cryptocurrency industry

G7 Bank Sector Higher Money Laundering Risk than Crypto Industry, Reports Mexico Financial Intelligence

According to an official report released by the Financial Intelligence Unit (FIU) of Mexico, the G7 banking sector comprising of major banks Santander, BBVA, Citibanamex, Banorte, HSBC, Scotiabank, and Inbursa—was the most prone to money laundering operations, despite being the most regulated.

Who is most at risk of money laundering?

Banks connected to exchange activity were also as highly ranked in terms of money laundering schemes. The report, which depicted the results of the second National Risk Assessment (NRA), discussed money laundering and terrorist financing. It detailed that there were four sectors within the financial industry that were most at risk of money laundering illicit activities.

The four categories were G7 banking, brokerage houses, exchange houses, and multiple banking institutions with commercial operations, as shared by El Economista. Among the four sectors outlined, the one with the highest risk of fraudulent activity was the G7 banking sector, which translated to approximately 80% of the banking sector’s assets.

The report by the FIU of Mexico also separated risk levels for money laundering and terrorist funding into four categories, depending on the magnitude of fraud – low, medium, medium-high, and high risk. The most regulated finance sector, the “G7 banking group,” ranked among the highest risk for money laundering.

Crypto scams easier to track than fiat

Though there appears to be increasing skepticism that fintech and crypto industries are always leveraged for money laundering schemes and monetary scams, the two sectors were surpassed by the traditional banking sector in terms of money laundering risk. The 2020 Financial Intelligence Unit of the Ministry of Finance and Public Credit report did not allocate a risk classification for the fintech industry.

During an ongoing panel hosted by the Association of Certified Financial Crime Specialists in August, Paxful Chief Compliance Officer Lana Schwartzmann mentioned that there are advantages to adopting cryptocurrency in a traditional fiat world. She referenced the infamous Twitter Bitcoin hack and stated that due to the digital trail left by crypto, digital assets fraud is easier to track than fiat. Had it been a traditional money heist, the investigation would not have been resolved as quickly.

Twitter Bitcoin heist

The Twitter Bitcoin (BTC) hack, which held the media spotlight in July, revolved around the narrative of three men who overtook Twitter by storm and generated over $100,000 worth of Bitcoin funds by hacking the accounts of world-known figures such as Elon Musk, Bill Gates, Kanye West, Joe Biden and more.

Thailand's SEC enhances investor protection with new cryptocurrency trading rules.

Thailand’s Securities and Exchange Commission (SEC) has introduced new guidelines to strengthen investor protection in the cryptocurrency industry. The SEC has mandated clearer disclosure of risk warnings and restrictions on digital asset business operators’ deposit and lending services.

The rules, endorsed during meetings in September, December of 2022, as well as May of 2023, require cryptocurrency business operators to explicitly inform potential investors about the inherent risks involved in trading. Customers must acknowledge these risks and provide consent before commencing trading, following an investment suitability assessment and appropriate investment proportions.

The second part of the new regulations prohibits digital asset business operators from providing or supporting deposit taking and lending services, with certain exceptions. These rules will take effect on August 30, 2023, and prohibit offering returns on digital asset deposits unless it falls under promotional activities defined by the SEC.

Additionally, the regulations prohibit any actions aimed at persuading or advertising deposit taking and lending services to the general public, including those provided by other entities.

US Bitcoin Corp-Hut 8 Merger Progresses Amid Celsius Plan Approval

U.S. Data Mining Group, Inc., doing business as US Bitcoin Corp (USBTC), today announced two pivotal developments: the progression of its merger with Hut 8 Mining Corp (“Hut 8”) and the court approval of the Celsius bankruptcy restructuring plan.

USBTC is advancing its all-stock merger (the “Transaction”) with Hut 8, a leading North American digital asset mining and high-performance computing infrastructure provider. The Securities and Exchange Commission (SEC) declared the registration statement for the merger effective on November 9. Asher Genoot, President and Co-Founder of USBTC, expressed enthusiasm about the merger, stating, “Joining forces with Hut 8 marks a new phase of growth for our shared company. This merger shows our ongoing dedication to operational excellence and provides a strengthened platform for our shared future.”

The merger is anticipated to be finalized by November 30, 2023, pending approval from USBTC stockholders and other customary closing conditions. Post-merger, the common stock of the new entity, Hut 8 Corp. (“New Hut”), is expected to be listed on the Nasdaq and the Toronto Stock Exchange under the proposed ticker symbol HUT.

In another significant development, USBTC, alongside consortium partners Arrington Capital, Proof Group, Steve Kokinos, and Ravi Kaza, acknowledges the court’s approval of the Celsius bankruptcy restructuring plan. This approval marks a crucial step for the consortium to begin managing Celsius’s assets and operations. The plan received overwhelming support from creditors, with a 95% approval rate.

The approved plan outlines a strategy for establishing and operating a new public, regulatory-compliant company to manage Celsius’ illiquid assets. This move signifies USBTC’s commitment to shaping the future of the cryptocurrency industry through operational excellence and innovative solutions.

USBTC, founded by visionary entrepreneurs and experienced executives, is a prominent North American mining company known for its efficiency, eco-friendliness, and large-scale operations. With campuses in New York, Nebraska, and Texas, USBTC aims to set industry standards.

Recently, Hut 8 Mining Corp has received the green light from the Canadian Supreme Court for the merger with USBTC. This approval further solidifies the merger’s progression and highlights Hut 8’s commitment to transparency and regulatory compliance in the cryptocurrency mining sector.

North Korea's Cyber Onslaught on Cryptocurrency: A $3 Billion Digital Heist

In recent years, North Korea has notably intensified its cyber operations, particularly targeting the cryptocurrency industry. This strategic shift emerged around 2017 when the country’s cybercriminal activities, previously focused on traditional financial institutions, pivoted towards the burgeoning field of digital currencies. The impetus for this change was likely due to the increased scrutiny and enhanced cybersecurity measures adopted by banks and financial institutions following a series of high-profile heists, including the infamous Bangladesh Bank robbery, according to Recorded Future.

Cryptocurrency, being a relatively new and less regulated industry, presented a lucrative and vulnerable target. North Korean operatives, leveraging their state-supported cyber capabilities, have since been implicated in a series of sophisticated attacks on various cryptocurrency exchanges and platforms globally. By 2022, their efforts culminated in the theft of an estimated $1.7 billion worth of cryptocurrency. This figure is staggering, not only in its sheer size but also in its economic significance to North Korea. It represents a substantial portion of the nation’s GDP and a significant chunk of its military budget, highlighting the strategic importance of these cyber heists to the regime.

The tactics employed by North Korean cyber actors mirror those used by traditional cybercriminals, including phishing, exploitation of software vulnerabilities, and the deployment of advanced malware. However, the scale and sophistication of their operations are markedly enhanced by the support and resources of a nation-state. This state backing allows them to execute more ambitious and coordinated attacks than typical cybercriminal groups.

In addition to stealing cryptocurrencies, North Korea has developed an intricate network for laundering these digital assets. The process often involves the use of cryptocurrency mixers and tumblers, services that obscure the origin of funds by mixing them with other transactions. This method complicates the task of tracing the stolen funds back to their illicit source. North Korean operatives have also been known to use stolen identities and fabricated documents to set up accounts on legitimate exchanges, further obfuscating their trail.

This pattern of cybercrime has significant implications not only for the cryptocurrency industry but also for the broader global financial system. The success of North Korea’s operations demonstrates the vulnerabilities that still exist in the digital financial world. It underscores the need for stronger regulatory frameworks and more robust cybersecurity measures across the industry.

Moreover, the use of stolen cryptocurrency to fund North Korea’s military ambitions, particularly its ballistic missile program, raises concerns at an international level. The regime’s ability to circumvent economic sanctions through cyber theft highlights the challenges faced by the global community in curbing North Korea’s military developments.

In response to this growing threat, experts suggest several mitigative strategies. Strengthening cybersecurity infrastructure, employing multi-factor authentication, training employees to recognize and respond to phishing attempts, and using hardware wallets for cryptocurrency storage are some recommended measures. Vigilance and caution in verifying the legitimacy of transactions and the sources of funds are also crucial in combating these sophisticated cyber operations.

As North Korea continues to refine its cyber capabilities and strategies, the need for a concerted and proactive response from the cryptocurrency industry and international regulatory bodies becomes increasingly urgent. The ongoing evolution of these cyber threats necessitates constant vigilance and adaptation to ensure the security and integrity of the global financial system.