BONOKOSKI: RCMP does vast bitcoin sting on money launderers

Increasingly crypto-assets are being used to launder the proceeds of crime

Article content

Three years ago, the Trudeau Liberals introduced first-of-their-kind regulations on bitcoin dealers out of legitimate fears that the pseudo-currency attracted money launderers.

Advertisement

Story continues below

Article content

“Increasingly crypto-assets are being used to launder the proceeds of crime,” then-finance minister Bill Morneau testified at the 2018 hearings of the Senate banking committee.

Unbeknownst to those lawmakers, however, the RCMP were already a year into a four-year sting operation of bitcoin dealers who, using the Darknet as their digital connection, were doing precisely what Morneau was talking about.

The Darknet, by short-form definition, is an underworld computer network with restricted access that is used chiefly for illegal peer-to-peer file sharing.

“(In fact,) investigators continue to analyze the vast amount of financial documents,” RCMP Cpl. Neil Vaid, of the International Investigations Unit, wrote in affidavit filed in Ontario Superior Court.

Advertisement

Story continues below

Article content

Documents in that affidavit, as first outlined in Blacklock’s Reporter, detailed an elaborate probe in which RCMP officers posing as bitcoin buyers pretended to launder proceeds of crime to flush out perpetrators.

In one wiretapped conversation with a bitcoin dealer, an undercover policeman asked: “Look man, do you even care where some of the money comes from?”

“I’m pretty sure you’ve got an idea that some of this isn’t exactly clean and I want to know if this is a problem,” the undercover cop continued.

“We don’t care where the coins come from,” replied the bitcoin dealer. “Nobody can tell anyways.”

The criminal investigation was prompted by 2017 tips from the U.S. Internal Revenue Service and tax auditors “about drug trafficking using bitcoin and the Darknet,” according to the court affidavit.

Advertisement

Story continues below

Article content

Canadian-based drug dealers using pseudonyms like Pharmacy Phil and Pharmacy Powder appeared to sell “quantities of fentanyl and crystal meth” in exchange for bitcoin.

Mounties documented “suspicious transactions of persons who were later determined by the RCMP to be drug traffickers,” and at one point had an undercover officer posing as an “importer and exporter” meet a bitcoin dealer in an Ottawa restaurant’s parking lot to exchange $20,000 in cash.

The RCMP affidavit, according to Blacklock’s, quoted one bitcoin dealer as saying: “Sometimes what we do is we have a lot of customers that will come every day for five days and pick up $9,000 a day.”

Such transactions, of course, were $1,000 shy of $10,000 amount that raises red flags in the finance industry.

Advertisement

Story continues below

Article content

As laid out in the National Law Review, bitcoin transactions actually have the ability to make money laundering easier for criminals because cryptocurrencies are conducted, transferred, and stored online and allow cybercriminals to move their funds instantly across borders.

We apologize, but this video has failed to load.

Laundering cryptocurrencies via online exchanges and then converting them to cash is much simpler than laundering bags full of cash often across borders. Online transactions have no borders, and it negates the need to physically move illegal money from place to place.

Ergo, it is easy and practical.

Not only that, there is a degree of anonymity associated with bitcoin transactions. While not 100% anonymous, these transactions are in fact pseudonymous, meaning the public bitcoin addresses used for transactions are not registered in the names of individuals.

If there were ever a system built for crypto-bandits, it’s bitcoin.

The transactions are stored publicly on the blockchain — the decentralized ledger where all bitcoin transactions are stored — but only the individual making the transaction has access to the account’s wallet.

Federal agencies, said the National Law Review, will therefore have a challenging time linking a particular bitcoin transaction back to any one individual,

But, as the RCMP has shown, it’s possible.

It just takes time and deep data dives.

markbonokoski@gmail.com

    Advertisement

    Story continues below

    Comments

    Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

    Share:

    Share on facebook
    Facebook
    Share on twitter
    Twitter
    Share on pinterest
    Pinterest
    Share on linkedin
    LinkedIn
    On Key

    Related Posts

    On AIR

    Russtrat world