Editing Money laundering (section)

====Digital electronic money====
{{see also|Cryptocurrency and crime}}

In theory, [[electronic money]] should provide as easy a method of transferring value without revealing identity as untracked banknotes, especially wire transfers involving anonymity-protecting numbered bank accounts.  In practice, however, the record-keeping capabilities of Internet service providers and other network resource maintainers tend to frustrate that intention.  While some [[cryptocurrency|cryptocurrencies]] under recent development have aimed to provide more possibilities of transaction anonymity for various reasons, the degree to which they succeed — and, in consequence, the degree to which they offer benefits for money laundering efforts — is controversial. Solutions such as [[Zcash|ZCash]] and [[Monero]] ― known as ''privacy coins''<ref>{{Cite book |last1=Larkin |first1=Charles |title=Understanding Cryptocurrency Fraud. The challenges and headwinds to regulate digital currencies |last2=Pearce |first2=Nick |last3=Shannon |first3=Nadine |date=2022 |publisher=De Gruyter |isbn=978-3-11-071688-7 |editor-last=Corbet |editor-first=Shaen |location=Boston/Berlin |pages=141 f |chapter=Criminality and cryptocurrencies: Enforcement and policy responses – Part II}}</ref> ― are examples of cryptocurrencies that provide unlinkable anonymity via proofs and/or obfuscation of information ([[ring signature]]s).<ref>Cf. {{Cite journal |last1=Kethineni |first1=Sesha |last2=Cao |first2=Ying |date=2020 |title=The Rise in Popularity of Cryptocurrency and Associated Criminal Activity |journal=International Criminal Justice Review |volume=30 |issue=3 |pages=334 |doi=10.1177/1057567719827051|s2cid=150755683 }}</ref> While not suitable for large-scale crimes, privacy coins like Monero are suitable for laundering money made through small-scale crimes.<ref>{{Cite book |last=Hou |first=Greg |title=Understanding Cryptocurrency Fraud. The challenges and headwinds to regulate digital currencies |date=2022 |publisher=De Gruyter |isbn=978-3-11-071688-7 |editor-last=Corbet |editor-first=Shaen |location=Boston/Berlin |pages=88 |chapter=Cryptocurrency money laundering and exit scams: Cases, regulatory responses and issue}}</ref>

Apart from traditional cryptocurrencies, [[NFT|Non-Fungible Token]]s (NFTs) are also commonly used in connection with money laundering activities.<ref>{{Cite report |url=https://rusi.org/explore-our-research/publications/commentary/nfts-new-frontier-money-laundering |title=NFTs: A New Frontier for Money Laundering? |last1=Owen |first1=Allison |last2=Chase |first2=Isabella |date=2 December 2021 |publisher=Royal United Services Institute |access-date=12 January 2023 |archive-date=16 January 2022 |archive-url=https://web.archive.org/web/20220116131322/https://rusi.org/explore-our-research/publications/commentary/nfts-new-frontier-money-laundering/ |url-status=live }}</ref> NFTs are often used to perform [[Wash Trade|Wash Trading]] by creating several different [[Cryptocurrency wallet|wallets]] for one individual, generating several fictitious sales and consequently selling the respective NFT to a third party.<ref>{{Cite report |url=https://home.treasury.gov/system/files/136/Treasury_Study_WoA.pdf |title=Study of the Facilitation of Money Laundering and Terror Finance Through the Trade in Works of Art |publisher=[[United States Department of the Treasury]] |page=27 |access-date=12 January 2023 |year=2022 |archive-date=13 April 2022 |archive-url=https://web.archive.org/web/20220413071205/https://home.treasury.gov/system/files/136/Treasury_Study_WoA.pdf |url-status=live }}</ref> According to a report by [[Chainalysis]], these types of wash trades are becoming increasingly popular among money launderers especially due to the largely anonymous nature of transactions on NFT marketplaces.<ref>{{Cite web |last=Quiroz-Gutierrez |first=Marco |date=4 February 2022 |title=A handful of NFT users are making big money off of a stealth scam. Here's how 'wash trading' works |url=https://fortune.com/2022/02/04/nft-wash-trade-scam-millions/ |access-date=12 January 2023 |website=Fortune |archive-date=15 December 2022 |archive-url=https://web.archive.org/web/20221215090338/https://fortune.com/2022/02/04/nft-wash-trade-scam-millions/ |url-status=live }}</ref><ref>{{Cite web |date=2 February 2022 |title=Crime and NFTs: Chainalysis Detects Significant Wash Trading and Some NFT Money Laundering In this Emerging Asset Class |url=https://blog.chainalysis.com/reports/2022-crypto-crime-report-preview-nft-wash-trading-money-laundering/ |access-date=12 January 2023 |publisher=Chainalysis |archive-date=6 December 2022 |archive-url=https://web.archive.org/web/20221206010533/https://blog.chainalysis.com/reports/2022-crypto-crime-report-preview-nft-wash-trading-money-laundering/ |url-status=live }}</ref> Auction platforms for NFT sales may face regulatory pressure to comply with anti-money laundering legislation.<ref>Cf. {{Cite report |url=https://home.treasury.gov/system/files/136/Treasury_Study_WoA.pdf |title=Study of the Facilitation of Money Laundering and Terror Finance Through the Trade in Works of Art |publisher=United States Department of the Treasury |page=26 |access-date=12 January 2023 |year=2022 |archive-date=13 April 2022 |archive-url=https://web.archive.org/web/20220413071205/https://home.treasury.gov/system/files/136/Treasury_Study_WoA.pdf |url-status=live }}</ref>

Additionally, [[Cryptocurrency tumbler|cryptocurrency mixers]] have been increasingly used by cybercriminals over the past decade to launder funds.<ref>{{Cite web |last=Team |first=Chainalysis |date=2022-07-14 |title=Mixer Usage Reaches All-time Highs in 2022 |url=https://blog.chainalysis.com/reports/crypto-mixer-criminal-volume-2022/ |access-date=2023-04-23 |website=Chainalysis |language=en-US |archive-date=23 April 2023 |archive-url=https://web.archive.org/web/20230423003145/https://blog.chainalysis.com/reports/crypto-mixer-criminal-volume-2022/ |url-status=live }}</ref> A mixer blends the cryptocurrencies of many users together to obfuscate the origins and owners of funds, enabling a greater degree of privacy on public blockchains like [[Bitcoin]] and [[Ethereum]].<ref>{{Cite web |last=Team |first=Chainalysis |date=2022-08-23 |title=Crypto Mixers and AML Compliance |url=https://blog.chainalysis.com/reports/crypto-mixers/ |access-date=2023-04-23 |website=Chainalysis |language=en-US |archive-date=23 April 2023 |archive-url=https://web.archive.org/web/20230423003143/https://blog.chainalysis.com/reports/crypto-mixers/ |url-status=live }}</ref> Although not explicitly illegal in many jurisdictions, the legality of mixers is controversial.<ref>{{Cite news |last=Yaffe-Bellany |first=David |date=2022-09-08 |title=Investors Sue Treasury Department for Blacklisting Crypto Platform |language=en-US |work=The New York Times |url=https://www.nytimes.com/2022/09/08/business/tornado-cash-treasury-sued.html |access-date=2023-04-23 |issn=0362-4331 |archive-date=23 April 2023 |archive-url=https://web.archive.org/web/20230423003142/https://www.nytimes.com/2022/09/08/business/tornado-cash-treasury-sued.html |url-status=live }}</ref> The use of the mixer [[Tornado Cash]] in the laundering of funds by the [[Lazarus Group]] led the [[Office of Foreign Assets Control]] to sanction it, prompting some users to sue the Treasury Department.<ref>{{Cite web |last=Yaffe-Bellany |first=David |date=8 September 2022 |title=Investors Sue Treasury Department for Blacklisting Crypto Platform |url=https://www.nytimes.com/2022/09/08/business/tornado-cash-treasury-sued.html |access-date=22 April 2023 |website=The New York Times |archive-date=23 April 2023 |archive-url=https://web.archive.org/web/20230423003142/https://www.nytimes.com/2022/09/08/business/tornado-cash-treasury-sued.html |url-status=live }}</ref> Proponents have argued mixers allow users to protect their privacy and that the government lacks the authority to restrict access to decentralized software. In the United States, [[Financial Crimes Enforcement Network|FinCEN]] requires mixers to register as money service businesses.<ref>{{Cite web |last=Network |first=Financial Crimes Enforcement |date=9 May 2019 |title=Application of FinCEN's Regulations to Certain Business Models Involving Convertible Virtual Currencies |url=https://www.fincen.gov/resources/statutes-regulations/guidance/application-fincens-regulations-certain-business-models |access-date=22 April 2023 |website=fincen.gov |archive-date=23 April 2023 |archive-url=https://web.archive.org/web/20230423003145/https://www.fincen.gov/resources/statutes-regulations/guidance/application-fincens-regulations-certain-business-models |url-status=live }}</ref>

In 2013, [[Jean-Loup Richet]], a research fellow at [[ESSEC]] ISIS, surveyed new techniques that cybercriminals were using in a report written for the [[United Nations Office on Drugs and Crime]].<ref name="Jean-Loup Richet">{{Cite arXiv |eprint=1310.2368 |class=cs.CY |author=Richet, Jean-Loup |title=Laundering Money Online: a review of cybercriminals methods |date=June 2013}}</ref> A common approach was to use a [[digital currency exchanger]] service which converted dollars into a digital currency called [[Liberty Reserve]], and could be sent and received anonymously. The receiver could convert the Liberty Reserve currency back into cash for a small fee. In May 2013, the US authorities shut down Liberty Reserve, charging its founder and various others with money laundering.<ref name="Wired">{{Cite magazine |last=Zetter, Kim |date=May 2013 |title=Liberty Reserve founder indicted on $6 billion money-laundering charges |url=https://www.wired.com/threatlevel/2013/05/liberty-reserve-indicted/ |magazine=Wired |access-date=20 October 2013 |archive-date=26 October 2013 |archive-url=https://web.archive.org/web/20131026031250/http://www.wired.com/threatlevel/2013/05/liberty-reserve-indicted |url-status=live }}</ref>

Another increasingly common way of laundering money is to use online gaming. In a growing number of online games, such as ''[[Second Life]]'' and ''[[World of Warcraft]],'' it is possible to [[gold farming|convert money into virtual goods, services, or virtual cash]] that can later be converted back into money.<ref name="Wired.uk" />

To avoid the usage of decentralized digital money such as [[Bitcoin]] for the profit of crime and corruption, Australia is planning to strengthen the nation's anti-money laundering laws.<ref name="ABC">{{Cite news |date=22 October 2017 |title=Bitcoin one step closer to being regulated in Australia under new anti-money laundering laws |work=ABC News |url=http://www.abc.net.au/news/2017-10-23/bitcoin-one-step-closer-to-being-regulated-in-australia/9058582 |access-date=18 Dec 2017 |archive-date=17 December 2017 |archive-url=https://web.archive.org/web/20171217183707/http://www.abc.net.au/news/2017-10-23/bitcoin-one-step-closer-to-being-regulated-in-australia/9058582 |url-status=live }}</ref> The characteristics of Bitcoin—it is completely deterministic, protocol-based and can be difficult to censor<ref>{{cite web |title=Why Is Bitcoin Censorship Resistant? |url=https://www.nasdaq.com/articles/why-is-bitcoin-censorship-resistant |website=Nasdaq |access-date=28 March 2025}}</ref>—make it possible to circumvent national laws using services like [[Tor (network)|Tor]] to obfuscate transaction origins. Bitcoin relies completely on cryptography, not on a central entity running under a [[Know your customer|KYC]] framework. There are several cases in which criminals have cashed out a significant amount of [[Bitcoin]] after ransomware attacks, drug dealings, cyber fraud and gunrunning.<ref name="cnbc.com">{{Cite web |date=3 August 2017 |title=Hackers have cashed out on $143,000 of bitcoin from the massive WannaCry ransomware attack |url=https://www.cnbc.com/2017/08/03/hackers-have-cashed-out-on-143000-of-bitcoin-from-the-massive-wannacry-ransomware-attack.html |access-date=18 Dec 2017 |website=[[CNBC]] |archive-date=27 January 2018 |archive-url=https://web.archive.org/web/20180127143206/https://www.cnbc.com/2017/08/03/hackers-have-cashed-out-on-143000-of-bitcoin-from-the-massive-wannacry-ransomware-attack.html |url-status=live }}</ref> However, many digital currency exchanges are now operating KYC programs under threat of regulation from the jurisdictions they operate.<ref>{{Cite news |date=2015-04-23 |title=Bitcoin Island: cleaning up the crypto currency |language=en-GB |work=BBC News |url=https://www.bbc.com/news/business-32394170 |access-date=2021-02-17 |archive-date=9 April 2021 |archive-url=https://web.archive.org/web/20210409220802/https://www.bbc.com/news/business-32394170 |url-status=live }}</ref><ref>{{Cite web |last=Bharathan |first=Vipin |title=Central Bankers And Crypto-Twitter Perennially In Opposition; Analysis Of Scale Of Crypto-Crime And The Prospect For Regulation |url=https://www.forbes.com/sites/vipinbharathan/2021/01/22/central-bankers-and-crypto-twitter-perennially-in-opposition-analysis-of-scale-of-crypto-crime-and-the-prospect-for-regulation/ |access-date=2021-02-17 |website=Forbes |language=en |archive-date=25 February 2021 |archive-url=https://web.archive.org/web/20210225204819/https://www.forbes.com/sites/vipinbharathan/2021/01/22/central-bankers-and-crypto-twitter-perennially-in-opposition-analysis-of-scale-of-crypto-crime-and-the-prospect-for-regulation/ |url-status=live }}</ref>