Bitcoins and other cryptocurrencies are the new currency for criminals

Bitcoin first went online in 2009 as open-source technology, invented by a secretive, anonymous person using the pseudonym Satoshi Nakamoto.

Bitcoin and other cryptocurrencies are never far from the news, mainly when the value is rising considerably. This week the price of a single bitcoin rose to a little over £10,000. Early buyers have made fortunes; except for that guy who used them to buy a pizza.

It is an odd ‘currency’, as it is not backed by any government, and certainly not by an underlying gold stock. Bitcoin has no overall regulation, but it relies on the activity of ‘miners’; rather like (at least in principle) the prospectors who mined old in the California gold rush. The currency’s quantity can only be increased if it is mined by collecting pending bitcoin transactions and working them into complex mathematical equations. A minor who solves the equation will get a newly ‘minted’ bitcoin.

So, why the attraction, why would a person wish to convert £10,000 into one bitcoin, or a lesser amount for a share of one?

One of the main attractions of bitcoin is that it exists across borders, outside of traditional banking controls and with a secure cloak of anonymity.

Those three magic ingredients make this type of currency attractive to those seeking to launder the proceeds of crime.

Nobody is interested in the identity of the trader, the proceeds can be cashed in almost anywhere in the world (there are even cash machines in some countries including England), and Blockchain encryption has rendered law enforcement impotent in this brave new world of international finance.

This explains a rise in value, in just one year of 13 times that at the end of 2016.

But, the larger the sums that need to be laundered, the more complex and risky it is to make those initial transactions.

That is where the middle-man comes in, a person either knowingly or unwittingly agreeing to purchase bitcoin, or, more commonly, transfer monies on behalf of a money launderer, taking a fee for his or her trouble along the way.

Sometimes the amount could be as little as a few hundred pounds but extrapolated this sum becomes significant. Such individuals are known as ‘money mules’.

The government is keen to regulate these new currencies, and in a recent statement to parliament the treasury minister said:

“The UK Government is currently negotiating amendments to the 4th Anti-Money Laundering Directive that will bring virtual currency exchange platforms and custodian wallet providers into Anti-Money Laundering and Counter-Terrorist Financing regulation, which will result in these firms’ activities being overseen by national competent authorities for these areas. The Government supports the intention behind these amendments. We expect these negotiations to conclude at EU level in late 2017/early 2018.”

Until these protections are in place, people will be able to assist in the laundering of cash, with little that the authorities can do to stop it.

It perhaps sounds the stuff of fiction, but in the first nine months of 2017, there were over 8652 ‘money mule’ cases identified by Cifas, the fraud prevention service. This criminality represents just the tip of a money laundering iceberg.

The penalty if caught is potentially significant, with sentences of imprisonment as long as 14 years available to a court.

If someone close to you seems to have come into money, you may want to start asking questions, before it is too late. More information can be found on this government website:

When a person becomes unwittingly involved in money laundering it is important to step back from the position as seen with the benefit of hindsight and examine what truly went on. A careful forensic analysis of the circumstances will reveal any defences available to someone suspected of money laundering crimes. Making a silly mistake is not yet a crime.