Meanwhile, blockchain analysis firm Chainalysis reported that in 2023, just 0.34% of on-chain transaction volume was linked to illicit activity.

Crypto ISAC noted that law enforcement agencies have increasingly used blockchain’s transparency to track illegal activity, positioning regulated crypto platforms as allies in combating crime. At the same time, when criminals use traditional finance systems, there are no public sources through which law enforcement can easily trace funds, which makes it harder for law enforcement agencies to track down criminals.

“This creates a higher burden of proof and requires the U.S. Attorney to empanel and jury to hear and issue the subpoena. Only then can law enforcement begin to piece together the forensic trail of the funds at issue.”

Crypto ISAC

The U.S. Treasury earlier also echoed these findings, stating that cash continues to be the go-to method for money laundering because of its anonymity, stability, and ubiquity. According to the Treasury’s February reports, bulk cash smuggling, often involving U.S. dollar banknotes transported across borders and deposited into foreign accounts, remains a common method for laundering illicit proceeds.

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Kazakhstan freezes $1.2m in crypto linked to 19 illegal OTC platforms

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Kazakhstan’s financial authorities have frozen $1.2 million in crypto and shut down 19 illegal exchangers with a turnover exceeding $60 million.

Kazakhstan has frozen $1.2 million in cryptocurrency and shut down 19 illegal over-the-counter platforms as part of a broader effort by the Financial Monitoring Agency to combat money laundering and terrorism financing.

Per AFM Chairman Zhanat Elimanov, the regulator is now focused on three main areas: illegal crypto mining, unlicensed exchanges, and unlawful transactions involving digital assets. As a result of continuous efforts, since the beginning of the year, Kazakhstan has dismantled nine illegal mining operations, confiscating nearly 4,000 crypto mining rigs.

In addition to the frozen funds, the authorities have also blocked 5,500 online exchangers operating without licenses. The total turnover of the closed OTC platforms exceeded $60 million.

In its efforts to regulate the crypto industry, Kazakhstan is targeting not only small exchangers but also major players. In December 2023, the country banned Coinbase, the largest cryptocurrency exchange in the United States, over allegations of violations of local crypto regulations.

At the time, the Ministry of Information confirmed that access to Coinbase was restricted at the request of the Ministry of Digital Development due to the exchange’s trading activities, which were found to violate Kazakhstan’s Law on Digital Assets. The law prohibits the issuance and circulation of uninsured digital assets and the operation of exchanges trading such assets.

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US seizes crypto domains connected to Russian money laundering scheme

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The US Department of Justice has seized domains linked to three crypto exchanges that have allegedly facilitated illicit transactions worth more than $800 million in relation to Russian money laundering operations.

The US authorities obtained court authorization to seize the domains of UAPS, PM2BTC, and Cryptex. Anyone who opens those domains will see a government notice indicating the site has been seized due to illegal activity.

In a statement published Sept. 26, the US DOJ charged two Russian nationals for allegedly pocketing millions from a prolific money laundering scheme built on a network of cyber criminals across the globe.

According to unsealed court documents, the DOJ accused Russian national Sergey Ivanov, also known as “Taleon,” of operating various money laundering services for cybercriminals, including ransomware groups and darknet drug traffickers.

Ivanov allegedly created and operated Russian payment and exchange services UAPS, PinPays, and PM2BTC, to process roughly $1.15 billion in digital asset transactions for money laundering purposes in the timeframe between July 2013 and Aug. 2024. 

Cryptex, another crypto exchange tied to money laundering, was also found to have facilitate transactions worth $1.4 billion, with 31% of them linked to criminal activity.

The US authorities seized the domains “Cryptex.net” and “Cryptex.one”. These sites were reported to offer anonymity to its users, allowing them to register for accounts without providing know-your-customer compliance requirements.

Similar to UAPS and PM2BTC, Cryptex was advertised directly to cybercriminals.

“Working with our Dutch partners, we shut down Cryptex, an illicit crypto exchange and recovered millions of dollars in cryptocurrency,” said Deputy Attorney General Lisa Monaco.

Russian national Timur Shakhmametov was also indicted for operating Joker’s Stash, one of the largest carding websites in history, which sold stolen credit and debit card information. Like Ivanov, Shakhmametov allegedly promoted Joker’s Stash website and its stolen payment card details on various cybercrime forums.

According to the press release, a cryptocurrency blockchain analysis revealed that approximately 32% of all traced Bitcoin (BTC) handled by these exchanges were associated with criminal activity. With more than $158 million Bitcoin connected to fraud, over $8.8 million was used for ransomware payments, and around $4.7 million originated from darknet drug markets.

Together with the DOJ, The U.S. Treasury has also sanctioned Ivanov and Cryptex. Meanwhile, the State Department offered a $11 million reward for information leading to the arrest of those involved in the Ivanov or Joker’s Stash operations.

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Brazil police bust $9.7b crypto laundering scheme

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Brazilian authorities have uncovered a $9.7 billion crypto laundering scheme, arresting suspects in multiple cities as part of a major financial crime investigation.

Brazilian authorities have clamped down on a multi-billion-dollar money laundering scheme involving cryptocurrencies across multiple cities, including São Paulo, Fortaleza, and Brasília.

As part of the so-called “Operation Niflheim,” the Federal Revenue and Federal Police executed 23 search and eight arrest warrants, targeting a network suspected of using crypto to launder funds from criminal activities, such as drug trafficking and smuggling, blockchain forensic firm TRM Labs revealed in a Sept. 20 blog post.

The investigation centers on two companies in Caxias do Sul that allegedly moved R$ 19 billion (around $3.6 billion) and R$ 15 billion ($2.8 billion) between August 2019 and May.

Brazilian crypto laundering scheme | Source: TRM Labs

The scheme involved four layers, including tax evaders, shell companies, and firms facilitating foreign exchange and crypto transactions. Laundered funds were then transferred abroad to countries like the U.S., Hong Kong, and the UAE.

“Authorities discovered that over half of the deposits linked to the main suspects came from individuals with criminal backgrounds, pointing to widespread use of cryptocurrencies to facilitate illicit activities.”

TRM Labs

A federal court froze $1.58 billion in funds held in bank accounts and cryptocurrency exchanges, though the report did not specify which platforms were involved. In total, the Federal Police reported that over $9.7 billion had been laundered since the investigation began in 2021, underscoring the significant role cryptocurrencies play in facilitating financial crimes in Brazil.

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China’s supreme court recognizes crypto in landmark AML law update

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China’s highest court and its public prosecution agency have for the first time recognized crypto transactions in their revised interpretation of the country’s anti-money laundering laws.

At a joint press conference on Aug. 19, representatives of the Supreme People’s Court and the Supreme People’s Procuratorate announced several reinterpretations of China’s AML laws, set to take effect on Aug. 20.

According to the announcement, a key highlight of the new interpretations was the listing of virtual asset transactions as a method of laundering money. Per the Chinese authorities, the conversion and transfer of criminal proceeds through crypto will now be considered as concealing the source and nature of criminal proceeds and their benefits “by other means.”

Those found guilty will face a gamut of penalties, including fines starting at 10,000 Chinese yuan (around $1,400) to 200,000 Chinese yuan (around $28,000 at current exchange rates). Furthermore, more severe offenders could also face jail time ranging from five to ten years. 

The amendments to the AML laws involve 13 articles, and are meant to provide clarity for the identification of money laundering crimes and the specific circumstances where certain regulations prohibiting the “concealing and covering up” of proceeds from criminal enterprise may come into effect. Additionally, the amendments have outlined the amount of fines and prison time breaking the AML laws will attract.

The amendments are the culmination of calls made earlier in the year by Chinese Prime Minister Li Qiang for the country to rewrite its AML laws to include crypto-related transactions. Additionally, authorities in the country made promises to punish people using crypto and blockchain technology to commit crimes, with the People’s Procuratorate claiming that crypto-related money laundering had become a major channel for criminals to hide their illicit wealth. 

As crypto.news reported earlier in the year, China has been experiencing an increase in crypto-related criminal activities, with the trend even becoming a major topic at the Chinese Association for the Study of Integrity and Law’s annual conference in late 2023.

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OSCE hosts crypto training for Armenian and Georgian investigators

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The OSCE hosted a three-day training in Warsaw to enhance crypto investigation skills for Armenian and Georgian law enforcement.

In an Aug. 14 press release, the Organization for Security and Co-operation in Europe announced that it had conducted a specialized training session on “countering blockchain obfuscation techniques” in Warsaw, aimed at improving the investigative skills of law enforcement from Armenia and Georgia.

The OSCE said the course, hosted by Poland’s Ministry of Finance, marked the second such session facilitated by the organization, as part of a broader effort to combat illicit activities facilitated by cryptocurrencies.

“This course, delivered by a team of experts with substantial experience, has helped me acquire skills that I can apply directly in my work environment, making it very practically relevant.”

A participant from Georgia’s Financial Monitoring Service

The training addressed challenges in detecting and tracing crypto transactions that cybercriminals reportedly use to obscure their illicit activities. Participants were trained on advanced techniques used by bad actors to hide their digital footprints on-chain and explored methods for law enforcement to effectively counter these tactics, the press release reads.

The OSCE says the course was designed to equip investigators with the tools needed to navigate the complexities of blockchain technology in real-world scenarios. The course also “encouraged the investigators to exchange knowledge on trends, challenges and good practices from the different beneficiary countries.”

This initiative is part of the OSCE’s extra-budgetary project, supported by Germany, Italy, Poland, Romania, the U.K., and the U.S., which aims to combat money laundering and other financial crimes facilitated by virtual assets. In November 2023, the OSCE also hosted a similar training for Ukrainian authorities, aimed at improving their capacity to trace crypto transactions.

In a separate effort, the U.S. Internal Revenue Service announced in September 2023 that nearly 40 Ukrainian law enforcement officers completed advanced training on crypto tracing, utilizing blockchain analytics tools from CipherTrace and BlockTrace.

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