A syndicate in Hong Kong, with links to cryptocurrency and money laundering, moved nearly $154 million in illegal funds before customs authorities shut it down in July.
The now-arrested ringleader and three others, using three shell companies, operated electronic accounts that traded in Tether digital tokens — early last year to May this year — before customs authorities got wind of what was happening.
The syndicate laundered $113 million using cryptocurrency. An additional $40 million was laundered through eight bank accounts using more conventional methods.
Grace Tang, superintendent, and head of customs’ financial investigation group said they flagged one of the shell companies for suspicious bank transactions, providing the first clue to the syndicate’s existence.
For three months, the customs team buried their heads into the dealings of the shell company, deeply examining numerous transaction records both in banks and cryptocurrency trading. In the process, they unearthed two more shell companies.
Tang’s team took hours to sift through acres of transactions related to money laundering before uncovering roughly 500 crypto transactions and nearly 1,800 suspicious bank transactions between the three shell companies.
The team waited for three months before pouncing on their targets.
In recent years, law enforcement officials across the world have experienced an uptick in money-laundering activities using digital currencies.
The nature of cryptocurrencies and the pervasive anonymity of the parties involved make crypto an ideal ground for money laundering activities through banking systems and across borders.
Tang adds that virtual currencies are ideal for concealing the identities of the crypto buyers and sellers dealing directly with criminals. Compelling criminals to “hide the origin, flow, and final destination of illegal proceeds”, she said.
Trading in digital assets needs people to set up digital wallets to store cryptocurrencies. The wallet owners are then given public and private keys to control their digital wallets and initiate transactions when necessary.
Tang declares the anonymous and private nature of crypto wallet addresses makes it ideal for criminals to hide their illegal loot into legitimate financial markets. Then clean the dirty money via crypto trading — evading law enforcement in the process.
So, cryptocurrencies are a fertile ground for syndicates to thrive in. Because they can easily recruit third parties to launder dirty money on their behalf. Or worse, carry out peer-to-peer transactions.
Tang also said the global Covid-19 pandemic creates a decent ecosystem for money laundering activities to flourish. Thanks to travel restrictions barring syndicates from physically moving illegal money across borders.