Cyber Laundering: International Policies And Practices

Contents
Preface
About the Editor
About the Contributors
Acknowledgments
List of Abbreviations
List of Tables
Introduction
Structure of the Book
Part I: Virtual laundering practices
Part II: Countermeasures and international response
Conclusion
Part I Virtual Laundering Practices
Chapter 1 Turning Cash to Cryptocurrency
Introduction
A Brief Overview of Cryptocurrency
Cryptocurrency Exchanges
AML efforts by legitimate exchanges
DeFi
Crypto dark pools
Over-the-counter purchases
Crypto mining (cash-hardware-crypto)
Art and NFTs
Cybercrime
Mixers
Crypto ATM
Physical/digital goods translation
Prepaid cards
Card resale
Other gift card redemption methods
Case Studies
Case study: Harvest Finance
Case study: Poly Network
Conclusion
References
Chapter 2 Combating Blockchain-Enabled Crime
Introduction
Bitcoin and Crime
What the Law Says
Bitcoin Tracing
Bitcoin mixing
1-to-1 transactions
Many-to-2 transactions
1-to-many transaction
Many-to-many transactions
TaintChain: Practical FIFO tracing
Understanding the Theft Reporting Ecosystem
Incentives of the taint tracking ecosystem
Theft reporting in practice
How the market really works now
Who owns the Bitcoin stock anyway?
Off-chain transactions
The E-Money Directive
Directive PE CONS 72/17
Positions of UK stakeholders
Policy Recommendations
Regulated exchanges
Consumer protection
Unregistered exchanges
Innovation and the role of central bank cryptocurrency
Nature of ownership
Dark market currencies
Capital requirements
Mitigating environmental harm
Conclusion
References
Chapter 3 Online Casinos: Artificial Intelligence and Money Laundering
Introduction
Casinos and Money Laundering
Online Casinos
The Use of AI to Curb Money Laundering
Conclusion
References
Chapter 4 Not a Game: The Need to Harmonize a Global Regulatory Approach to Combat Money Laundering via Virtual Assets in Massively Multiplayer Online Games
Introduction
Massively Multiplayer Online Games Exploited by Launderers
Virtual Asset Platforms Raise ML Risks
Skins and NFTs
Code Has Value
Loot Boxes and Gambling
History of Laundering in MMOs
Ownership of Value
Evolved Methods of Laundering via Virtual Goods
Gold Farming
Tokenizing Game Assets
Borderless Games
Detecting RMT Transactions in MMOs
Conclusion and Recommendations
References
Chapter 5 Malicious Financial Activities in the Dark Web — Prevailing Information and Knowledge
Introduction
The Internet
A minute on the Internet
The volume of information on the Internet
The extent of information creation on the Internet
The Deep Web
What is the size of the Internet relative to the deep web?
The Dark Web
The size of the dark web
Marketplaces and shop vendors in the dark web
Drug Trafficking on the Dark Web
The size of the drug market in the dark web
The volume of drug trafficking transactions and revenues
Types of drugs purchased on the dark web
The most active drug market countries in the dark web
Weapons and Ammunition
Data Trade on the Dark Web
Cybercrime on the Dark Web
Money Laundering on the Dark Web
Cryptocurrencies and money laundering on the dark web
Anti-money laundry and the dark web
Summary
References
Chapter 6 Cyber Terrorism and Organized Crime
Introduction
Defining Organized Crime and Terrorism
Organized Crime
Terrorist Groups
The Evolution of Cybercrime
Risk versus Reward
Virtual Private Networks
Proxy servers
The Onion Router
Compromised systems
Funding Organized Crime and Terrorism
Hacking
Business e-mail compromise (BEC)
Ransomware
Money Laundering and the Emergence of Digital Money
Regulation and legislation
Legal challenges
Virtual currency
Mitigating the threat
Preventing Attacks
Defensive strategies
Offensive strategies
Governance, standards, and frameworks
Regulation
References
Part II Countermeasures and International Response
Chapter 7 Evolution of Legal and Regulatory Responses to Money Laundering Risks Related to Virtual Assets: The Examples of the European Union and the US
Introduction
VAs
VCs
Cryptocurrency
Initial Coin Offering
Security Token Offering
Financial Action Task Force Recommendations
Requirements for Regulating VA and VASPs
RBA
Registration or licensing requirements
Recordkeeping and travel rule
Customer due diligence
Suspicious transaction report
Coordination and cooperation
EU Laws and Regulations
US Laws and Regulations
Issues to Consider
Legal obligations for internet service providers
Asymmetry in regulations
Privacy laws and data sharing
Anonymity
Conclusion
References
Chapter 8 Worldwide Cooperation and Enforcement Issues
Introduction
What Are Virtual Currencies?
VCs and CL Activities
Toward an International Cooperation for CL
Understanding the global nature of CL
Catalysts and consequences of CL
Challenges and obstacles for fighting international CL
Logistical challenges
Legal challenges
Technical challenges
Cultural challenges
Current Stance of the International Community on International Cooperation
Recommendations for Regulations and Practices
Lessons from legal frameworks for combating CL crimes
Cybercrime law
Substantive law
Procedural law
Preventative law
Lessons from Other Nations’ Approaches to Combating ML and CL Activities
Agencies and Actors
The United Nations
European Union and European Commission
Egmont Group and Financial Intelligence Units
Red Flags for International Cooperation to Target
Conclusion
References
Chapter 9 Anti-Cyber Laundering: The Inclusion of Virtual Asset Service Providers
Prolegomena: Anonymization and Pseudonymization
Introduction
The applicable FATF recommendations to the VASP sector
The licensing or registration of VASPs: A prerequisite
Measures applicable to the VASP sector
Measures common to all obliged entities
Measures customized to VASPs
The main challenges
Legal challenges
Technical challenges
Enforcement measures
The consequences of monitoring the availability of information
Freezing and prohibiting transactions
Conclusion
Challenges linked to obfuscation are numerous
References
Chapter 10 Cryptocurrencies’ Asset Recovery: A Multi-Dimensional Approach
Interpretations of Digital Currency
Digital currencies as a store of value
Digital currencies as a medium of exchange
Digital currencies as a unit of account
Is digital currency money?
Can digital currencies be considered as assets?
Can digital currencies be considered as property?
General Principles of Seized Asset Management
Transparency and integrity
Protection of a bona fide third party
Cost management and efficiency
Cryptocurrencies’ Asset Recovery Procedures
Identification of assets subject to provisional measures
Asset management considerations
Timing of provisional measures
Procedures for Seizing VAs
Pre-seizure planning
Taking control of assets
Chain of custody
Jurisdictional issues
Post-seizure asset management
Asset management of cryptocurrencies till a final court order judgment
Converting VAs immediately to fiat currency
Profitable management of seized VAs
Valuation
Inventory
Security
Disposal
Final Thoughts/Conclusions
References
Chapter 11 Prosecuting Transnational Cybercrimes: From Territorial Sovereignty to New Jurisdiction — The Swiss Experience
Cyber Money Laundering: An Introduction
The Rise of Cybercrime: A Historical Perspective
The Challenges of Cybercrime and Cybercrime Investigations
The Convention on Cybercrime
The Swiss Perspective
Article 299 SCC: Violation of foreign territorial sovereignty
Swiss case law in ICTs and cybercrime-related investigations
New Paths Toward Effective Cyber Investigations: The (Draft) Second Additional Protocol to the Convention on Cybercrime on Enhanced Cooperation and Disclosure of Electronic Evidence
Conclusion
References
Index