A recent EU SNRA report [pdf] outlined the current risks in the terrorist financing (TF) and money laundering (ML) sectors. The European Commission report briefly outlined virtual currencies (VCs) and then boldly claimed that “criminal organizations” avoided them due to the “high technology required.” Criminals want to use virtual currencies such as Bitcoin, Monero, or Litecoin—but the currencies are too complicated, the Commission explained.
While low on the TL and ML “threat” scale, virtual currencies ranked high on the “vulnerability” scale. The low threat, as they described, came from an apparent lack of technical capability amongst criminals. The elevated vulnerability was due to the lack of regulation and oversight in the cryptocurrency sector.
Starting with terrorist financing, the report pointed out that terrorist groups “are known to have given instructions on the internet” about using VCs. Twitter, the report explicitly explained, was a medium for terrorists to distribute “how to” guides on virtual currencies.
“However, the technology is quite recent and in any case requires some knowledge and technical expertise which has a dissuasive effect on terrorist groups,” the Commission’s expert analysts wrote. “LEAs have gathered some information according to which terrorist groups may use virtual currencies to finance terrorist activities,” but, “the use of virtual currencies requires technical expertise which makes it less attractive.”
The money laundering section shared the same message as the terrorism section:
“One of the reasons is that the reliance on virtual currencies to launder proceeds of crime requires some technical expertise. According to LEAs, the amounts of money laundered via virtual currencies are quite low, which tends to demonstrate that criminals’ intent to use them is rather limited because this modus operandi is not considered as attractive enough. […] From a technical point, virtual currencies present some commonalities with e-money but the IT expertise at stake for virtual currencies means that organised crime would have lower capability to use them than e-money which is more widely accepted.”
Notably, one of the sources for the report was Europol’s 2016 IOCTA. The document—an organized crime assessment wherein DeepDotWeb articles are used as references—repeatedly referred to cryptocurrency used by criminals. Additionally, Europol’s IOCTA read, “for almost all types of organised crime, criminals are deploying and adapting technology with ever greater skill and to ever greater effect.” Furthermore, “this is now, perhaps, the greatest challenge facing law enforcement authorities around the world, including in the EU.”
While the European Commission covered dozens of other possible TF and ML methods, they concluded the virtual currency section with their mitigation plan’s steps. One of which included monitoring the “risks posed by Fintech/Regtech” and “crypto-to-crypto currency exchanges.” Another step, one they had hinted at for months [pdf], was to “set-up and maintain a central database registering users’ identities and wallet addresses accessible to FIUs, as well as self-declaration forms for the use of virtual currency users.”