Saturday, December 4, 2021

Latin American crime cartels turn to crypto to clean up their cash

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Back in April 2019, Mexican authorities detained suspected human trafficker Ignacio Santoyo at a lavish area of this Caribbean resort of Playa del Carmen after connecting him into a prostitution racket stretching across Latin America.

Nevertheless, it wasn’t that the 2,000 girls Santoyo is alleged to have blackmailed and sexually manipulated that finally resulted in his capture, but the bitcoin he’s suspected of having to help launder the profits of his surgeries, officials explained.

The cryptocurrency is emerging as a new front in Latin America’s battle against gangs fighting for control of criminal niches for sex, drugs, firearms, and people, based on law-enforcement authorities.

“There is a transition into committing crimes in cyberspace, such as obtaining cryptocurrencies to make money… and also the pandemic is quickening it,” said Santiago Nieto, head of the Mexican finance ministry’s financial intelligence unit (UIF).

Neither Santoyo, who’s in custody, nor attorneys representing him might be reached for comment, and they haven’t commented publicly about the situation previously.

Santoyo’s arrest revealed an early victory for new law in Mexico – one of just two countries in Latin America, together with Brazil, to enact such laws – which attempts to tackle the intractable problem of law agencies can monitor the usage of bitcoin along with other cryptocurrencies created to anonymize users.

The legislation requires all enrolled cryptocurrency trading platforms to record transports over 56,000 pesos ($2,830). It had been passed in 2018 however, it required several weeks to implement the machine, which remains a work in progress.

Bitcoin’s usage to extort cash is especially increasing among drug gangs like the Jalisco New Generation Cartel (CJNG) along with the Sinaloa Cartel of seized kingpin Joaquin”El Chapo” Guzman, U.S. and Mexican police state.

Mexican President Andres Manuel Lopez Obrador has confronted record amounts of gang-fueled violence throughout his first two years in office, along with the possibility of cartels hiding their gains in lightly-regulated distances is a significant concern.

The amounts involved with the few cases discovered are typically tens of thousands or tens of thousands of dollars. They signify a drop in the ocean as well as organized crime’s tough money laundry – estimated at $25 billion annually in Mexico alone, as stated by the authorities and financial-intelligence companies.

Yet bigger sums have started to crop up throughout the area throughout the previous 3 decades, using a group of global authorities dividing three Colombian drug gangs laundering millions of dollars through cryptocurrencies, police say. Back in Mexico, the expectation is that the rules will help trap big fish.

The one thing harder than smuggling drugs across boundaries is getting back the profits to cartels, officials say. Money is thick, and hauling it exposes traffickers to elevated risk. Placing it into banking methods aimed to discover dirty money is perilous, also.

UIF chief Nieto said offenders typically split their illegal cash into small quantities and deposited them into a various bank account, a technique called”smurfing”.

Then they use those accounts to obtain a run of small quantities of bitcoin on the internet, he added, obscuring the source of their cash and permitting them to pay partners elsewhere on earth.

In Santoyo’s case, police who were pursuing him said they eventually tracked him down after he purchased enough bitcoin to activate an alarm under the law. Moreover, when creating his trades via a documented stage, Santoyo left private details including his contact number and address.

Between May and November 2018, Santoyo along with his sister obtained a few 441,000 pesos ($22,260) at bitcoin involving them on Bitso, a trading platform in Mexico and Argentina, according to government documents found by Reuters.

Bitso, among 11 enrolled crypto trading platforms in Mexico, declined to comment.

Mexican authorities also have their sights set on”Bandidos revolution group”, a group national prosecutors suspect of stealing millions of dollars throughout cyber attacks on big banks.

In May 2019, police detained suspected gang leader Hector Ortiz in the central state of Guanajuato later he spent”thousands of dollars” on bitcoin.

This triggered the bitcoin brink detector, allowing investigators to trace Ortiz through his mobile phone.

Neither Ortiz nor attorneys representing him may be reached for comment.

Rolando Rosas, head of the Cyber Investigations Unit (UICOT) in the Mexican attorney general’s office, said it had been tough to track offenders’ use of bitcoin, despite the law.

UICOT has roughly 120 people on its employees. However, to be competitive, it requires about four times he added.

The work is painstaking and frequently frustrating.

The law has contributed to 1,033 bitcoin brink alarms being triggered so much this season. Researchers must pursue up everyone to assess if it may be questionable and if the consumer is connected to some criminal behavior or cartels.

Even then, such a system may simply identify trades with registered trading businesses. Rosas acknowledged his group had restricted visibility of trades from the darknet and unregulated platforms, which U.S. and Latin American officials state conceal the real scale of laundering.

Approximately 98 percent of Mexico’s trades over the 56,000-peso brink in 2020 were flagged by a single registered cryptosystem, at the CJNG cartel’s home state of Jalisco, based on government data found by Reuters.

That, said UIF chief Nieto, proposed the CJNG might be busy in money laundering through cryptocurrencies. Nonetheless, it’s too early to gauge how much cash is involved in Mexico’s crypto laundry since the information remains infrequent, he added.

In another indication of the lengths to which organized crime will prevent moving hard money, U.S. officials have told Reuters that cartels are turning into Chinese”money agents” who utilize burner telephones and Chinese banking programs to move capital.

A fall in seizures of hard money within the last decade from $741 million to $234 million in 2018 – indicates newer technologies such as cryptocurrency laundering are gaining ground, according to a U.S. Drug Enforcement Agency (DEA) report published in January this year. The majority of the cash came from Mexican and Colombian cartels, it stated.

The DEA told Reuters the usage of electronic monies by such cartels – or Transnational Criminal Organizations (TCOs)- was an”emerging and growing tendency to launder illegal profits”.

“It’s believed using digital money is only going to gain in the future”

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Priyanshu Vijayvargiya
Founder and Editor-in-Chief of 'Virtualattacks Inc' Priyanshu Vijayvargiya is a cybersecurity analyst, Information Security professional, developer, and a white hat hacker.

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