A new report by Transparency International Russia, the first one since our relaunch as a TI chapter in exile, looks into a route for anonymous conversion of cryptocurrencies into fiat money.
Transparency International Russia has discovered a black market of verified user accounts for sale which are registered with the providers of crypto-to-fiat transfers and enable anonymous transfers of money from Russia to the UK and EU. In order to get detailed information on how this market works, analysts of Transparency International Russia contacted the sellers of such accounts under the pretext of making a purchase.
We looked in particular at the offer of accounts which were opened by these sellers at a service named Wirex, one of crypto-to-fiat payment providers which is a UK-registered company and a major player in this market. Wirex enables transfers from crypto to fiat bank accounts with the option of access to a debit card. Hence, the purchase of a verified user account with this system on the black market allows for the use of this service as a route for anonymous conversion of suspicious funds in cryptocurrencies into fiat money and evasion of customer due diligence procedures.
According to our findings, buying a verified account, although illegal, is a simple process which allows both the buyer and the seller of the account to remain anonymous. The accounts sold are registered in the names of citizens of EU countries and Ukraine, as well as Ukrainian refugees with residence permits in EU countries, and the price varies from USD 30 to USD 220.
Photos of identification documents and photo or video proofs from the money mules can be provided by the accounts sellers. Also, to mitigate the risks of accounts getting blocked by the crypto-to-fiat provider’s AML service, the money mules are expected to stay in touch with the buyer via the vendor after the purchase of the account.
The sellers were willing to provide a bulk supply of accounts and were ready to make as many as 60 per week. This ability to provide a wholesale supply gives an opportunity for smurfing, which is a practice of money laundering when large sums of money are split into small transactions for transferring in order to avoid attention of AML controllers.
Average monthly inflow in the USDT wallet which was used by one of the vendors is USD 95,088. In theory, this could equal hundreds, if not thousands, of money mule accounts sold per month. TI Russia’s research highlights the vulnerabilities in the financial system that provide opportunities for criminals to integrate the proceeds of unlawful conduct into a traditional bank system via crypto. Based on our findings, we recommend that Wirex and other crypto-to-fiat service providers need to tighten up their monitoring processes, which should help identify and report potential money mules to the relevant country’s financial intelligence unit. We also recommend close coordination between AML supervisory and law enforcement agencies in the UK and EU to the threat posed by money mules with accounts at crypto-to-fiat transfer services.
Besides that, TI Russia looked at the background of Wirex and revealed that despite having a UK-based holding company and being regulated as an electronic money institution by the UK’s Financial Conduct Authority, it is currently not registered as a crypto asset company with the FCA. According to its website, Wirex’s traditional currency services were provided in EEA by UAB Wirex from Lithuania, which acted as an authorised distributor of UAB Payrnet, a separate Lithuanian company operating as an e-money institution. In February 2023, UAB Payrnet faced an investigation initiated by the Bank of Lithuania over concerns of gross and systematic violation of money laundering and terrorist financing laws, and in June 2023, the Bank of Lithuania revoked UAB Payrnet’s licence of the electronic money institution for serious, systematic and multiple violations of legal acts. Our opinion is that AML supervisors in the UK and EU should give closer scrutiny to Wirex’s operations.
Read the new report, Anonymity for Sale: The Thriving Black Market of Crypto-to-Fiat Mules, in full here.
