[HN Gopher] How the Baltic states became the hub of crypto money...
___________________________________________________________________
How the Baltic states became the hub of crypto money laundering and
fraud
Author : kledru
Score : 139 points
Date : 2023-10-04 17:26 UTC (5 hours ago)
(HTM) web link (vsquare.org)
(TXT) w3m dump (vsquare.org)
| celtoid wrote:
| Jeez...why can't they launder their money through the Seychelles
| and Dominica like normal people do?
| anonym29 wrote:
| Seychelles had some legal changes in recent years that has made
| it much less attractive for such activity.
|
| Strange as it may seem, the US is now one of the best countries
| for money laundering, particularly a few states that are very
| business-friendly, like Delaware.
| hiAndrewQuinn wrote:
| It's true. There's a whole Planet Money episode about this
| somewhere in their archives; I think Economics Explained on
| YouTube also touches on this. Shell corps are the way to go
| (not that I would know, of course).
| swagmoose wrote:
| Episode 390: We Set Up An Offshore Company In A Tax Haven
|
| It's been a long time, but remember thinking how well done
| it was. TLDR was (as previous poster mentioned) that
| Delaware corps were best for anonymity.
| bradgranath wrote:
| [flagged]
| resolutebat wrote:
| We're finding about this because Estonia has transparent
| government services and a tradition of investigative journalism.
| These days, though, every crypto company and plenty of scamsters
| of all sorts seem to be located in Dubai, and good luck finding
| any transparency or doing any investigations in the United Arab
| Emirates.
| Beijinger wrote:
| Isn't Dubai where the crypto queen is rumored to live?
|
| https://en.wikipedia.org/wiki/Ruja_Ignatova
|
| Edit: Bc it got downvoted first. I saw a documentary about her
| and she had tremendously good contacts to Dubai and it was
| hinted she lives there now. The Wiki page claims that she is
| rumoured to have been killed.
| alephnerd wrote:
| > every crypto company and plenty of scamsters of all sorts
| seem to be located in Dubai
|
| This is largely because of the Russia-Ukraine war/escalation in
| 2022.
|
| Before that, Russia was a major FDI player in the Baltic
| states, but after 2022 Russian citizens were largely cut off.
| [deleted]
| pavlov wrote:
| _> "These days, though, every crypto company and plenty of
| scamsters of all sorts seem to be located in Dubai"_
|
| Hopefully they'll one day scam the wrong sheik and get thrown
| in jail with no exit visas in sight.
|
| It's one thing to run your crypto empire in a place like the
| Bahamas where you expect to be able to simply buy the
| government (like FTX openly bragged about). It's another to run
| it in an authoritarian country where the money you're stealing
| might belong to the billionaires who own the whole place and
| hand out death sentences to critics.
| Avamander wrote:
| This transparency is actually even frowned upon by the EU due
| to privacy concerns.
|
| I don't agree though, businesses and who profits from them
| should be transparent.
| monero-xmr wrote:
| There are organised groups that will launder funds via Twitch
| tips. Another common pattern is to sell a digital good like an
| ebook.
|
| Money laundering cannot possibly be stamped out. The best you can
| do is try and limit giant one-time affairs through a bank, but
| laundering money is extraordinarily easy, with crypto or not.
| sabellito wrote:
| How do they launder money via Twitch tips if the money already
| needs to be "in the system" for tipping to be possible?
| RhodesianHunter wrote:
| Money laundering isn't about getting money into the system,
| it's about making it look like it comes from sources that
| aren't illegal.
|
| If entity A can set up hundreds of fake twitch accounts, all
| of which tip entity B from A's pool of illegal money, then B
| can claim that it's revenue is entirely above board, it just
| came from Twitch tips.
| olalonde wrote:
| Multiple accounts, small amounts. The hard part about money
| laundering is not really getting money in the system. It's
| building a credible story for when someone (e.g. the police)
| asks where your money comes from. In this case, "I'm a
| popular Twitch streamer". Products that have high profit
| margins (e.g. streaming, digital products, gambling,
| software, etc.) are ideal for that and why they are often
| considered "high risk" by financial institutions.
| [deleted]
| dmbche wrote:
| It was a way to extract money from stolen credit cards! It's
| quite easy to pay for card info, but difficult to use it
| without it being brought back to you.
| gryzzly wrote:
| and before that the biggest money laundering
| https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_s...
| (kinda enabling Putin to become what he is)
| mrcode007 wrote:
| Here's an example of FSB getting funds . There's more coverage in
| Polish, because one of the executives is now in jail in Poland.
| https://finance.yahoo.com/news/criminal-case-against-failed-...
|
| Similar stories played out with companies affiliated with
| Bitfinex IIRC, where people got arrested and connections to
| cartels and human trafficking were revealed.
| dralley wrote:
| Jan Marsalek, of the Wirecard fraud fame, who fled Germany to
| Russia to escape prosecution, is now suspected to have been an
| asset of Russian intelligence working alongside a ring of at
| least 5 other spies.
|
| https://www.wsj.com/world/europe/u-k-says-wirecard-executive...
|
| One of the biggest credit card fraud empires on the planet was
| run by the son of a deputy in the Russian Duma.
|
| https://www.youtube.com/watch?v=6Chp12sEnWk&t=3m23s
| TacticalCoder wrote:
| > One of the biggest credit card fraud empires on the planet
| was run by the son of a deputy in the Russian Duma.
|
| $169 million in credit card fraud.
|
| I raise you with the biggest crypto exchange ponzi (so far)
| being run by the son of two Stanford lawyers and law teachers
| (dad teaching tax laws and mom teaching ethics, while having
| none). Well connected people to the US political elite,
| donating tens of millions to US political candidates.
|
| All the while having one of the most respected publication in
| the US (maybe not so much respected anymore now) actively
| participating in the scheme.
| btilly wrote:
| Both bad things can be true.
|
| Crypto is one of the best methods available to Russia to
| circumvent sanctions and turn their capabilities to hard
| currencies. This is true whether we're talking about
| acquiring money by running frauds internationally, or
| finding ways to be paid for cybercrimes like ransomware.
|
| Rather bigger amounts of defrauding are possible for
| Americans who figure out how to directly access the
| American financial system. That doesn't change the way that
| it is being used by Russia. And the Russian use case is far
| more relevant to this story - they are undoubtably involved
| in a shockingly large fraction of the crypto money
| launderers that were registered in Estonia.
| roenxi wrote:
| Aren't the best sanction-busting tools the Russians have
| things named "Rupee" and "Yuan"? Possibly even "gold".
|
| The situation isn't clear yet, but it looks like the
| biggest problems with sanctions is that China is an
| advanced manufacturer that isn't part of NATO. Everyone
| outside of NATO seems to be calm enough about the war.
| bobthepanda wrote:
| IIRC wasn't Russia having a hard time offloading all the
| rupees in its possession? https://www.businessinsider.in/
| policy/economy/news/russia-do...
| btilly wrote:
| Those are great sanction-busting tools for getting
| payments from organizations who actively wish to
| cooperate with Russia to get paid. They aren't good tools
| for getting paid by victims of cyberattacks.
| vkou wrote:
| > Aren't the best sanction-busting tools the Russians
| have things named "Rupee" and "Yuan"? Possibly even
| "gold".
|
| They are.
|
| Converting crypto to hard currency outside of Russia
| without tripping flags is certainly possible, but has all
| the same problems of using hard currency while under
| sanctions in the first place.
| 0xDEF wrote:
| A lot of the fraud and laundering happening after the
| Russian invasion of Ukraine is definitely something
| Russia is doing to earn some extra cash and hurt the
| West.
|
| However before 2022 it was just as much wealthy Russians
| doing it to put their money beyond the reach of the
| Russian state.
|
| https://en.wikipedia.org/wiki/Danske_Bank_money_launderin
| g_s...
| vkou wrote:
| > A lot of the fraud and laundering happening after the
| Russian invasion of Ukraine is definitely something
| Russia is doing to earn some extra cash and hurt the
| West.
|
| That's like saying that US-made guns fueling cartel
| violence is 'America doing something to earn some extra
| cash, and to hurt Mexico'. It's ridiculous, and not
| accurate.
|
| It's just economically-rational actors trying to make
| money, and taking advantage of legislative and
| enforcement arbitrage. This kind of arbitrage exists any
| time two different systems interact with eachother.
| Foreigners, and foreign criminals are not some weird hive
| mind in cahoots with their state.
| Beijinger wrote:
| "Crypto is one of the best methods available to Russia to
| circumvent sanctions and turn their capabilities to hard
| currencies."
|
| Is it? Any evidence for this?
|
| It was my understanding that they use gold:
| https://www.theguardian.com/world/2018/jan/03/turkey-
| banker-...
|
| But I know that crypto is somewhat important for North
| Korea
| btilly wrote:
| The phrase "one of the best methods" means not the only
| one. Yes, gold is another method that is used.
|
| But ransomware gangs are overwhelmingly Russian, and
| overwhelmingly use crypto as their payment channel. It is
| far from the first kind of cybercrime to be
| overwhelmingly Russian, and disrupting payment channels
| is a good way to shut it down.
|
| Read https://www.lawfaremedia.org/article/ransomware-
| problem-bitc... for more on this. From one of the key
| figures in shutting down the Viagra spam problem. Which
| was also largely created by Russia.
| Beijinger wrote:
| "But ransomware gangs are overwhelmingly Russian, and
| overwhelmingly use crypto as their payment channel"
|
| Would it not be a little bit strange for Russian
| ransomware to provide an IBAN or a Money Wire to a bank?
| And Russian ransomware actors are, in contrast to North
| Korean and as far as I know, not state actors. (Russian
| Troll factories are not ransom ware)
| btilly wrote:
| Russian ransomware actors are not state actors, but
| couldn't operate in the way that they do without the
| sanction of the state. This is why the phrase "Russian
| ransomware actors" makes sense.
|
| So, for example, they take some interesting actions to
| avoid accidentally making the state unhappy.
| https://krebsonsecurity.com/2021/05/try-this-one-weird-
| trick... shows an amusing consequence of this.
|
| But they also wind up with the same kinds of
| relationships with the state that the Wagner group did.
| And so we get things like https://www.cisa.gov/news-
| events/cybersecurity-advisories/aa.... Russian military
| activity comes backed up with Russian cyberattacks that
| use all the same techniques, and presumably some of the
| same people, that Russian cybercriminals do.
|
| And these attacks were not necessarily trivial. For
| example https://www.reuters.com/world/europe/russia-
| behind-cyberatta... verifies that KA-SAT was taken
| offline. Starlink was also under constant cyberattack. I
| strongly suspect that Musk's unwillingness to allow
| Starlink in areas under Russian control, and
| unwillingness to allow Starlink to be used in offensive
| military attacks, are exactly to reduce how much he is a
| direct target of Russian activity.
| rospaya wrote:
| > All the while having one of the most respected
| publication in the US (maybe not so much respected anymore
| now) actively participating in the scheme.
|
| Which one is that?
| lern_too_spel wrote:
| One is going to prison. The other gets a pat on the back
| from the Kremlin.
| simpleuser27 wrote:
| It wouldn't be HN without classic "But America Bad!"
| whataboutism.
| mc32 wrote:
| I dunno, one crime was ~200MM the other ~10MMM, so an
| order of magnitude and a half larger crime. Both are
| associated with political figures in their respective
| countries.
| thrway63245 wrote:
| Americans are always good guys by definition.
| thriftwy wrote:
| Why do people bother typing in accusations in the
| discussion that they know would be widely overturned in
| the opposing direction?
|
| That's not a tabloid, you cannot force text on your
| audience and have their "what about" heard only by their
| relatives.
| blargey wrote:
| Because "What about" is a distraction tactic. It does not
| overturn anything.
| thriftwy wrote:
| More often than not, the original message in the first
| place was a distraction.
|
| You do not get to dictate the direction of discussion to
| your peers and having them go along. So what are they
| distracting it from?
| [deleted]
| boeingUH60 wrote:
| The same guy mentioned in that article was also charged by the
| US Gov for hacking Mt. Gox; https://thetechee.com/us-govt-
| charges-two-russians-for-mt-go....
| donkykong22 wrote:
| [dead]
| olalonde wrote:
| I know it sounds a bit crazy but what if the government hired
| people to investigate and arrest criminals instead of requiring
| private companies to do that? AML is a costly and ineffective
| security theater.
| [deleted]
| anonym29 wrote:
| Plot twist: the government already does, it's even more costly
| than the private sector, it's still ineffective, and you get to
| pay for it!
| olalonde wrote:
| Yes, that was the joke. The police should do their job and
| they are to blame for failing to identify (and to arrest)
| scammers and criminals. Yet the article blames it all on
| private businesses, who really shouldn't be tasked with
| detective work in the first place.
| petre wrote:
| If blames the failures of these states to identify and shut
| down operations literally working against them. These
| crypto companies acted as intermediaries for financing
| Russian mercs with money out of drugs ops.
| anonym29 wrote:
| Sorry, Poe's Law got me here.
| miohtama wrote:
| There are few problems with the anti-money laundering regimes,
| but these two are the main problems
|
| - They do not address the underlying crime: prevent the crime
| in the first place, instead of moving funds
|
| - The focus is on compliance, not on the crime prevention: make
| sure banks checks all the boxes on the form, so that no one
| will get a jail card
|
| Furthermore AML tends to mix sanctions (we don't like China)
| with organised crime (drugs). The political sanctions
| themselves are not always direct result of a crime.
|
| What could be done to improve the situation
|
| - Making all company shareholder data public (was in the EU,
| but then a crook who worked for Russian oligarchs got this
| overturned https://www.investigate-europe.eu/posts/luxembourg-
| businessm... )
|
| - Make real estate agents criminally responsible for selling
| real estate for criminals
|
| - Focus on the largest asset flows (Danske Bank, London real
| estate) instead of setting up paper compliance procedures for
| consumers
|
| - Transparent funding flows (public blockchain)
| empath-nirvana wrote:
| Everyone who is money laundering lies on the AML/KYC forms. The
| banks know this, the government knows this, the criminals know
| this. The point of all the AML/KYC stuff isn't to prevent money
| laundering, but to replace a difficult-to-prosecute crime
| (money laundering) with an easy-to-prosecute crime (lying on
| bank forms).
|
| It's creating a paper trail for the prosecution when the feds
| decide they want to take someone down.
|
| It's not money laundering per se that the feds have an interest
| in prosecuting. They have an interest in prosecuting sanctions
| evasion, tax evasion, black mail, drug smuggling, etc. It's the
| source of dirty money that they want to stop, not the dirty
| money itself.
|
| What happens is they think someone is smuggling drugs. They see
| they have money, the money looks suspicious, they get a warrant
| from the bank, they give them all their AML/KYC forms, and the
| feds go and track down the real source, and find out that the
| forms were full of lies and now they can get the drug dealer on
| bank fraud charges -- which means they don't need to connect
| them to drugs or murders or anything else, even if that's the
| real reason they're interested in them.
|
| AML/KYC stuff only prevents crime in that it forces criminals
| to commit other, easier to prosecute crimes to cover up their
| original crimes.
| baybal2 wrote:
| > The point of all the AML/KYC stuff isn't to prevent money
| laundering, but to replace a difficult-to-prosecute crime
| (money laundering) with an easy-to-prosecute crime (lying on
| bank forms).
|
| Absolute nonsense. There was a time when like half of all
| Russian mafia lived in London fully in the open, and they
| only vacated the place when they started being kicked out
| through visa cancellations, not fraud charges.
|
| This change changes really nothing in the fact that _first
| world country governments don 't want to prosecute those
| guys._
|
| At most, they don't give a fuck, at worst, they are actively
| conniving.
|
| And it's not that they are hard to prosecute at all. Anybody
| who can read some Russian can get a completely damning charge
| sheet with a few minutes googling on most of them, let alone
| British MI-6 analysts.
|
| The crazy theory that you can somehow increase prosecution
| chances with "Al Capon charge" makes little sense if
| criminals whose offences are provable in 5 minutes without
| that are walking around. like nothing.
|
| There are many accounts in the press of banks employees
| saying they send hundreds of suspicious activity reports for
| absolutely clear cut cases without any reaction. And they
| can't do anything on their own, as their paperwork is
| completely impeccable from the reporting standpoint.
|
| Thinking rationally, it makes sense that a mafioso who is
| going to launder few billion $, will ensure that his
| paperwork looks more full, and accurate than that of a legit
| company. Few percents of such sums will hire legions of top
| lawyers to do the reporting.
| olalonde wrote:
| You are absolutely right, but I have two issues with that:
|
| 1) Non-criminals also lie on the forms. Mainly because it's
| sometimes their only way to open a bank account (if they are
| deemed risky by an AML department), even if they have a legal
| source of income. This renders people who would otherwise not
| be criminals into criminals. Just recently, I came across a
| Tweet[0] from someone who will have to face this dilemma
| sooner or later.
|
| 2) It's a loophole for prosecution, as you admit yourself.
| It's meant to circumvent well established legal principles.
| For example, in AML cases, the burden of proof is reversed
| ("guilty until proven innocent"). It's used as a tool to
| punish people for crimes when the evidence is not sufficient.
| Is this really something we want?
|
| [0]
| https://twitter.com/mikeinspace/status/1708719585556344993
| hiatus wrote:
| That thread is about someone determining the cost basis of
| their crypto and suggesting they go with $0 as they can't
| reliably ascertain that number. How does that relate to
| lying on bank forms?
| olalonde wrote:
| The question was unrelated but they will nevertheless
| face this issue. Because if it's a decent amount of
| Bitcoin and they don't have a paper trail, they will get
| flagged and reported by their bank and/or crypto
| exchange. And they will possibly go to prison for money
| laundering as they won't be able to prove the source of
| their Bitcoin. So they have three choices:
|
| 1) Give up on on their legally acquired BTC, potentially
| worth millions of dollar.
|
| 2) Be honest on the form and pray that they don't get
| flagged.
|
| 3) Lie on the form.
|
| There's basically no legal option for cashing out their
| BTC. A lot of early BTC adopters face this issue, as not
| everyone had the foresight to keep a paper trail for
| their 50$ "funny internet money" purchase at Starbucks.
|
| Disclaimer: IANAL and this is not legal advice.
| hiatus wrote:
| Be honest on what form? I've moved hundred of thousands
| of dollars and crypto through exchanges and have never
| filled out a form regarding the provenance of the funds.
| olalonde wrote:
| Which country? Your exchange or bank would not be
| compliant in the US. Money transmitters have a duty to
| determine the source of funds for large transactions. And
| they have to report any "suspicious activity" to
| authorities (FinCEN in the US). By the way, it's not
| necessarily a literal form, they can ask by phone or
| email for example. The specific details vary from country
| to country, like what amount threshold triggers the
| verification or what constitutes acceptable proof, but
| it's pretty standard thanks to the FATF[0].
|
| [0]
| https://en.wikipedia.org/wiki/Financial_Action_Task_Force
| hiatus wrote:
| This was in the US. SARs are filled out by banks, not
| individuals. I've literally never been asked for any
| proof from Coinbase for over 300k in transfers.
| olalonde wrote:
| Coinbase does ask that. You can Google "coinbase source
| of funds" for confirmation. They even mention it in their
| user agreement[0].
|
| You got lucky and/or maybe forgot that you supplied that
| information when you signed up. Sometimes it can just
| take the form of asking for occupation and income. It's
| possible that they didn't ask further proof if they
| determined that your transactions were not unusual given
| your declared occupation and income.
|
| [0]
| https://coinbase.com/legal/user_agreement/united_states
| "Verifying your identity by submitting the following
| information: [...] Source of Funds"
| spicymapotofu wrote:
| These early adopters are paying for their lack of
| bookkeeping the same way someone who kept a similar
| amount of trail-less cash out of the bank would. It's
| hard to find sympathy for that kind of glibness,
| especially when crypto actually can be traced back still
| under most conditions - assuming your bank didn't lose
| their records from the time, you could show a purchase
| and vague value increase over time, and accompanying
| account statements would resolve any AML concerns.
| olalonde wrote:
| You think it's fair that someone should lose millions of
| dollars or go to jail because they didn't keep paperwork
| for a 50$ cash purchase they made a decade ago? In the
| early days of Bitcoin, a lot of the purchases were made
| peer-to-peer with cash. There were even websites called
| faucets that were literally giving it away.
| droopyEyelids wrote:
| What you're describing is a tricky situation with trade-
| offs.
|
| When you face a tricky situation with trade-offs, you have
| to find a smart and/or complicated solution. It's not
| usually productive to say "just throw away the solution we
| have" even if that can be an emotionally satisfying answer.
| user3939382 wrote:
| A common strain of anarchism proposes all security is private.
| logicchains wrote:
| With anarchism there'd be no money laundering, because money
| laundering is the crime of "lying to the government about
| where you got your money".
| fatfingerd wrote:
| I think it might just get more complicated because without
| government's monopoly, and as shown in places where that
| wanes, anyone can decide people making money this way or
| that way are a problem they want to fix..
| yieldcrv wrote:
| Cayman Islands does this AML compliance officer requirement too,
| I pay out the ass for them (and so does every VC fund you fawn
| over)
|
| These jurisdictions really just keep adding layers of obligatory
| professionals and it neither changes the reputation of the
| jurisdiction or helps a fundamentally flawed problem of trying to
| whitelist transactions accurately
|
| I'm still of the predilection that states should just give up on
| trying to police money flows
|
| It doesn't work in the US, Caymans, Estonia, anywhere!
|
| Domestic gangs would always pass KYC, and foreign terrorism just
| simply isnt that expensive to always worry about funding them.
| Terrorism doesn't happen because nobody's interested in flying
| planes into buildings. You don't need to encumber the GDP by 1%
| trying to prevent financing that, ostensibly.
| TacticalCoder wrote:
| > These jurisdictions really just keep adding layers of
| obligatory professionals and it neither changes the reputation
| of the jurisdiction
|
| It depends. I used to live in Belgium and now in Luxembourg and
| _both_ countries have been removed from an international gray
| list of countries refusing to share banking information (they
| do share now).
|
| Old article from 2009:
|
| https://www.politico.eu/article/luxembourg-and-belgium-remov...
|
| There was a time where people would literally come to
| Luxembourg with duffelbags full of bank notes and nobody would
| ask anything.
|
| But these times are definitely gone.
|
| > I'm still of the predilection that states should just give up
| on trying to police money flows
|
| Having been directly hit by this and KYC/AML making my life
| miserable I fully agree with that.
|
| Some people have their entire bank account frozen, sometimes
| for _months_ , because they make one wire transfer of a few
| thousands EUR to another country: happened to someone I know
| (who's an AML specialist, which is ironic) for buying a watch
| in Dubai and happened to someone else I know for... Paying for
| his wedding (which was taking place in another country than the
| one he was living in). His wedding nearly got cancelled due to
| zealots at the bank convinced they found an international drugs
| trafficker or something...
|
| The worst of the worst is that everybody at the bank is
| convinced they're some super important person, part of a global
| elite secret service or something, where nobody can talk. Worse
| than the mafia. And that they'll lose their job or go to jail
| if they ever mention to the client why their account is getting
| frozen.
|
| It's all pathetic really.
| peanut-walrus wrote:
| You can and will quite literally go to jail if you tell the
| client why their account is getting frozen while it's a part
| of a money laundering or terrorism financing investigation.
| spicymapotofu wrote:
| Compliance workers in the bank are, in fact, on the line to
| the tune of jail time, in some jurisdictions, and the fees
| for institutions found inadequate usually start with 'b'. Not
| that every zealot is right, but the penalties in their line
| are approximately as bad as your exaggerated examples.
| theironhammer wrote:
| It was only because the USA realized Terrorists use these
| Secretive Bank channels too that there was a crack down. No
| interest before that.
| dheera wrote:
| States or countries? We need to stop conflating these two words.
| throwaway4EE wrote:
| [dead]
| 0xDEF wrote:
| This has been going on before crypto. Between 2007-2015 some very
| wealthy Russians laundered more than EUR200 billion from Russia
| to tax havens around the world using Danske Bank's branch in
| Estonia.
|
| https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_s...
| TacticalCoder wrote:
| > where over a billion euros have been laundered or defrauded
|
| GDP size: $105 trillion
|
| Percentage of the world GDP linked to criminal activities: 3% to
| 5% of the GDP (CIA official factbook).
|
| We're talking $3 to $5 _TRILLION_ linked to criminal activities.
|
| Cryptocurrencies do not even register.
|
| Highly convenient scapegoat though.
|
| Crime, money laundering, fraud, ponzi, etc. all existed long
| before Satoshi created Bitcoin.
|
| Back to the $3 to $5 trillion linked to crime: KYC/AML brings
| back about $12 billion per year.
|
| A rounding error.
| onlyrealcuzzo wrote:
| It doesn't matter what percentage of all fraud is crypto - it
| matters what percentage of crypto is fraud.
| miohtama wrote:
| > Overall, the share of all cryptocurrency activity
| associated with illicit activity has risen for the first time
| since 2019, from 0.12% in 2021 to 0.24% in 2022. [2]
|
| https://go.chainalysis.com/2023-crypto-crime-report-
| demo.htm...
| throwjdn wrote:
| [dead]
| nateabele wrote:
| Indeed. Never mind the fact that all transactions take
| place on an immutable public ledger that's available
| forever...
| jiggawatts wrote:
| "See, right here is the public record of how you were
| fooled into buying a worthless NFT. Then right _here_ is
| where you converted USD into Crypto Bux so you could earn
| an impossible 25% interest rate... for a month... until
| Bux went to zero... right here. See? Can't be a scam!
| It's all public!"
| ForkMeOnTinder wrote:
| Another estimate from a known crypto skeptic puts an upper
| bound at 3% illegal activity.[1]
|
| > For example, illegal transactions, scams and gambling
| together make up less than 3% of volume.
|
| Either way this 0.12%-3% range doesn't begin to approach
| the ~6%-12% estimated illegal volume for USD.[2]
|
| [1]:
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3942181
|
| [2]:
| https://www.investopedia.com/articles/markets/032916/how-
| big...
| miohtama wrote:
| Criminals prefer cash and real estate, so it is not a
| surprise.
| tornato7 wrote:
| Definitely depends on what you classify as illegal and
| how you count it. For example, if I count FTX ($9bn), UST
| ($18bn), and LUNA ($40bn) I'm already at 5% of the crypto
| market cap.
| GrumpyNl wrote:
| What are the other crypto activities? I dont see that many
| places where you can pay with crypto, so what are those
| other activities, or is that just trading?
| onlyrealcuzzo wrote:
| Speculation
| shuckles wrote:
| But wouldn't a speculator buy and hold (i.e. not be
| active)?
| tornato7 wrote:
| Stablecoins (payments or store of value) are likely the
| largest non-trading activity today with $123B market cap
| and $30B in daily volume. You'll see a lot of volume
| around staking crypto / running validators. Tokenized
| treasury bonds and other real-world-assets like carbon
| credits are getting up there, so is credit investing with
| companies like Maple / Credix / Centrifuge.
|
| The long tail of activities includes things like DAOs
| (remember Constitution DAO?), prediction markets,
| internet infrastructure (VPNs, Arweave, ENS), synthetic
| assets, and more.
| Terr_ wrote:
| Since this is in the context of tracing illicit funding,
| two items to throw in the pile for consideration:
|
| 1. Trading which is actually part of the
| laundering/tumbling process, to disguise the path of
| coins from initial shady transactions.
|
| 2. "Wash trading" (yet another cleaning-related term)
| where a self-trade is disguised as a real one in order to
| manipulate the market.
| nwah1 wrote:
| Bingo
| supz_k wrote:
| Never thought about it that way. Just wondering what is the
| percentage of crypto used for criminal activities? I guess it
| won't be easy to thing to measure?
| miohtama wrote:
| Related to this it is estimated ~1% - 2% of money on your
| bank account is criminal origin (depends on the bank, on the
| country).
|
| Most of criminals prefer real estate and cash over
| cryptocurrencies. London and Dubai are the best.
|
| Here is a documentary on Londongrad
|
| https://youtu.be/GAOJCcwxDug?si=M0Lnso1rjmdckoDH
|
| You can even find a map that shows different parts of London
| where East European and related criminals have set up their
| homes
|
| https://twitter.com/moo9000/status/1471369253966290948
| baybal2 wrote:
| [dead]
| [deleted]
| throwjdn wrote:
| [dead]
| hiAndrewQuinn wrote:
| I hope Estonia, Latvia and Lithuania don't continue down this
| path. I've looked at the graphs of their economic success over
| the past 3 decades with quite a bit of interest.
|
| I'd love to see all of them break through to the level of my
| adoptive homeland of Finland, and perhaps even beyond (if we
| don't find a way to make ourselves more business friendly first,
| of course!). Tremendous potential in all 3 of these places. I'd
| love to visit Riga or Tallinn one of these days.
| 0xDEF wrote:
| If you look more into the money laundering that has been
| happening in the Baltic countries a lot of it it wealthy
| Russians attempting to get their money out of Russia and into
| tax havens around the world.
| Roark66 wrote:
| The whole region(central and Eastern Europe) has great economic
| potential especially if you consider many transport links are
| being finished linking the North with the South through Poland,
| Czech Republic and beyond(hopefully Ukraine too in future) .
|
| In recent history in the region all important railroads and
| motorways were always East-West to facilitate quick military
| transfer while new North-South links are a lot more valuable
| for the region's economy. If only we manage to keep our
| tax/business laws stable, have more effective judiciary and
| work towards common interests instead of being played against
| eachother by various "powers" we'll have it pretty good.
| thriftwy wrote:
| I'm frankly not sure why you expect the level of Finland to
| remain where it was.
|
| 20 years ago Russian writer Viktor Pelevin remarked that "we
| are like a banana republic that has to import its bananas from
| Finland". But fast forward those 20 years, Finland itself is
| now a buffer state that buffers a dead end. In many ways,
| Baltic states and Finland made money trading with Russia, and
| if Russia stays AFK, their combined economic viability is in
| doubt.
|
| I'm not sure what is Finland's comparative advantage these
| days. What are things that are is cheaper to do in Finland (or
| Latvia) that you cannot do in Hungary, on Cyprus or in Denmark?
| The logistic leg is surely longer and I'm frankly not sure that
| you're going to pull it off.
| dragandj wrote:
| In my opinion, Finns are very honest, hard working, and
| _reliable_. They obviously don 't try to sell themselves as
| cheap, so they don't compete on price, but on quality.
| heavenlyblue wrote:
| I like how the parent puts Denmark next to Hungary and
| Cyprus, as if their salaries could be comparable in any
| way.
|
| This is like comparing Silicon Valley salaries with Chinese
| thriftwy wrote:
| Can their salaries, and productivity, be compared with
| Finland though?
|
| My point was, Finland is doing several different things,
| most of which may now be done cheaper elsewhere.
| theironhammer wrote:
| What about skills based? Doing things that other "cheap"
| countries can't do? If u can't compete on price compete
| on know-how.
| thriftwy wrote:
| I don't think they lack skills on Cyprus and in Denmark.
| Hungarians are also quite bright.
|
| Sure, I don't expect that Finland's economy would just
| implode. Developed countries don't do that. But it's
| quite possible it will enter multiple years long economic
| malaise, even by post-2022 EU accounts. As other
| countries slowly eat its lunch by developing matching
| skills while having better logistical disposition to use
| them.
| [deleted]
| kuratkull wrote:
| We won't, not our goal, not what we want. I think it'll fade
| into a small blip in our past vaguely remembered as "that crazy
| time when a lot of crypto companies opened offices and we shut
| them down".
|
| - Estonian
| artemonster wrote:
| what potential you are talking about? I am from there and there
| is absolutely nothing. no human capital, no resources, no
| political willingness (only huge corruption). the only viable
| business was to be a sort-of-kind-of-middleman between EU and
| Russia and thats also gone. most young people left for greener
| pastures towards EU. go visit all of these places and please
| wander outside the tourist area, and better yet, rent a car a
| travel through countries (they are small, a road trip through
| baltic states will take you less than a week). after that tell
| me more about this "tremendous potential".
| Strom wrote:
| > _no human capital_
|
| Let's look at some data. Estonia ranks extremely high in
| math, science, and reading tests given to 15 year olds as
| shown by the international PISA tests. [1] In fact only a
| handful of Asian countries rank higher. The results are
| basically the same as the highest ranking state in the US -
| Massachusetts.
|
| > _huge corruption_
|
| Estonia ranks #14 in the Corruption Perceptions Index, which
| is really good. [2] Also, having lived in Estonia most of my
| life I have never encountered a situation that involves a
| bribe, whether explicit or implied.
|
| > _most young people left for greener pastures_
|
| Young people want to see the world. I personally spent years
| living in other countries, and a lot of my friends as well.
| However most of us ended up returning in our 30s. Turns out
| Estonia is pretty great.
|
| --
|
| [1] https://en.wikipedia.org/wiki/Programme_for_International
| _St...
|
| [2] https://en.wikipedia.org/wiki/Corruption_Perceptions_Inde
| x#2...
| foobarian wrote:
| Estonia runs most of the corporate world, and much of the
| Android app ecosystem as well. Not bad!
| AndroTux wrote:
| I moved from Germany to Estonia because in Germany, there
| really is no political willingness to support
| entrepreneurship, startups or the internet in general. If
| you're not a big car company, you're not going to be happy in
| Germany as a company owner.
|
| As a founder, I am much happier in Estonia. Life is much
| simpler when you don't have to jump through twenty hoops
| because of some stupid political decision for every action
| you take as a small business. While I can't speak for all of
| the Baltics, Estonia truly has a lot of potential in that
| regard. Hell, the ,,IRS" here has a support chat! Unthinkable
| in Germany.
|
| Sure, a lot of things need work and are still developing,
| especially in rural areas, and of course no country comes
| without issues, but Tallinn isn't far off German cities in
| many areas. In some, it's even outright better. Free public
| transport anyone? Being able to pay by card everywhere? Self-
| checkout in supermarkets? Not a thing in Germany.
| gwervc wrote:
| > Life is much simpler when you don't have to jump through
| twenty hoops because of some stupid political decision for
| every action you take as a small business.
|
| There is the same issue in France. I'm pretty sure it's
| viewed by big companies that own the government as a
| feature to impede concurence (however small) to arise.
| blacksmith_tb wrote:
| Not the OP, but my house (in the US) has very nice triple-
| paned windows that were manufactured in Latvia by Intus.
| Estonia certainly has a cool, digitally-savvy reputation,
| though I gather a lot of that is closer to "these things
| which should be easy like getting licenses etc. are actually
| easy" so maybe that's partly hype. Haven't heard much about
| Lithuania recently, to be fair. I would be willing to believe
| the Baltics aren't going to change the whole world overnight,
| but is it really as bleak as you're suggesting?
| Yiin wrote:
| It's really not, but we do have our share of doomers and
| high throughput of dezinformation campaigns from Russia, so
| substantial amount of public only sees the negatives. Trust
| issues with government is also somewhat explainable with
| being free country for only about 50 out of the latest 200
| years.
| notpushkin wrote:
| The whole current AML scene is very sad. Sanctions against Russia
| don't harm any of the Putin's friends who can figure out another
| way to get money across the border. Sanctions against Russia only
| harm ordinary Russians.
| tcgv wrote:
| > Sanctions against Russia only harm ordinary Russians.
|
| That's by design. Sanctions put pressure to the country as a
| whole. Once people start getting angry they will question their
| leadership and maybe demand for changes.
|
| Sure, sanctions can also target specific individuals, like the
| russian elite, olygarchs, but that alone doesn't change the
| status quo.
| masijo wrote:
| I propose starving people to death in countries we don't
| like. That way the people will surely revolt against their
| government and we can then go in and spread democracy :)
| Beijinger wrote:
| [flagged]
| jacquesm wrote:
| Sorry? The 'business model of Estonia'? I think you're
| conflating the actions of a company within Estonia with the
| actions of the country as a whole. Also: if you've been scammed
| your first port of call is not the Estonian law authorities but
| your own (other) Estonian lawyer (as in: a lawyer that you
| pay).
| jacquesm wrote:
| Child comment is now dead (and rightly so, but this was my
| reply).
|
| > Yep. Have you read the headline of this post?
|
| Yes, I did, as well as the post itself, in fact this sort of
| comment is against the guidelines but since you're a new
| account maybe you want to give them a read? Link at the
| bottom of every page.
|
| > Good luck with that. Trust me, we tried.
|
| I've had several dealings with lawyers in Estonia and no
| reason for a complaint so far. But I didn't get them from
| some other website, I asked around in Estonia with business
| contacts there.
|
| > Again, if financial institutions are involved I am not sure
| you are right. This are is heavy regulated from AML to KYC to
| whatever.
|
| That doesn't matter.
|
| > Crypto scammers plague Estonia's e-residency program
|
| Yes, they do. Unfortunately. They also plague Twitter,
| Facebook, HN at times, the United States and the start-up
| scene in general. That's nothing to do with Estonia per-se
| but more a reflection of how easy it is to set up a business
| somewhere.
|
| > This comes only three months after the crypto-friendly
| nation became the epicenter of a $220 billion money
| laundering scandal.
|
| Latvia had a similar issue a few years ago, they US basically
| pulled the plug on that and since then it's a lot better. But
| countries with underpowered regulatory entities will always
| be at risk of these things. But that does not make it 'the
| businessmodel of the country' any more than that the drug
| trade is the business model of the Netherlands or the United
| States. It's a clear reflection of facts of geography,
| ability to regulate and oversee, ability to police,
| experience and so on. The Baltics are attractive because (1)
| they don't have a whole lot of experience fighting this stuff
| (2) are proximate to some very large sources of illicit funds
| (3) lack manpower and funds themselves (see your quote about
| 'how big is their GDP' -> that's not proof this is their
| business model but an excellent reason why they can't do as
| much about it as they should).
|
| As far as I'm concerned Estonia (and Latvia and Lithuania)
| can pull the plug on _all_ crypto companies in their
| respective company registries. And let 's not get started
| about Slovakia, Serbia and Macedonia who all have their own
| problems to work through.
| Beijinger wrote:
| It actually reminds me of a newspaper article about Mexico
| that is now unfortunately behind a paywall:
| https://worldview.stratfor.com/article/mexico-and-failed-
| sta...
|
| It argued that Mexico is not a failed state and compares
| the contribution and profit margins of the Mexican industry
| to GDP and the contribution and profit margins of the drug
| industry to GDP. The conclusion was that the country is
| basically geographically divided between the industrialized
| area and the drug trade area and both parts provide roughly
| similar shares to the Mexican GDP and that it would be
| irrational for the Mexican government to change or fight
| this. Sorry, don't shoot the messenger.
| jacquesm wrote:
| The Mexican situation is entirely different from the
| Baltics, you can't compare the two.
| Beijinger wrote:
| Sorry, maybe I did not get my point clear here. The
| article about Mexico suggested that it would be
| irrational for Mexican authorities to really fight the
| drug trade. My thought was, for such a tiny economy as
| Estonia, were one fraud alone counted to 200 Billion, how
| rational would it be to fight this?
|
| Maybe I am wrong. Probably. But it is at least worth a
| thought.
| jacquesm wrote:
| It would be very rational for both to fight it. But in
| the case of Mexico, if not for the DEA and a lot of
| assistance from the USA the government would be overrun
| by the narcotics operators, the fact that this isn't the
| case is the result of decades of work (and not all of it
| legal or above board). Mexican politicians are very much
| at risk, see:
|
| https://en.wikipedia.org/wiki/List_of_politicians_killed_
| in_...
|
| This means that it may be right and rational to fight the
| drug trade _and they are trying_ but the personal risks
| and risks to the rest of society are non-zero and may
| well be fatal to those individuals seen as instrumental
| to that fight (same in Colombia, perhaps more so).
|
| For Estonia the desire to fight these things is
| definitely there, but the manpower simply isn't. And this
| is the only thing that I really begrudge the Estonian
| authorities in particular: they never really sat down to
| think through the abuse potential and what likely would
| happen as a result of their e-* programs. They went into
| it all naive and starry eyed whereas professionals the
| world over saw it and thought that it was going to
| attract a very mixed crowd with a very large risk of
| abuse.
| Beijinger wrote:
| I would not want to be someone to fight drug trafficking
| in Mexico. No doubt.
|
| I have been in Colombia countless times and it is an
| amazing place. The cities have parts that look like
| Florida. The skyscrapers were likely build with drug
| money (Floridas were not?). It is the Colombian
| government that says, please, let us legalize Cocaine.
| https://www.niskanencenter.org/colombias-efforts-to-
| legalize...
|
| The e-residency might have been a good idea. Or not. I
| don't know. BTW, you can get the same now in Ukraine:
| https://visitukraine.today/blog/2186/diia-for-foreigners-
| how...
|
| But the results are not good. In one article it was
| written, that basically 2 e-residency companies bring in
| 90% of the tax revenue.
| jacquesm wrote:
| The e-residency was a good idea implemented on the cheap
| and poorly.
|
| And yes, the Colombian government is on the side of
| legislation because that would give them better tools to
| deal with the fall-out of all of this. The USA is as much
| the source of the problem as it is the reason anything is
| done at all, what the longer term solution is I have no
| idea but these are very complex problems and
| generalizations do not help. Frustratingly Trump and his
| policies have turned back the clock in Mexico about a
| decade or so. Illegal immigration was down substantially
| and people were even moving back to Mexico because the
| standard of living was improving. Right up until the
| 'build the wall' bullshit.
|
| I've spent enough time in Colombia to know that the
| average person is super nice and extremely friendly but
| at the same time I'm aware that their internal problems
| and the low key war - right now actually lower key than
| in many years past - going on there is a massive problem
| that no single individual or even any particular slice of
| government is going to solve. There are economic,
| regional, international and historical components to all
| this that will require a lot of time and effort to get it
| all to move to a better place. That said, Medellin today
| vs Medellin 25 years ago is a completely different
| affair.
| Beijinger wrote:
| I was not aware that I violate any guidelines. But that a
| lawyer is your first choice when fraud is involved with
| financial institutions is not obvious for me. Reminds me
| when people called the BaFin in Germany and wanted to
| report fraud agains wirecard and they just hung up on those
| people.
|
| "I've had several dealings with lawyers in Estonia and no
| reason for a complaint so far. But I didn't get them from
| some other website, I asked around in Estonia with business
| contacts there."
|
| We did not have this option. To get a reliable, English
| speaking lawyer in a foreign country, the list provided by
| your embassy is normally a good start.
|
| Again: One scandal 220 billion? I mean, how big is their
| (Estonias) GDP
|
| "Latvia had a similar issue a few years ago, they US
| basically pulled the plug on that and since then it's a lot
| better. "
|
| It really should not be another country pulling the plug on
| you.
|
| Today, only 353 companies own a crypto license in Estonia
| while 1,234 companies did so at the end of 2019.
|
| No comment.
| jacquesm wrote:
| What you are proving is that they _are_ in fact working
| on this problem. And it is a problem, but it is not
| Estonia doing this, it is simply criminals taking
| advantage of an underpowered state in the EU that tries
| very hard to create ways to hook up to foreign
| entrepreneurs. Unfortunately the crypto gangs are like
| cockroaches. But it isn 't Estonia itself doing this and
| you really should stop making silly statements like that.
|
| The US did the right thing in forcing Latvia to have a
| higher standard, at the same time, these countries are
| very weak in terms of controls and yet they have to have
| all of the trappings of a fully functional EU state to be
| able to play by the rules. This stretches local
| resources, sometimes beyond the breaking point. As an
| illustration: you, a citizen of another country _also_
| did business in Estonia, something that likely would be
| quite difficult in many other places for exactly those
| reasons.
|
| Finally: BaFin had problems, they run a lot deeper than
| WireCard and you would be similarly silly in stating that
| fraud was the businessmodel for Germany. Such
| generalizations serve no purpose.
| Beijinger wrote:
| "What you are proving is that they are in fact working on
| this problem."
|
| The scam site has been up for many years.
|
| "be similarly silly in stating that fraud was the
| businessmodel for Germany"
|
| No, I never stated that [financial] fraud was/is the
| business model for Germany. Especially Germany, while a
| hub for laundering money in other ways, is not very
| finance heavy. I was just pointing out that German
| authorities did not do their job in a nearly criminal
| way.
|
| Germany considered 'paradise' for money laundering
|
| https://www.refire-online.com/investment/germany-
| considered-...
| jacquesm wrote:
| > No, I never stated that [financial] fraud was/is the
| business model for Germany.
|
| Please read more carefully.
|
| > The scam site has been up for many years.
|
| And likely will continue to be so until someone
| successfully brings a case to the Estonian courts. And
| that will require that party to go by the book, it will
| likely be costly (as it always is when bringing suit in a
| country not your own) and will take a long time.
|
| > What you are proving is that they are in fact working
| on this problem.
|
| But what I meant was: the fact that the numbers are going
| down is proof positive that something is being done, but
| probably just not fast enough. Otoh governments tends to
| be ridiculously ineffective in thse things.
|
| FWIW Estonia has ~1.3 million people living there, the
| vast majority of them earn their living in legal ways and
| silly generalizations are not going to help you gain much
| sympathy. Estonia, Latvia and Lithuania (and a number of
| other EU states) all have underpowered financial, legal
| and enforcement branches in large part because they are
| simply not the wealthiest countries and this situation
| attracts scammers and other criminals like flies. This is
| a real problem. Solutions are neither going to be quick
| nor easy.
| Beijinger wrote:
| "FWIW Estonia has ~1.3 million people living there, the
| vast majority of them earn their living in legal ways "
|
| I never said anything against Estonian people, neither
| did I say anything against Mexicans. Most people earn
| their living in a legal way. Even in a favela (Brazilian
| slum) the drug dealers make a tiny tiny fraction of the
| population. (In fact, I did not even say anything against
| drug trade. I think the war on drugs has failed
| tremendously and drugs should be legalized as much as
| they can be reasonably legalized).
|
| "FWIW Estonia has ~1.3 million people living there,
| ..have underpowered financial, legal and enforcement
| branches"
|
| Well, how many inhabitants does Luxembourg or
| Liechtenstein have? A fraction of this. This can't be an
| excuse.
| jacquesm wrote:
| Luxembourg and Liechtenstein are both fabulously wealthy
| _and_ also have historically had a huge problem with
| illegal deposits. Not the best examples, to put it
| mildly.
|
| What you wrote was that this was 'the businessmodel of
| Estonia', and I'm illustrating to you that this isn't
| true. Whether you intended to sleight the Estonian people
| or not goes right out the window when you make such
| generalizing claims about the entire country. It just
| isn't true.
| Beijinger wrote:
| "Luxembourg and Liechtenstein are both fabulously wealthy
| and also have historically had a huge problem with
| illegal deposits."
|
| So you are hinting that they build their wealth the same
| way as Estonia does now?
|
| :-)
| jacquesm wrote:
| No, I'm stating that they have already done so and that
| Estonia isn't doing this in a purposeful way.
| Liechtenstein, Gstaad, Monaco, Luxembourg, the Channel
| Islands and a bunch of other entities within Europe have
| all made bank over the last 100 years or so by taking
| illegal deposits of all kinds _within their regulated
| banking system_.
|
| Estonia isn't in that league, nor are they trying to get
| there. They simply can't cope with the influx, whereas
| for those others that influx of illegal capital was the
| goal itself, which is well documented, and which,
| incidentally is one of the reasons moneyed interests
| aimed to have the UK secede the EU. Unless you have
| actual proof that Estonia created their program with the
| express interest of attracting illegal cash I think you
| should drop the generalization.
| Beijinger wrote:
| I don't think influx of illegal capital was the goal. But
| it might have become an interesting source of income.
|
| " I think you should drop the generalization."
|
| Maybe it is the 20k I lost. But Estonian law enforcement
| is abysmal.
| jacquesm wrote:
| > Maybe it is the 20k I lost.
|
| I will not belittle that in any way and I understand your
| frustration, and given the amount involved it is _just_
| in that grey zone where trying to recover it is likely
| just throwing good money after bad. For an extra zero it
| would be well worth it and a zero less and you probably
| wouldn 't lose sleep over it.
|
| > But Estonian law enforcement is abysmal.
|
| This we fully agree on.
| [deleted]
| [deleted]
| [deleted]
| guerrilla wrote:
| They seem to be a hub of money laundering in general. Danske Bank
| and then Swedbank. I think the latter case may have been the
| biggest ever, or at least they got the biggest fine for it ever.
| Aerroon wrote:
| Both are foreign banks though. The entire banking and telecom
| sectors are basically in the hands of foreign companies.
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