- Authorities in Spain disclose that criminals use Bitcoin ATMs to evade money-laundering laws
- AML restrictions don’t cover the use-cases of Bitcoin ATMs
- Felons in Spain have used this loophole to launder money to drug traffickers
On July 11, 2019, Spanish law enforcement revealed that bitcoin ATMs are being widely used for illicit drug payments. The Spanish authorities believe that crypto automated teller machines pose a vulnerability that sidetracks the restrictions set for European Union’s Anti-Money Laundering regulations.
According to a Bloomberg report, Spanish police revealed that bitcoin ATMs are being widely used for illicit drug payments. This news comes after the Spanish Authorities exposed a laundering operation that used Bitcoin ATMs in May 2019.
Europe’s AML Regulations Amendments
As reported by Blockchain Reporter, the Financial Action Task Force (FATF) and the UK have been working on AML strategies that would lock down the vulnerable areas cited in the regulatory restrictions.
However, while cryptocurrency exchanges and custodians will be scrutinized by the new EU Anti-Money Laundering regulations (which will be effective in 2020), this takedown by Spanish authorities has revealed that perps may take advantage of a loophole in the restrictions that doesn’t extend to the cash machines’ owners.
This loophole has been perceived as a gateway that would allow sophisticated dealers to exploit the use-cases of bitcoin ATMs without getting flagged.
The Investigation
Bloomberg cites anonymous representatives of Guardia Civil (a Spanish law enforcement group) who stated that in April 2018, police in Spain shut down a drug operation where a criminal group used bitcoin ATMs in their fraudulent activities.
The group reportedly set up two ATMs from trading platforms and installed them in an office in Madrid, where they masqueraded as a center for remittances and cryptocurrency trading. They then proceeded to use the center to transfer money from bank accounts to trading platforms as a way of topping up the ATMs with digital assets.
It is reported that this group managed to transfer more than 8 million euros ($9 million) in bitcoin to drug traffickers in Colombia and other countries, purchasing the cryptocurrency for cash from the ATMs.
During the takedown, Spanish Police reportedly seized two Bitcoin ATMs, four cold wallets, and 20 online wallets. Bloomberg further reports that prosecutors are now trying to prove a link between the crypto ATMs and the seized digital assets. However, the authorities hit a snag in this approach since there is no clarity of Bitcoin’s legal status in Spain.
What the Authorities Learned
The criminal group used the scheme to deposit large amounts of cash to bank accounts in Spain and abroad without attracting attention.
The authorities in Spain asserted that there should be stricter crypto ATM regulations because the current rules designed for money handlers such as banks and jewelry dealers don’t apply to ATMs or cryptocurrency trading platforms.
Bitcoin ATMs are spreading fast, with well over 5,400 machines installed worldwide. However, with owners exempted from having to comply with strict anti-money-laundering regulations, authorities fear that these “money machines” could be used to launder money for illicit operations.
