Bitcoin Crime

The surge in popularity of cryptocurrency is causing a minefield for the UK government and criminal law enforcement.

Many different types of cryptocurrency are in existence; however the most well-known is Bitcoin. Although they can be used for the same purpose as traditional currencies, they are not backed by a government and are not currently subject to any kind of regulation. Bitcoin has been linked to online drug sales, sex trafficking, ransomware attacks and money laundering.

It is suspected by Europol that three to four billion pounds of criminal money in Europe is being laundered by the use of cryptocurrencies. The popularity of the use of cryptocurrencies for criminal purposes derives from the fact it is an international currency which is not subject to traditional banking controls and most importantly it can be anonymous.

Although Bitcoin itself isn't totally anonymous as there is a record of all transaction history that could be interrogated, there are other currencies that have been created to try and circumvent this. Monero and Zcash are examples of these new currencies which benefit from additional technologies, for example anonymising IP addresses or "zero-proof technology" which removes any identifying information from a blockchain's ledger (a publicly accessible record of all transactions made using the currency). It is thought that the technology will develop very quickly to the point where digital transactions are virtually untraceable.

Planned Regulations

Due to the concerns about criminal activity, the UK and other EU governments are planning to regulate cryptocurrencies by bringing them under EU anti-money laundering rules.

"The UK government is currently negotiating amendments to the anti-money-laundering directive that will bring virtual currency exchange platforms and custodian wallet providers into anti-money laundering and counter-terrorist financing regulation, which will result in these firms' activities being overseen by national competent authorities for these areas."

The treasury expects the changes to come into effect by December 2018. This could force traders to disclose their identities and require online platforms to report any suspicious transactions as well as carrying out due diligence.

There are already companies in existence, such as Coincheckup, that specialise in tracking bitcoin transactions and attributing them to individuals. These services are being utilised by law enforcement authorities across the world. If an individual is suspected of holding criminal property and bitcoin transactions can be linked back to them, this could be used as evidence of money laundering. Prosecutions for bitcoin related offences have been increasing over the last few years, with the Dutch courts appearing to lead the way.

Money Mules

Another issue that arises from the criminal use of cryptocurrency is people being recruited to as "money mules". This is where criminal proceeds are split into smaller amounts of cryptocurrency and given to people who are not seen to be associated with the criminals and are usually unaware about the true nature of the transaction. The mules will then convert the cryptocurrency into cash before returning it to the criminals and earning themselves a fee. Cifas, the fraud prevention service, found that between January-September 2017 there were 8652 money mule cases by 18-24 year olds which was a 75% increase on the previous year, although this figure includes money mules who deal in normal currency. Being accused of this crime is very serious as the penalty can be up to 14 years imprisonment.

Contact us for Speclialist Legal Advice

If you are concerned that you or someone you know may have been used as a money mule or you require advice about money laundering, please contact our Crime team on 020 3811 3293 or make an enquiry online.


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