BONOKOSKI: RCMP makes a big bitcoin sting in money launderers

Cryptoassets are increasingly being used to launder proceeds of crime

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Three years ago, Trudeau liberals introduced the first regulations of its kind on bitcoin dealers over legitimate fears that the pseudo-currency would attract money launderers.


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“More and more cryptoassets are being used to launder the proceeds of crime,” then-finance minister Bill Morneau testified at the 2018 Senate banking committee hearings.

However, unbeknownst to those lawmakers, the RCMP had already been in a four-year sting operation for a year by bitcoin dealers who, using the Darknet as their digital connection, were doing precisely what Morneau was talking about.

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

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


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The documents in that affidavit, as first described in Blacklock’s Reporter, detailed an elaborate investigation in which RCMP officers posing as bitcoin buyers intended to launder the proceeds of crime to expel the perpetrators.

In a tapped conversation with a bitcoin trader, an undercover cop asked, “Look, do you care where some of the money comes from?”

“I’m pretty sure you have 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 trader. “No one can say it anyway.”

The criminal investigation was prompted by the 2017 councils of the US Internal Revenue Service and tax auditors “on drug trafficking with bitcoin and Darknet,” according to the court affidavit.


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Canada-based drug dealers using pseudonyms such as Pharmacy Phil and Pharmacy Powder appeared to sell “quantities of fentanyl and methamphetamine” in exchange for bitcoins.

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

The RCMP affidavit, according to Blacklock’s, quoted a bitcoin trader as saying, “Sometimes what we do is we have a lot of clients who come in every day for five days and collect $ 9,000 a day.”

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


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

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Laundering cryptocurrencies through online exchanges and then converting them to cash is much simpler than laundering bags full of cash often across borders. Online transactions are borderless and negates the need to physically move illegal money from one place to another.

Ergo, it is easy and practical.

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

If ever there was a system built for crypto-bandits, it is bitcoin.

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

Therefore, federal agencies, the National Law Review said, will have a difficult time linking a particular bitcoin transaction to any individual,

But, as the RCMP has shown, it is possible.

It just takes time and deep data analysis.

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