The United States Government Accounting Office (or GOA) has published a report, detailing how cryptocurrencies (and crypto kiosks) can be used to facilitate human and drug trafficking.
A crypto kiosk is another term for the popular cryptocurrency ATMs that are spreading across the US.
The report presents two main reasons why these kiosks or ATMs may be helping to facilitate criminal activity.
“While kiosk operators must register with FinCEN [Rede de Combate a Crimes Financeiros], are not required to routinely report the specific locations of their kiosks,” according to the report.
“This limits the ability of federal agencies to identify kiosks in areas that have been designated as high risk for financial crimes and may involve human and drug trafficking.”
The report then adds that cryptocurrency kiosks “may choose not to collect information about a user’s identity.” This, in turn, provides “a degree of anonymity” and makes cryptocurrencies “attractive to criminals,” GOA claimed.
The report also cites the Federal Bureau of Investigation (or FBI), which stated that there is “an increase in the use of cryptocurrency kiosks for illicit purposes,” including human and drug trafficking.
According to the website Coin ATM Radar, which allows ATM operators to voluntarily report the location of their equipment, crypto ATMs are rapidly spreading across the US.
As of January 2017, a total of 560 were active in the US. Today, that number has increased to over 30,000.
The GOA report also singled out bitcoin as the biggest culprit.
“Agencies have noted that bitcoin is the cryptocurrency most commonly used to facilitate illicit activities, according to officials from several federal agencies we interviewed,” the report explained.
Understanding what GAO’s concerns are
In June 2021, GAO had reported on payment methods accepted by platforms involved in the US commercial online sex market, which GAO claims can be used for illegal sex trafficking.
“The internet provides an online marketplace for commercial sex, which can be used to promote self or others’ prostitution and sex trafficking,” the secretariat explained.
The GOA analyzed 27 platforms involved in the online commercial sex market, adding: “Such platforms can be used to facilitate sex trafficking.”
Their analysis found that 15 of the platforms accepted cryptocurrencies as a form of payment, among other traditional forms of payments. Three of them accepted only cryptocurrencies.
GOA also interviewed officials at the Customs and Immigration National Security Investigations (ICE-HSI) unit, who claimed that certain “anonymization features” of cryptocurrencies attract sex traffickers.
Drug and crypto traffic
GOA has also discovered that cryptocurrencies can be used to facilitate drug trafficking – a connection that has been made many times.
According to the ICE-HSI Unit Cybercrime Center (cited in the report), an estimated 80% to 90% of sales on the dark web are related to illegal drugs, and these transactions are all cryptocurrency transactions because “other types of payments are generally not are accepted on dark web marketplaces.”
The report cited the Drug Enforcement Administration’s National Drug Threat Assessment, which found in 2020 that cryptocurrencies were increasingly being used as a means of transferring profits internationally.
It has been known that dark web drug markets have been using cryptocurrencies for years. Major cases (all cited in the GAO report) include Silk Road (2014), Alphabay (2017), Wall Street Market (2019) and Buyersclub (2020).
Second Dice Published by Chainalysis in 2020, dark web marketplaces made more money in 2020 than any other year.
More recently, Chainalysis found that crypto-related crimes hit a record $14 billion in 2021.
That number represented just 0.15% of the total cryptocurrency volume of $15.8 trillion. However, it marked the lowest percentage of illicit transactions in the industry in history.
*Translated and edited by Daniela Pereira do Nascimento with permission from the Decrypt.co.