Finland has one of the lowest crime rates in the world—but according to new research, it’s a different story when it comes to the murky world of crypto.
CipherTrace says 12.1% of Bitcoin funds sent to Finnish exchanges come directly from criminal sources. As a percentage, that’s the highest worldwide.
LocalBitcoins, a peer-to-peer crypto marketplace, is partly to blame. It is based in the Finnish capital of Helsinki, and received 99% of these ill-gotten funds, according to a report released on June 2 by the cryptocurrency intelligence firm.
Exchanges in Russia (5.23%) and the United Kingdom (0.69%) were also popular destinations, as a lack of clarity from British regulators “has made the country’s exchanges a hotspot for criminals to quickly and easily cash out.”
However, the global average of direct criminal funds received by exchanges is continuing to fall. It dropped 47% in 2019, and just 0.17% of the funds sent to these platforms last year came directly from criminal sources.
A busy start to the year
Back in April, data from Chainalysis had suggested that darknet revenues were plummeting because of COVID-19.
The CipherTrace research offers a more rounded look at crypto-related criminal activity for the first five months of 2020—and estimated that $1.4 billion has been lost to thefts, hacks, and fraud over the period.
Given that a total of $4.5 billion was swindled from victims in 2019, it seems crypto criminals are a long way off beating their all-time record. That said, 2020 will likely come in second place if current trends continue.
According to CipherTrace, a spate of coronavirus-themed crypto crimes emerged as cases spread worldwide and millions of people went into lockdown. However, some of these ruses were more successful than others.
Of the COVID-related products being sold on the dark web, phishing sites appear to be the most popular. Although some scammers were trying to make a quick buck by offering fake personal protective equipment, it appears they had very little sales.
When it comes to fraud, malicious actors tend to prowl legitimate platforms—luring victims into chat rooms where requests for Bitcoin payments can be made.
“While governments funnel resources into mitigating detrimental health and economic impacts of the pandemic, criminals are taking advantage of the lack of oversight resulting from the need for urgent action,” CipherTrace said.
The scams uncovered have been pretty appalling. One impersonated the Red Cross and attempted to extract personal details or payment in crypto—and while it claimed to offer information that would keep people safe from COVID-19, the victims were actually being spied on.
AML works, but scammers getting savvy
The fact that $1.4 billion has already been stolen so far in 2020 is grim, and suggests much more needs to be done. However, CipherTrace said there are signs that anti-money laundering measures are effective, as criminals are finding it much harder to clean their funds through exchanges.
One problem lies in how scammers are upping their game and getting savvier—obfuscating the origins of their stolen funds in brand-new ways. Instead of performing one-hop interactions (where crypto goes directly to an exchange), many are now opting for two-hop interactions, where funds are layered through multiple private wallets first. All of this puts exchanges at much greater risk.
CipherTrace also found that 74% of Bitcoin moved between exchanges crosses borders, underlining the importance of global AML standards. Looking ahead to where regulators will set their sights next, researchers predicted Bitcoin ATMs could be the next target—as American users are far more likely to send funds to high-risk exchanges that are frequently used for money laundering.