Europol: Criminals Wary of Using Crypto Despite Embracing New Tech

Europol, the European Union's law enforcement agency, has recently released a comprehensive report. It sheds light on how criminals are embracing certain technologies for illicit purposes, focusing particularly on their ability to use cryptocurrency.

Criminals Like to Use Technology

Europol's "European Financial and Economic Crime Threat Assessment" report delves deep into the intricate web of financial and economic crimes that plague modern society.

It reveals a stark reality—almost 70% of criminal networks operating within the EU resort to money laundering techniques. These techniques range from basic practices to sophisticated operations involving professional money laundering networks and underground banking systems.

But it doesn't stop there. Criminals are increasingly turning to advanced technologies such as artificial intelligence (AI), machine learning and deep fake technology to perpetrate financial and economic crimes.

Crypto Transactions Represent Less Than 1%

Despite the surge in web3 tech, including privacy focused blockchains, DeFi protocols, NFTs and the metaverse, the report unveils an intriguing fact. Crypto transactions constitute less than 1% of the overall transaction volume in the criminal world. Europol's Executive Director, Catherine De Bolle, affirms this trend, citing successful law enforcement seizures as a significant deterrent to criminals considering cryptocurrency for their illicit activities

Recent law enforcement operations in 2023 seemingly validate this claim. In a joint operation against ChipMixer, Europol seized nearly $50 million worth of bitcoin. ChipMixer was a controversial cryptocurrency laundering service that operated out of Vietnam from 2017 to 2023. The service utilized servers located in Germany to help hide the source of crypto funds.

Over its six years of operation, ChipMixer allegedly laundered more than $3 billion worth of cryptocurrency that had been obtained through illegal means. The service allowed criminals to disguise the origin of crypto, making it difficult for authorities to trace. ChipMixer was shut down in 2023 after a joint investigation by Interpol and Vietnamese authorities.

In another operation conducted in January, Europol and Eurojust dismantled a crypto fraud network, confiscating over $1 million in cryptocurrencies and €50,000 in cash. Hong Kong Police also made headlines by dismantling a $65 million Triad organized crime-controlled operation that used crypto trades to launder the proceeds of as many as 314 crimes.

Wider Impact of Financial Crime

The Europol report paints a broader picture of the financial crimes that have infiltrated various sectors of society. It highlights the correlation between advancements in technology and criminal exploitation, as FinTech, DeFi and virtual banking institutions become prime targets for money laundering and fraud.

A high-level viewpoint at the engines of crime. Source: Europol

Digital payments, especially the "Buy Now Pay Later" financing trend, have emerged as a fertile ground for criminal activity. Offenders exploit the vulnerabilities in the BNPL application process to engage in theft.

Decentralized finance, or DeFi, with its promises of independence and security, is also susceptible to economic crime, as criminals stash illicit assets on DeFi platforms. Fraudulent investment schemes and a wide range of criminal activities, from illegal goods trading to fraud and money laundering, continue to favor cryptocurrencies even though they remain a small fraction of overall transactions.

The ability to instantly trade NFTs across borders presents risks of fraud and money laundering. Groups like the North Korea-linked Lazarus Group could potentially exploit NFTs for illicit purposes.

Tracking Lazarus Illicit Crypto Activity

Blockchain surveillance firm Elliptic recently published a report revealing that they have linked North Korean hacking group Lazarus to five major crypto hacks in 2023. The hack includes the recent $54 million hack of global cryptocurrency exchange CoinEx.

The address used by Lazarus during their hack of crypto casino Stake.com was also used to receive stolen funds from CoinEx, indicating that Lazarus is likely responsible, according to Elliptic's analysis. In total, Elliptic estimates Lazarus has stolen nearly $240 million in crypto through hacks of platforms like CoinEx, Stake.com, CoinsPaid and Alphapo.

Elliptic's report shows the blockchain-based transactions of Lazarus. Source Elliptic

It seems that the hacking group is focusing more on centralized platforms and carrying out social engineering attacks. In response to the hack, CoinEx has requested that the hackers contact them to negotiate a bug bounty and return of funds. Many believe that the proceeds from cyberattacks attributed to North Korea have gone toward funding its nuclear weapons program.

An Ever-Changing Landscape

These recent reports provide an overview of the continually changing landscape of financial crime in the digital era. It shows how technology can be exploited by criminals - but conversely also used to combat financial crime.

As methods of financial crime evolve, these reports highlight the need for law enforcement agencies and international partners to stay alert - and employ new technological approaches to address threats.