Ignacio Santoyo, a suspected human trafficker, was arrested by Mexican police in April 2019, in Playa del Carmen after linking him to a prostitution racket extending across Latin America.
Santoyo was not arrested due to the alleged blackmail and sexual exploitation of 2000 women, but the bitcoin he is suspected of using to help launder his operations proceeds, officials said.
Crypto in Crime
Since its inception, criminal companies have plagued Bitcoin with well-known darknet markets such as Silk Road, dominating cryptocurrency stocks in its early years. However, as Bitcoin supporters strive to increase the legitimacy of the world’s leading cryptocurrency, criminals continue to be attracted to the asset.
Santiago Nieto, head of the Mexican finance ministry’s financial intelligence unit (UIF), said that there’s a transition to committing crimes in cyberspace, like acquiring cryptocurrencies to launder money, and the pandemic is accelerating it.
No comments have been made by either the lawyers or Santoyo himself regarding the case. Santoyo’s arrest is an enactment of the new law in Mexico, which is one of only two nations in Latin America to enact such legislation that seeks to tackle cryptocurrency use in crime due to its anonymity.
The law was passed in 2018 and spells out that all registered cryptocurrency trading platforms will report transfers above 56,000 pesos ($2,830). It took many months to implement the system, and it is still a work in progress.
U.S. and Mexican authorities confirm that bitcoin’s use to launder money is remarkably increasing among drug gangs such as the Jalisco New Generation Cartel (CJNG) and the Sinaloa Cartel of captured kingpin Joaquin “El Chapo” Guzman.
Cryptocurrency as a Scapegoat for Criminals
Smuggling drugs across borders is one thing but getting profits back to cartels is a whole other issue. Transporting cash is a high risk of exposing traffickers because money is heavy.
UIF chief Nieto said criminals would split their illicit cash into small amounts and deposit them in various bank accounts, smurfing. To raise red flags, the threshold for banking transactions is $7,500.
The small deposits are then used to buy small amounts of Bitcoin repeatedly. It allows them to obscure the origin of the money and enable them to pay associates elsewhere worldwide.
After he bought enough bitcoin to trigger an alert under the new law, authorities who had been after Santoyo for months finally tracked him down. Santoyo made transactions through a registered platform, and personal details such as his phone number and address emerged.
Michael Miller said that both Mexican and Colombian TCOs are increasing their virtual currency use because of the anonymity and speed of transactions. The use of virtual currency is expected to only increase in the future.