Internet-related Money-laundering: the Technical Issues and the Legal Challenges Albena Spasova – President of the Management Board International Cyber.

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Presentation transcript:

Internet-related Money-laundering: the Technical Issues and the Legal Challenges Albena Spasova – President of the Management Board International Cyber Investigation Training Academy Bulgaria Co-funded by the Justice Programme of the European Union

Agenda 1. Digital revolution and Internet specifics 2. Electronic money, virtual world currencies and crypto currencies 3. Money laundering: cyber criminals methods

How is the world around us changing?

Our office

Is it time for a Revolution? What about Digital Revolution?

6

It is hard to quantify the shift The data is not clear Its hard to measure: old rules seem not to apply It’s hard to put structure around the changes and to put the pieces together But we can qualify it… We are in the middle of massive, disruptive digital transformation Digital Revolution:

e-crimeacademy.com

Media

What is this?

This?

What about this?

Web 1.0

Internet

Dark market

GOOGLE 57 search criteria Location Browser Computer

Key Word„Новини“

Information

once upon a time...

if you control the code, you control the world.

May 2, 2000

GPS point

Wave Bubble

GPS Spoofer

3D printer

3D printing

What is crypto currency? Virtual or crypto currencies are described by European Central Bank in 2012 as “type of unregulated, digital money issued and usually controlled by its developers, and which are used and accepted among the members of a certain virtual community”

Digital currencies Digital currency is a form of virtual currency or medium of exchange that is created and stored electronically. Some digital currencies like Bitcoin, known as crypto currencies. Like traditional money these currencies can be used to buy physical goods and services. May be restricted only in closed communities such as for use in online games or social networks.

Cryptocurrencies Cryptocurrency is a medium of exchange using cryptography to secure the transactions and to control the creation of new units. The first known cryptocurrency is Bitcoin /2009/. Since then a number of cryptocurrencies were invented. Cryptocurrencies use decentralized control as opposed to centralized electronic money/centralized banking systems

Key actors and their roles in virtual currency schemes 1/2 Inventors create a virtual currency and develop the technical part of its network. Issuers are able to generate units of the virtual currency Miners are persons, sometimes working as a group, who voluntarily make computer processing available in order to validate a set of transactions Processing service providers facilitate the transfer of units from one user to another

Key actors and their roles in virtual currency schemes 2/2 Users choose to obtain virtual currency for purchasing virtual or real goods and services from specific merchants Wallet providers offer a digital wallet to users for storing their virtual currency cryptographic keys and transaction authentication codes Exchanges offer trading services to users by quoting the exchange rates by which the exchange will buy/sell virtual currency against the main currencies (US dollar, renmimbi, yen, euro) or against other virtual currencies Trading platforms function as marketplaces, bringing together buyers and sellers of virtual currencies by providing them with a platform on which they can offer and bid among themselves.

Portfolio Easy usage Accessibility

Anonymity The level of verification required upon transfer crypto currency is not the same as what is used to transfer money from traditional currency. In traditional transfers anonymity is hard to achieve because it’s necessary to present personal identification documents. This does not prevent, however, having anonymous transfers of traditional currencies. The relative ease with which carry out transfers of virtual currency makes them more attractive to cybercriminals.

Exchange Bitcoin portfolios are not necessarily encrypted. Transactions can be public. Levels of anonymity during transactions are not strictly regulated, but are higher than traditional electronic payment systems and discretion is guaranteed by the alias. To receive or to send crypto currencies, you need to know only the address of the recipient and sender.

Stats

Where do they come from?!

Farms - Botnet

Black markets Virtual currencies are increasingly used for money laundering. A key element is where cybercriminals can use virtual currency to obtain illegal products and services.

Supporters In June 2011, the hacker group LulzSec uses Bitcoin and Liberty Reserve in combination, to launder funds donated by supporters. According to the FBI, LulzSec use part of those funds to purchase a botnet.

The future Tracking the money?! How to do that?

Laundering money online Money laundering is a critical step in the cyber crime process which is experiencing some changes as hackers and their criminal colleagues continually alter and optimize payment mechanisms.

Money laundering schemes Online gaming - Online role playing games provide an easy way for criminals to launder money. This frequently involves the opening of numerous different accounts on various online games to move money. Micro laundering - Cyber criminals are increasingly looking at micro laundering via sites like PayPal or, interestingly, using job advertising sites, to avoid detection.

Money laundering schemes Liberty Reserve Frequently associated with carding communities, Liberty Reserve (LR) had a bad reputation amongst some Black Hats boards.

Money laundering schemes Liberty Reserve

Money laundering schemes Liberty Reserve Frequently associated with carding communities, Liberty Reserve (LR) had a bad reputation amongst some Black Hats boards.

Money laundering schemes..

Money laundering schemes The closure and seizure of Liberty Reserve will not end these fraudulent practices – there are numerous competitors and alternatives (WebMoney, Bitcoins, Paymer, PerfectMoney and so on)…

Money laundering schemes Black Market Peso Exchange

Money laundering schemes Online Games as obfuscators Online role playing games provide an easy way for criminals to launder money. This frequently involves the opening of numerous different accounts on various online games to move money.

Money laundering schemes Online Games as obfuscators Massively multi-player online role playing games (MMORPGs) provide an easy way for criminals to launder money. Since MMORPGs use credits that players can exchange for real money, it is easy to do.

Money laundering schemes Micro laundering: micro-payment, micro-jobs and m-commerce Scenario: using virtual credit cards as an alternative to prepaid mobile cards; they could be funded with a scammed bank account – with instant transaction – and used as a foundation of a PayPal account that would be laundered through a micro-laundering scheme

Money laundering schemes Micro laundering: micro-payment, micro-jobs and m-commerce Scenario: using virtual credit cards as an alternative to prepaid mobile cards; they could be funded with a scammed bank account – with instant transaction – and used as a foundation of a PayPal account that would be laundered through a micro-laundering scheme

Money laundering schemes Micro laundering: micro-payment, micro-jobs and m-commerce Online jobs marketplaces such as Freelancer or Fiverr provide an interesting legitimate covert for money launderers. Job marketplaces could be used as anonymizers, escrow services providing a useful way for covering up the launderer’s traces.

Money laundering schemes Micro laundering: micro-payment, micro-jobs and m-commerce The spread of mobile banking has been especially rapid and broad in Africa and Russia (see M-Pesa - Kenya's mobile wallet - and SMS Coin for instance) while global M-commerce market has grown steadily. It is now possible to send money from prepaid mobile card to criminal partners that will convert the credit into cash. This method provides criminals anonymity with a quick and easy access to money from nearly anywhere in the world.

Money laundering schemes Micro laundering: micro-payment, micro-jobs and m-commerce Virtual credit cards are a growing alternative to prepaid mobile cards; Because online and mobile micro-payment are interconnected with traditional payment services, funds can now be moved to or from a variety of payment methods, increasing the difficulty to apprehend money launderers. It is possible to launder a large amount of money in small amounts through thousands of electronic transactions.

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